CENTRAL PACIFIC FINANCIAL CORP
For the period ended Mar 31, 2026. Filed Apr 29, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed Apr 29, 2026
CPF$38.30-0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-10-29.
0000701347-25-000049
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-04-29.
0000701347-26-000028
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 203 previous paragraphs and 174 current paragraphs.
104 unchanged; 56 reworded; 14 added; 42 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 26 previous and 18 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
•market volatility and monetary fluctuations;
Current report
General
Current report
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.
Current report
Executive Overview
Current report
UHERO's February 2026 forecast projects a gradual recovery from last year's mild recession, with growth constrained by weak international tourism offset by modest improvements in consumer spending and the local labor market. Inflation is anticipated to remain uncertain while mortgage rates will remain near 6%. Real personal income is expected to grow by about 1% annually, while real gross domestic product will expand by 1.6%. These projections contemplate greater forecast risks with uncertain trade policy, potential additional federal workforce reductions, and ongoing weakness in international tourism.
Current report
According to a February 2026 forecast report by UHERO, Hawaii's tourism sector will stabilize. Total visitor arrivals by air are expected to decline by approximately 0.6% to 9.58 million in 2026, down from 9.65 million in 2025. Visitor spending is expected to increase by approximately 0.7% to $21.3 billion in 2026, up from $21.2 billion in 2025. Stagnant tourism volume from Japan is beginning to improve, but faces headwinds with the depreciation of the yen. Tourism from international markets other than Japan face challenges with the deterioration in foreign attitudes toward U.S. domestic and foreign policy. Growth from the U.S. market is expected to bring modest gains.
Current report
The February 2026 UHERO report was published prior to the onset of the U.S. conflict with Iran. Any potential impacts from this conflict could have broad-based implications for Hawaii depending on its duration, scope, and intensity, all of which remain uncertain as the situation continues to evolve. Tourism levels may be adversely affected by higher travel costs, as energy prices have increased amid heightened geopolitical tensions in the Middle East, contributing to higher airline fares. Elevated airfare has the potential to raise the overall cost of travel to Hawaii and, if these conditions persist, could moderate growth in visitor demand.
Current report
In March 2026, the FOMC decided to maintain the target range for the federal funds rate at 3.50% to 3.75% due to the uncertainty about the economic outlook and implications of the developments across the Middle East.
Current report
Total other operating income for the first quarter of 2026 was $11.6 million, which increased by $0.5 million, or 4.3%, from $11.1 million in same quarter in 2025. The increase was primarily driven by income related to a debit card program contract extension consideration of $0.7 million, included in other income.
Current report
Total other operating expense for the first quarter of 2026 was $43.7 million, which increased by $1.6 million, or 3.8%, from $42.1 million for the same quarter in 2025, primarily driven by higher salaries and employee benefits of $1.3 million.
Current report
Total assets were $7.50 billion as of March 31, 2026, an increase of $86.1 million, or 1.2%, from $7.41 billion as of December 31, 2025. The increase was primarily driven by increases in loans, interest-bearing deposits in other financial institutions, and investment securities.
Current report
(1) Hawaii loans include Guam loans, which represent less than one percent of total Hawaii loans.
Current report
(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.
Current report
Criticized loans increased by $27.6 million from December 31, 2025 to $98.7 million, or 1.9% of total loans, as of March 31, 2026 . Within criticized loans, special mention loans increased by $1.6 million to $5.2 million, or 0.1% of total loans and classified loans increased by $26.0 million to $93.6 million, or 1.8% of total loans.
Removed paragraphs (42)
Previous report
•market volatility and monetary fluctuations, including the transition away from the London Interbank Offered Rate Index;
Previous report
Overview
Previous report
Our foundational principles are based on continuing to be a leading bank for small businesses, a professional and reliable resource to meet Hawaii’s housing needs, and also serve as a bridge between Hawaii and Japan. Through a legacy of strong connections with Japan, including individuals, businesses and several regional banks, we continue to service the needs and promote ongoing activities primarily through deposit product offerings and two-way referrals of other products and services.
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Financial Summary
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$83.4 million, compared to $63.6 million for the nine months ended September 30, 2024. See the following section titled "Non-GAAP Financial Measures" for reconciliation of PPNR.
