CENTRAL PACIFIC FINANCIAL CORP

Previous wording

•the impact of the current U.S. administration's recent economic policies, including potential international tariffs, and other cost-cutting initiatives;

Current wording

•the impact of the current U.S. administration's recent economic policies, including international tariffs, and other cost-cutting initiatives;

Previous wording

•the adverse effects of the COVID-19 pandemic virus (and its variants) and other pandemic viruses on local, national and international economies, including, but not limited to, the adverse impact on tourism and construction in the State of Hawaii, our borrowers, customers, third-party contractors, vendors and employees, as well as the effects of government programs and initiatives in response thereto;

Current wording

•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;

Previous wording

•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 FDIC assessments;

Current wording

•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;

Previous wording

•the effects of any acquisitions or dispositions we may make or evaluate, and the costs associated with any potential or actual acquisition or disposition, including re-engagement in any potential acquisition process;

Current wording

•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;

Previous wording

•cybersecurity and data privacy breaches and the consequence therefrom;

Current wording

•cybersecurity and data privacy breaches and the consequence therefrom, including those involving our third-party vendors or other service providers;

Previous wording

•the impact of potential future Banking-as-a-Service ("BaaS") initiatives; and

Current wording

•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;

Previous wording

Net income for the three months ended March 31, 2025 was $17.8 million, or $0.65 per diluted share, compared to net income of $12.9 million, or $0.48 per diluted share for the three months ended March 31, 2024.

Current wording

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.

Previous wording

During the three months ended March 31, 2025, the Company recorded a provision for credit losses of $4.2 million, compared to a provision of $3.9 million during the three months ended March 31, 2024. The increase in the provision was primarily driven by the macro-economic forecast used in our current expected credit losses model.

Current wording

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.

Previous wording

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 March 31, 2025 was $26.7 million, compared to $20.9 million for the three months ended March 31, 2024. See the following section titled "Non-GAAP Financial Measures" for reconciliation of PPNR.

Current wording

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.

Previous wording

The higher PPNR in the first quarter of 2025 was primarily due to higher net interest income of $7.5 million compared to the year-ago period. 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.

Current wording

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.

Previous wording

A key measure of operating efficiency tracked by the Company is the efficiency ratio, which 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.

Current wording

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.

Previous wording

The following table sets forth a reconciliation to our efficiency ratio for the periods presented:

Current wording

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

Previous wording

The improvement in the efficiency ratio in the first quarter of 2025, compared to the same year-ago period, was primarily due to higher net interest income, offset by higher other operating expense.

Current wording

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.

Previous wording

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 environment and environmental conditions in Hawaii. Macroeconomic conditions also influence our performance. A favorable business environment is generally characterized by expanding gross state product, low unemployment and rising personal income, while an unfavorable business environment is characterized by the reverse.

Current wording

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.

Previous wording

According to preliminary statistics from the Hawaii Tourism Authority ("HTA"), a total of 1.55 million visitors arrived to the Hawaiian Islands during the two months ended February 28, 2025, mainly from the U.S. Mainland, up 1.0% from 1.54 million visitors in the same prior year period, but down 2.9% from 1.60 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 6.3% during the two months ended February 28, 2025 compared to the same prior year period, and were down by approximately 56.3% from the same period in 2019.

Current wording

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.

Previous wording

Total spending for visitors arriving in the two months ended February 28, 2025 was $3.62 billion, up 4.5% from $3.47 billion in the same period last year, and up by 20.5% from $3.01 billion in the same period in 2019.

Current wording

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.

Previous wording

According to a February 2025 report by the University of Hawaii Economic Research Organization ("UHERO"), total visitor arrivals by air are expected to be approximately 9.94 million in 2025, which is an increase of approximately 2.6% from 9.69 million in 2024. Visitor spending is expected to modestly decline by approximately 0.2% to $20.55 billion in 2025 from $20.58 billion in 2024.

Current wording

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.