Previous report
The following table presents annualized returns on average assets ("ROA") and average shareholders' equity ("ROE"), as well as basic and diluted earnings per share ("EPS") for the periods presented. ROA and ROE are annualized using a 30/360 day convention.
Previous report
Management does not consider these transactions to be representative of the Company's core operating performance. The related income tax effects were calculated using an assumed effective tax rate of 23%.
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Adjusted Net Income and Diluted Earnings per Share
Previous report
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:
Previous report
Adjusted Return on Average Assets and Adjusted Return on Average Shareholders' Equity
Previous report
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:
Previous report
According to a September 2025 forecast report by the University of Hawaii Economic Research Organization ("UHERO"), Hawaii's tourism sector will experience a modest decline. Total visitor arrivals by air are expected to decline by approximately 1.3% to 9.58 million in 2025, down from 9.71 million in 2024. Visitor spending is also expected to decline by approximately 1.4% to $20.19 billion in 2025, down from $20.48 billion in 2024. While early-year gains, especially on Maui, offered some optimism, the sector now faces mounting challenges including sharp declines in international arrivals, particularly from Japan and Canada, driven by weaker foreign currencies, reduced airlift, and soft booking trends. Additionally, domestic travel demand is expected to weaken due to rising costs and economic uncertainty. Federal policy disruptions, such as high U.S. import tariffs, sweeping federal layoffs, and volatile immigration and fiscal policies, have further undermined consumer confidence and global travel sentiment, compounding the sector’s struggles. A full recovery in visitor arrivals is not expected until 2028.
Previous report
UHERO's September 2025 forecast projects a challenging economic outlook for Hawaii through the remainder of the year, with a mild recession expected. Key drivers include weakening U.S. and global conditions, declining tourism—especially from international markets—and stalled job growth. Inflation is anticipated to rise due to tariff impacts, while construction remains the only major source of economic strength. Real personal income is forecast to grow modestly by 1.3% in 2025, while real gross state product is projected to increase by 1.7% in 2025. These projections assume continued high tariffs, federal spending cuts, and no immediate U.S. recession, though downside risks remain elevated due to policy uncertainty and global economic fragility.
Previous report
To combat inflation, the FRB raised the Federal Funds rate from a target range of 0.00% to 0.25% in early 2022 to a 22-year high of 5.25% to 5.50% by mid-2023. The rate remained unchanged until September 2024, when the Federal Open Market Committee ("FOMC") initiated a series of rate cuts, lowering the target range to 4.25% to 4.50% by year-end 2024.
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Interest Income
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Taxable-equivalent interest income was $80.1 million for the third quarter of 2025, an increase of $2.1 million, or 2.7%, from $78.0 million for the same quarter in 2024. The increase was primarily attributable to an increase in average yield earned on loans of 12 bps, resulting in an increase in interest income of approximately $1.7 million, and an increase in average yield earned on investment securities of 26 bps, resulting in an increase in interest income of approximately $1.0 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 a decrease in interest income of approximately $0.9 million.
Previous report
Interest Expense
Previous report
Interest expense was $18.7 million for the third quarter of 2025, a decrease of $5.4 million, or 22.4%, from $24.0 million for the same quarter in 2024. The decrease was primarily attributable to a decrease in average interest-bearing deposits of $72.5 million, resulting in a decrease in interest expense of approximately $1.4 million, a 39 bps decrease in the average rate paid on interest-bearing deposits to 1.43% resulting in a decrease in interest expense of approximately $3.6 million, and a $0.4 million reduction in interest expense on long-term debt, primarily due to the payoff of a $25.0 million FHLB advance during the first quarter of 2025.
Previous report
Net Interest Margin
Previous report
Net interest income (expressed on a taxable-equivalent basis) was $179.4 million for the nine months ended September 30, 2025, an increase of $22.9 million or 14.7% from $156.4 million for the same period in 2024. The increase from the same period in 2024 was primarily due to higher average yields earned on loans and investment securities, which significantly increased interest income, combined with lower average interest-bearing deposit balances and lower average rates paid on interest-bearing deposits, which significantly reduced interest expense. These positive variances were partially offset by a decline in average loan balances which reduced interest income, combined with declines in the average balance and average yield earned on interest-bearing deposits in other financial institutions, which also reduced interest income.
Previous report
Interest Income
Previous report
Taxable-equivalent interest income was $235.9 million for the nine months ended September 30, 2025, an increase of $7.2 million, or 3.2%, from $228.6 million for the same period in 2024. The increase was primarily attributable to an increase in the average yield earned on loans of 16 bps, resulting in an increase in interest income of approximately $6.3 million, and an increase in the average yield earned on investment securities of 41 bps, resulting in an increase in interest income of approximately $4.6 million. The increase in the average yield earned on investment securities was partially attributable to an investment portfolio repositioning completed during the fourth quarter of 2024, in which the Company sold lower-yielding available-for-sale debt securities with a book value of $106.5 million and reinvested proceeds in $101.6 million of higher-yielding debt securities. In addition, the Company recorded income from an interest rate swap that became effective on March 31, 2024 of $2.1 million in the nine months ended September 30, 2025, compared to $1.9 million in the same period in 2024. These increases were partially offset by a decrease in average loan balances of $54.8 million, resulting in a decrease in interest income of approximately $2.0 million, and decreases in the average balance and average yield earned on interest-bearing deposits in other financial institutions of $41.4 million and 103 bps, respectively, resulting in a decrease in interest income of approximately $3.0 million.
Previous report
Interest Expense
Previous report
Interest expense was $56.5 million for the nine months ended September 30, 2025, a decrease of $15.7 million, or 21.7%, from $72.2 million in the same period in 2024. The decrease was primarily attributable to a decrease in the average rate paid on interest-bearing deposits of 38 bps to 1.44%, resulting in a decrease in interest expense of approximately $9.2 million, and a decrease in average interest-bearing deposit balances of $80.9 million, resulting in a decrease in interest expense of approximately $5.5 million.
Previous report
Net Interest Margin
Previous report
Net interest margin was 3.41% for the nine months ended September 30, 2025, an increase of 46 bps from 2.95% in the same period in 2024. As previously discussed, the increase in net interest margin was primarily attributable to increases in average yields earned on loans and investment securities, combined with a decline in average rates paid on interest-bearing deposits and long-term debt.
Previous report
Total other operating income for the third quarter of 2025 was $13.5 million, which increased by $0.8 million, or 6.1%, from $12.7 million in same quarter in 2024. The increase was primarily driven by higher investment services income, included in other service charges and fees, of $0.5 million.
Previous report
Total other operating income for the nine months ended September 30, 2025 was $37.6 million, which increased by $1.5 million, or 4.2%, from $36.1 million for the same period in 2024. The increase was primarily due to higher other service charges and fees, which increased by $1.1 million, largely due to higher investment services fees of $0.8 million and ATM and debit card fees of $0.4 million, and higher income from fiduciary activities, which increased by $0.3 million.
Previous report
Total other operating expense for the third quarter of 2025 was $47.0 million, which increased by $0.3 million, or 0.7%, from $46.7 million for the same quarter in 2024. The increase was primarily driven by higher salaries and employee benefits of $2.5 million, computer software of $0.6 million, and $1.5 million in expenses related to the consolidation of the Company's former Operations Center into its main headquarters. The higher salaries and employee benefits was primarily attributable to higher incentive accruals. These increases were partially offset by $3.1 million in expenses related to the evaluation and assessment of a strategic opportunity in the same period in 2024, and lower directors' deferred compensation expense of $0.8 million.
Previous report
Total other operating expense for the nine months ended September 30, 2025 was $133.0 million, which increased by $4.6 million, or 3.6%, from $128.4 million for the same period in 2024. The increase was primarily driven by higher salaries and employee benefits of $5.0 million, computer software expense of $1.9 million, $1.5 million in expenses related to the consolidation of the Company's former Operations Center into its main headquarters, and legal and professional services of $1.1 million. The higher salaries and employee benefits was largely attributable to higher incentive accruals. These increases were partially offset by $3.1 million in expenses related to the evaluation and assessment of a strategic opportunity in the same period in 2024, and lower directors' deferred compensation plan expense of $1.1 million.
Previous report
The increase in income tax expense for the three and nine months ended September 30, 2025 was primarily attributable to higher pre-tax income compared to the same periods in 2024. The decrease in the effective tax rate in the three and nine months ended September 30, 2025 was mainly driven by the recognition of higher low-income housing tax credits, along with the tax benefit associated with the donation of real estate in connection with the consolidation of the Company's Operations Center in the third quarter of 2025.