Previous wording

The Department of Labor and Industrial Relations reported that Hawaii's seasonally adjusted annual unemployment rate was 2.9% in the month of March 2025, compared to 3.0% in the month of March 2024 and the national seasonally adjusted unemployment rate of 4.2% in the month of March 2025. UHERO projects Hawaii's seasonally adjusted annual unemployment rate to remain low at approximately 3.4% in 2025.

Current wording

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.

Previous wording

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 0.7% and real gross state product to grow by 1.6% in 2025.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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 quarter of 2025 despite some mixed results. According to the Honolulu Board of Realtors, sales of Oahu single-family homes in the three months ended March 31, 2025 were down 4.0%, while sales of Oahu condominiums were up 0.4% from the same prior year period. The Oahu single-family home median price in the three months ended March 31, 2025 rose by 7.5% to $1.15 million from $1.07 million in the same prior year period. The Oahu condominium median price in the three months ended March 31, 2025 rose by 1.0% to $510,000 from $505,000 in the same prior year period.

Current wording

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.

Previous wording

In an effort to rein in inflation, the FRB aggressively increased interest rates since the first quarter of 2022 when the Federal Funds Rate target range was 0.00% to 0.25%. Since then, the FRB has raised the Federal Funds Rate by more than five percentage points, up to a 22-year high, 5.25% to 5.50%. The Federal Funds Rate remained at that level until September 2024. At the September 2024 Federal Open Market Committee ("FOMC") meeting, the FOMC lowered interest rates by 50 bps to 4.75% to 5.00%, as they gained greater confidence that inflation is moving sustainably towards its 2% target. In November and December 2024, the FOMC lowered interest rates by an additional 25 bps each to a target range of 4.25% to 4.50% at the end of 2024. In 2025, the FOMC has kept the Federal Funds Rate unchanged through its March 2025 meeting.

Current wording

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.

Previous wording

A comparison of net interest income and net interest margin on a taxable-equivalent basis for the three months ended March 31, 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.

Current wording

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.

Previous wording

Net interest income (expressed on a taxable-equivalent basis) was $57.9 million for the first quarter of 2025, representing an increase of $7.5 million, or 14.9% from $50.4 million in the year-ago quarter. The increase in net interest income from the year-ago quarter was primarily due to lower average interest-bearing deposit balances and lower average rates paid on interest-bearing deposits, combined with higher average yields earned on interest earning assets. These positive variances were partially offset by a decline in average loans.

Current wording

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.

Previous wording

Taxable-equivalent interest income was $77.4 million for the first quarter of 2025, representing an increase of $2.8 million, or 3.8%, from $74.6 million in the year-ago quarter. The increase during the first quarter of 2025, compared to the year-ago quarter was primarily attributable to an increase in average yield earned on loans of 21 basis points ("bp" or "bps"), resulting in an increase in interest income of approximately $2.5 million and an increase in average yield earned on investment securities of 63 bps, resulting in an increase in interest income of approximately $2.4 million. The increase in the average yield earned on investment securities was primarily attributable to the investment securities portfolio repositioning completed in the fourth quarter of 2024, combined with income of $0.7 million from an interest rate swap that became effective on March 31, 2024. 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 $1.4 million, and a decrease in average loan balances of $88.9 million, resulting in a decrease in interest income of approximately $1.2 million.

Current wording

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.

Previous wording

Interest expense was $19.5 million for the first quarter of 2025, representing a decrease of $4.7 million, or 19.4%, from $24.2 million in the year-ago quarter. Average interest-bearing deposits decreased by $91.2 million, resulting in a decrease in interest expense of approximately $2.3 million. In addition, average rates paid on interest-bearing deposits of 1.48% decreased by 34 bps from the year-ago quarter, resulting in a decrease in interest expense of approximately $2.1 million.

Current wording

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.

Previous wording

Our net interest margin of 3.31% for the first quarter of 2025 increased by 48 bps from 2.83% in the year-ago quarter. The increase in net interest margin for the first 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.

Current wording

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.