Previous report
Total assets were $7.42 billion as of September 30, 2025, a decrease of $50.6 million, or 0.7%, from $7.47 billion as of December 31, 2024. The decrease was primarily driven by reductions in interest-bearing deposits in other financial institutions, total deposits, and long-term borrowings, partially offset by increases in loans and FRB stock.
Previous report
During the three months ended March 31, 2025, the Company reclassified $58.3 million of Hawaii consumer loans to the Hawaii commercial and industrial loan class, based on the loans' structure and characteristics, which more closely aligned with commercial and industrial lending criteria.
Previous report
Criticized loans increased by $62.3 million from December 31, 2024 to $95.1 million, or 1.8% of the total loan portfolio, as of September 30, 2025 . Within criticized loans, special mention loans increased by $24.4 million to $33.0 million, or 0.6% of the total loan portfolio and classified loans increased by $37.9 million to $62.1 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 remain performing and are adequately collateralized.
Previous report
For the nine months ended September 30, 2025, the Company recorded a provision for credit losses on loans of $11.2 million and net charge-offs of $9.9 million. During the same period in 2024, the Company recorded a provision of $9.6 million and net charge-offs of $11.9 million.
Previous report
In accordance with U.S. GAAP, loans held for sale and other real estate owned are excluded from the Company's ACL assessment.
Previous report
On July 3, 2023, following the cessation of the LIBOR benchmark rate on June 30, 2023, the Company amended the debt agreements for Trust IV and Trust V to adopt the CME Term Secured Overnight Financing Rate ("SOFR") plus a tenor spread adjustment. Under Accounting Standards Codification ("ASC") 848, these modifications were accounted for as a continuation of the existing contracts. The $30.0 million in floating rate trust preferred securities of Trust IV now bear interest at the three-month CME Term SOFR plus a tenor spread adjustment of 0.26% plus 2.45%. The $20.0 million in floating rate trust preferred securities of Trust V now bear interest at the three-month CME Term SOFR plus a tenor spread adjustment of 0.26% plus 1.87%.
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Subordinated Notes
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On October 20, 2020, the Company completed a $55.0 million private placement of ten-year fixed-to-floating rate subordinated notes, which was used to support regulatory capital ratios and for general corporate purposes. These notes were subsequently exchanged for registered notes with identical terms at the end of the fourth quarter of 2020.
Previous report
The notes bear a fixed interest rate of 4.75% for the first five years through November 1, 2025, after which the interest rate resets quarterly to the then current three-month SOFR, as published by the Federal Reserve Bank of New York, plus 4.56%, for the remaining five years. The subordinated notes are callable on any quarterly interest payment date on or after November 1, 2025. On September 11, 2025, the Company provided notice to the trustee of its plan for full redemption of the subordinated notes, at par, on November 1, 2025. Holders of the subordinated notes were subsequently notified on October 1, 2025.
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Reworded paragraphs (56)
Previous wording
•the impact of the current U.S. administration's economic policies, including potential international tariffs, and other cost-cutting initiatives;
Current wording
•the impact of the current U.S. administration's economic policies, including potential international tariffs, geopolitical instability, trade tensions, and other cost-cutting or fiscal initiatives;
Previous wording
•the impact of local, national, and international economic conditions and natural disasters (such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, or earthquakes) on our markets and major industries within Hawaii;
Current wording
•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;
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•legal and regulatory proceedings, including actual or threatened litigation and the efforts of governmental and regulatory exams and orders, as well as the costs of ongoing or potential compliance efforts;
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•the costs and effects of legal and regulatory proceedings, including actual or threatened litigation and the efforts of governmental and regulatory exams and orders, as well as the costs of ongoing or potential compliance efforts;
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•the effects of accounting standard changes adopted by regulatory agencies, the Public Company Accounting Oversight Board ("PCAOB"), or the Financial Accounting Standards Board ("FASB"), and the cost and resources associated with implementation;
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•the effect of accounting standard changes adopted by regulatory agencies, the Public Company Accounting Oversight Board ("PCAOB"), or the Financial Accounting Standards Board ("FASB"), and the cost and resources associated with implementation;
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•changes in trade, tariff, monetary, or fiscal policies and laws, including actions by the Board of Governors of the Federal Reserve System (the "FRB" or the "Federal Reserve");
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•changes in trade, tariff, monetary, or fiscal policies and laws, including actions by the Board of Governors of the Federal Reserve System
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•political instability, acts of war, terrorism, or other geopolitical conflicts;
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•political instability, acts of war or terrorism, or other geopolitical conflicts;
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•deficiencies in our internal controls over financial reporting or disclosure controls, and our ability to remediate them;
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•deficiencies in our internal controls over financial reporting or disclosure controls and procedures, and our ability to remediate them;
Previous wording
For further information with respect to factors that could cause actual results to materially differ from the expectations or projections stated in the forward-looking statements, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's Forms 10-Q and 10-K for the current fiscal quarter and the last fiscal year, respectively, and in particular, the discussion of "Risk Factors" set forth 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.
Current wording
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.
Previous wording
The Bank was founded by World War II veterans who, despite returning home as war heroes, were not afforded the same banking opportunities in Hawaii. In response, they established the Bank to serve individuals and small businesses in Hawaii that lacked access to financial services at the time. This legacy continues to shape our mission to deliver exceptional customer service and tailored financial products that meet our customers' needs, including:
Current wording
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 commitment to creating opportunity and serving our community continues in the present day as we strive to deliver exceptional customer service and tailored financial products to meet the unique needs of our customers and the communities we serve. This legacy continues to shape our mission to deliver exceptional customer service and tailored financial products that meet our customers' needs, including:
Previous wording
Management has reviewed the development and selection of the critical accounting estimates noted below with the Audit Committee of the Board of Directors, and the Audit Committee has also reviewed the accompanying disclosures.
Current wording
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.
Previous wording
Management has identified the determination of the allowance for credit losses ("ACL") on loans as a critical accounting policy as of September 30, 2025 and December 31, 2024. 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 2024 Annual Report on Form 10-K.
Current wording
Management determined the allowance for credit losses ("ACL") on loans is a critical accounting policy as of March 31, 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.
Previous wording
For the three months ended September 30, 2025, the Company reported net income of $18.6 million, or $0.69 per diluted share, compared to net income of $13.3 million, or $0.49 per diluted share for the same period in 2024. For the nine months ended September 30, 2025 net income was $54.6 million, or $2.01 per diluted share, compared to net income of $42.1 million, or $1.55 per diluted share for the nine months ended September 30, 2024.
Current wording
For the three months ended March 31, 2026, the Company reported net income of $20.7 million, or $0.78 per diluted share, compared to net income of $17.8 million, or $0.65 per diluted share for the same period in 2025.
Previous wording
During the three months ended September 30, 2025, the Company recorded a provision for credit losses of $4.2 million, compared to a provision of $2.8 million during the same period in 2024. During the nine months ended September 30, 2025, the Company recorded a provision for credit losses of $13.3 million, compared to a provision of $9.0 million during the nine months ended September 30, 2024. The increase in the provision was primarily driven by an increase in loans, changes in the macro-economic forecast used in the current expected credit losses model, along with higher off-balance sheet credit exposure related to new unfunded construction loan commitments.
Current wording
During the three months ended March 31, 2026, the Company recorded a provision for credit losses of $2.4 million, compared to a provision of $4.2 million during the same period in 2025. The decrease in the provision was primarily driven by a decrease in loan balances and changes in the economic forecast used in our current expected credit losses model.
Previous wording
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 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. The Company believes they are valuable tools for both investors and management in assessing historical results and forecasting future performance.
Current wording
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 into its financial performance and position by excluding transactions that may be non‑recurring, non‑operational, or not indicative of ongoing results. These measures are used by management and investors to evaluate performance trends over time, support period‑to‑period comparisons, and assess historical results and future performance.
Previous wording
Non-GAAP financial measures may not be comparable to similarly entitled measures reported by other companies. The following reconciling adjustments from GAAP to non-GAAP adjusted financial measures are limited to: (1) net pre-tax expenses of $1.5 million related to the consolidation of the Company's former Operations Center into its main headquarters during the three months ended September 30, 2025, and (2) pre-tax expenses of $3.1 million related to the evaluation and assessment of a strategic opportunity during the three months ended September 30, 2024.
Current wording
Non-GAAP financial measures may not be comparable to similarly entitled measures reported by other companies. The results for the three months ended March 31, 2026 were not materially impacted by items outside of the normal course of business.