Previous wording

For the first quarter of 2025, total other operating income was $11.1 million, which decreased by $0.1 million, or 1.3%, from $11.2 million in the year-ago quarter. The decrease was primarily due to lower income from bank-owned life insurance ("BOLI") of $1.0 million, partially offset by higher other service charges and fees of $0.5 million, and income from fiduciary activities of $0.2 million. The lower 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.

Current wording

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.

Previous wording

For the first quarter of 2025, total other operating expense was $42.1 million, which increased by $1.5 million, or 3.7%, from $40.6 million in the year-ago quarter. The increase was primarily due to higher salaries and employee benefits of $1.1 million, legal and professional services of $0.5 million, and computer software of $0.4 million, partially offset by lower directors' deferred compensation plan expense of $0.4 million. The lower directors' deferred compensation plan expense were partially attributable to volatile equity market returns and are hedged with COLI policies, reported together with income from BOLI.

Current wording

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.

Previous wording

The Company recorded income tax expense of $4.8 million for the first quarter of 2025, compared to $4.0 million in the same year-ago period. The effective tax rate ("ETR") for the first quarter of 2025 was 21.25%, compared to 23.49% in the same year-ago period. The increase in income tax expense for the three months ended March 31, 2025 was primarily attributable to higher pre-tax income compared to the same year-ago period. The decrease in the effective tax rate in the first quarter of 2025 was primarily attributable to higher low-income housing tax credits recognized in the first quarter of 2025, compared to the same year-ago period.

Current wording

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.

Previous wording

The Company's net deferred tax assets ("DTA"), net of valuation allowance, totaled $12.5 million and $17.8 million as of March 31, 2025 and December 31, 2024, respectively, and was included in other assets on our consolidated balance sheets.

Current wording

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.

Previous wording

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

Current wording

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")

Previous wording

Total assets were $7.41 billion as of March 31, 2025 and decreased by $66.9 million, or 0.9%, from $7.47 billion as of December 31, 2024 primarily due to declines in interest-bearing deposits in other financial institutions, total deposits and long-term borrowings, partially offset by increases in investment securities and FRB stock.

Current wording

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.

Previous wording

Investment securities totaled $1.37 billion as of March 31, 2025, which increased by $35.5 million, or 2.7%, from $1.33 billion as of December 31, 2024. The increase in the investment securities portfolio reflected purchases of $40.8 million and an increase in the market valuation on the AFS portfolio of $16.8 million, partially offset by principal runoff of $22.2 million.

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

The Company strategically enhances its Hawaii loan portfolio by selectively pursuing commercial and non-residential 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.

Current wording

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.

Previous wording

The Hawaii loan portfolio decreased by $44.5 million, or 1.0%, from December 31, 2024. The decrease reflected decreases in consumer of $54.8 million, residential mortgage of $22.3 million, and home equity of $21.7 million. These decreases were partially offset by increases in commercial and industrial of $30.9 million, construction of $13.9 million, and commercial mortgage of $9.5 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 category as the loans' structure and characteristics more closely aligned with loans in the commercial and industrial category.

Current wording

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

Previous wording

The U.S. Mainland loan portfolio increased by $46.2 million, or 6.2%, from December 31, 2024. The increase was primarily attributable to increases in commercial mortgage of $42.2 million and consumer of $6.2 million, partially offset by a decrease in commercial and industrial of $3.2 million.

Current wording

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.

Previous wording

Nonperforming assets totaled $11.1 million, or 0.15% of total assets as of March 31, 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 $2.4 million, partially offset by $0.6 million in repayments of nonaccrual loans, $0.6 million in loans returned to accrual status and $1.2 million in net charge-offs, valuation and other adjustments.

Current wording

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.

Previous wording

Criticized loans as of March 31, 2025 increased by $11.0 million from December 31, 2024 to $43.8 million, or 0.8% of the total loan portfolio. Special mention loans declined by $1.6 million to $7.0 million, or 0.1% of the total loan portfolio. Classified loans increased by $12.6 million to $36.9 million, or 0.7% of the total loan portfolio.

Current wording

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.