Previous wording
PPNR is a non-GAAP financial measure that excludes provision for credit losses and income tax expense from net income. The Company believes PPNR is a useful tool for evaluating its ability to generate earnings from operations before accounting for credit costs. The following table presents a reconciliation of the Company's non-GAAP PPNR and adjusted PPNR, excluding the reconciling adjustments discussed above, for the periods presented:
Current wording
The Pre-Provision Net Revenue ("PPNR") is a non-GAAP financial measure that excludes the provision for credit losses and income tax expense from net income. The Company believes PPNR is a useful tool for evaluating its ability to generate earnings from operations before accounting for credit costs. The following table presents the Company's non-GAAP PPNR for the periods presented:
Previous wording
The increase in PPNR in the third quarter of 2025 and nine months ended September 30, 2025 was primarily driven by higher net interest income of $7.5 million and $22.8 million, respectively, compared to the same prior-year periods. The higher net interest income was largely attributable to higher average yields earned on interest-earning assets, combined with lower average rates paid on interest-bearing deposits.
Current wording
The increase in PPNR in the three months ended March 31, 2026 was primarily driven by higher net interest income of $3.7 million, compared to the same prior-year period. The higher net interest income was largely attributable to higher average yields earned on loans, combined with lower average rates paid on interest-bearing deposits.
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The improvements in the efficiency ratio in the third quarter of 2025 and nine months ended September 30, 2025, compared to the same periods in 2024, was primarily driven by higher net interest income and other operating income, which more than offset the increase in other operating expense.
Current wording
The improvements in the efficiency ratio in the three months ended March 31, 2026, compared to the same periods in 2025, was primarily driven by higher net interest income and other operating income, which more than offset the increase in other operating expense.
Previous wording
The Department of Labor and Industrial Relations reported that Hawaii's seasonally adjusted annual unemployment rate was 2.7% in August 2025, slightly lower than 3.0% in August 2024 and well below the national seasonally adjusted unemployment rate of 4.3%. UHERO forecasts Hawaii's seasonally adjusted annual unemployment rate to remain steady at 3.0% for the full year 2025.
Current wording
The Hawaii State Department of Business, Economic Development and Tourism ("DBEDT") reported that Hawaii's seasonally adjusted unemployment rate was 2.3% in February 2026, slightly lower than 2.6% in January 2025 and well below the national seasonally adjusted unemployment rate of 4.3%. University of Hawaii Economic Research Organization ("UHERO") forecasts Hawaii's seasonally adjusted unemployment rate to remain steady at 2.2%.
Previous wording
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, 2025. According to the Honolulu Board of Realtors, sales of Oahu single-family homes rose 0.8%, while Oahu condominium sales fell 3.0% in the nine months ended September 30, 2025, compared to the same period in 2024. The median sale price of Oahu single-family homes increased 4.1% to $1.15 million in the nine months ended September 30, 2025, compared to $1.1 million in the same period in 2024. The median sale price of Oahu condominiums declined by 1.0% to $505,000 in the nine months ended September 30, 2025, compared to $510,000 in the same period in 2024.
Current wording
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 three months ended March 31, 2026. According to the Honolulu Board of Realtors, sales of Oahu single-family homes rose 10.9%, while Oahu condominium sales fell 3.6% for the three months ended March 31, 2026, compared to the same period in 2025. The median sale price of Oahu single-family homes increased 3.4% to $1.2 million in the three months ended March 31, 2026, compared to $1.15 million in the same period in 2025. The median sale price of Oahu condominiums increased by 2.0% to $510,000 in the three months ended March 31, 2026, compared to $500,000 in the same period in 2025.
Previous wording
According to preliminary data from the Hawaii Tourism Authority ("HTA"), 6.6 million visitors arrived in the Hawaiian Islands during the eight months ended August 31, 2025, an increase of 0.7% from 6.5 million visitors during the same period in 2024, but a decline of 7.0% compared to 7.1 million in the pre-pandemic peak year of 2019. Visitor arrivals from Japan continue to lag, with average daily census figures down 2.5% year-over-year and 54.6% below 2019 levels. However, strong domestic travel has helped offset this shortfall, mainly from the U.S. Mainland.
Current wording
According to preliminary data from the Hawaii Tourism Authority ("HTA"), 1.66 million visitors arrived in the Hawaiian Islands during the two months ended February 28, 2026, an increase of 7.2% from 1.55 million visitors during the same period in 2025. Visitor arrivals from Japan are improving with a 6.6% increase year-over-year.
Previous wording
Visitor spending totaled $14.62 billion in the eight months ended August 31, 2025, up 4.5% from $14.00 billion in the same period in 2024, and 21.3% higher than the $12.06 billion in the same period in 2019.
Current wording
Visitor spending totaled $4.2 billion in the two months ended February 28, 2026, up 15% from $3.6 billion in the same period in 2025.
Previous wording
Changes in monetary policy, particularly interest rate movements, can significantly impact operations by affecting: (i) interest income on loans and investment securities, (ii) interest expense on deposits and borrowings, (iii) loan origination and deposit acquisition, and (iv) the fair value of our assets and liabilities, among other factors.
Current wording
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.
Previous wording
In September 2025, the FOMC implemented its first rate cut of the year, reducing the target range by 25 basis points ("bps") to 4.00% to 4.25%. This decision was driven by signs of a weakening labor market and moderated economic growth, despite inflation remaining above the Fed’s 2% target. The FOMC also signaled the possibility of two additional rate cuts before year-end 2025, contingent on evolving economic conditions.
Current wording
In September 2025, the Federal Open Market Committee ("FOMC") implemented its first rate cut of 2025, reducing the target range by 25 basis points ("bps") to 4.00% to 4.25%. This decision was driven by signs of a weakening labor market and moderated economic growth, despite inflation remaining above the Fed’s 2% target. During the fourth quarter of 2025, the FOMC cut rates twice by 25 bps to a target rate of 3.50% to 3.75% at the end of 2025. The FOMC also signaled the possibility of one more cut in 2026 as they aim to balance employment and inflation goals.
Previous wording
A comparison of net interest income and net interest margin on a taxable-equivalent basis for the three and nine months ended September 30, 2025 and 2024 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.
Current wording
A comparison of net interest income and net interest margin on a taxable-equivalent basis for the three months ended March 31, 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.
Previous wording
Net interest income (expressed on a taxable-equivalent basis) was $61.5 million for the third quarter of 2025, an increase of $7.5 million, or 13.9% from $54.0 million for the same quarter of 2024. The increase was primarily driven by higher average yields earned on loans and investment securities, which significantly increased interest income, combined with lower average interest-bearing deposit balances and lower average rates paid on interest-bearing deposits, which reduced interest expense. These positive variances were partially offset by declines in the average balance and average yield earned on interest-bearing deposits in other financial institutions, which reduced interest income.
Current wording
Net interest income (expressed on a taxable-equivalent basis) was $61.5 million for the first quarter of 2026, an increase of $3.7 million, or 6.3% from $57.9 million for the same quarter of 2025. The increase was primarily driven by higher average balances on interest-bearing deposits in other institutions and higher average yields earned on loans, combined with lower average rates paid on interest-bearing deposits and lower average balances on long-term debt due to the repayment of subordinated notes in the fourth quarter of 2025. These positive variances were partially offset by a decline in the average balance and average yields earned on investments.
Previous wording
Net interest margin was 3.49% for the third quarter of 2025, an increase of 42 bps from 3.07% for the same quarter in 2024. The increase in net interest margin was primarily due to increases in average yields earned on loans and investment securities, combined with the decrease in the average rate paid on interest-bearing deposits. These positive variances were partially offset by a decline in the average yield earned on interest-bearing deposits in other financial institutions.
Current wording
Net interest margin was 3.53% for the first quarter of 2026, an increase of 22 bps from 3.31% for the same quarter in 2025. The increase in net interest margin was primarily due to increases in average yields earned on loans combined with the decrease in the average rate paid on interest-bearing deposits. These positive variances were partially offset by a decline in the average yields earned on investments.
Previous wording
The Company recorded income tax expense of $5.1 million for the third quarter of 2025, compared to $3.8 million for the same quarter in 2024. For the nine months ended September 30, 2025, the Company recorded income tax expense of $15.5 million, compared to $12.6 million for the same period in 2024.
Current wording
The Company recorded income tax expense of $6.2 million for the first quarter of 2026, compared to $4.8 million for the same quarter in 2025. The increase in income tax expense for the three months ended March 31, 2026 compared to the same period in 2025 is primarily attributable to higher pre-tax income.
Previous wording
The effective tax rate ("ETR") for the third quarter of 2025 was 21.44%, compared to 22.03% for the same quarter in 2024. The ETR for the nine months ended September 30, 2025 was 22.07%, compared to 23.00% for the same period in 2024.
Current wording
The effective tax rate ("ETR") for the first quarter of 2026 was 22.99%, compared to 21.25% for the same quarter in 2025. The increase in the ETR is primarily attributable to lower tax-exempt BOLI income compared to the same period in 2025.
Previous wording
The Company's net deferred tax assets ("DTA"), net of valuation allowance, totaled $18.5 million as of September 30, 2025, compared to $17.8 million as of December 31, 2024. These amounts were included in other assets on the Company's consolidated balance sheets.
Current wording
The Company's net deferred tax assets ("DTAs"), net of valuation allowance, totaled $26.8 million as of March 31, 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.
Previous wording
The valuation allowance on the Company's net DTA totaled $3.1 million as of September 30, 2025, and $3.1 million as of December 31, 2024. The valuation allowance related entirely to DTAs arising from apportioned net operating loss ("NOL") carryforwards for California state income tax purposes, as the Company does not expect to generate sufficient taxable income in California to utilize these DTAs.
Current wording
The valuation allowance on the Company's net DTA totaled $3.4 million and $3.4 million as of March 31, 2026 and December 31, 2025, 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.
Previous wording
Investment securities totaled $1.33 billion as of September 30, 2025, a decrease of $5.0 million, or 0.4%, from $1.33 billion as of December 31, 2024. The decrease in the investment securities portfolio reflected principal runoff of $88.7 million, partially offset by net purchases of $49.1 million, and a $34.6 million increase in the market valuation of the AFS portfolio.
Current wording
Investment securities totaled $1.33 billion as of March 31, 2026, an increase of $23.1 million, or 1.8%, from $1.31 billion as of December 31, 2025. The increase in the investment securities portfolio reflected net purchases of $48.9 million, and amortization of unrecognized losses on investment securities transferred to HTM of $1.5 million, partially offset by principal runoff and net accretion of discount totaling $24.7 million, and a $2.6 million decrease in the market valuation of the AFS portfolio.
Previous wording
Loans, net of deferred costs, totaled $5.37 billion as of September 30, 2025, an increase of $34.4 million, or 0.6%, from $5.33 billion as of December 31, 2024. The increase was primarily driven by increases in commercial mortgage loans of $112.5 million, construction loans of $72.4 million, and commercial and industrial loans of $1.9 million. These increases were partially offset by decreases in home equity loans of $66.1 million, residential mortgage loans of $53.0 million, and consumer loans of $33.4 million.
Current wording
Loans, net of deferred costs, totaled $5.32 billion as of March 31, 2026, an increase of $31.3 million, or 0.6%, from $5.29 billion as of December 31, 2025. The increase was primarily driven by an increase in commercial mortgage loans of $109.3 million, partially offset by decreases in residential mortgage loans of $32.2 million, home equity loans of $17.7 million, consumer loans of $15.5 million, and construction loans of $8.8 million.
Previous wording
The Hawaii loan portfolio decreased by $100.7 million, or 2.2%, from December 31, 2024. The decrease was primarily due to decreases in home equity loans of $66.1 million, residential mortgage loans of $53.0 million, and consumer loans of $51.6 million. These decreases were partially offset by increases in commercial and industrial loans of $34.6 million, construction loans of $30.9 million, and commercial mortgage loans of $4.5 million.
Current wording
The Hawaii loan portfolio decreased by $58.7 million, or 1.3%, from December 31, 2025. The decrease was primarily due to decreases in residential mortgage loans of $32.2 million, construction loans of $25.4, and home equity loans of $17.7 million. These decreases were partially offset by an increase in commercial mortgage loans of $26.0 million.
Previous wording
The U.S. Mainland loan portfolio increased by $135.1 million, or 18.0%, from December 31, 2024. The increase was primarily driven by increases in commercial mortgage loans of $108.0 million, construction loans of $41.5 million, and consumer loans of $18.3 million, partially offset by a decrease in commercial and industrial loans of $32.8 million. During the nine months ended September 30, 2025, the Company purchased $99.6 million in U.S. Mainland consumer automobile loan portfolios.
Current wording
The U.S. Mainland loan portfolio increased by $89.9 million, or 11.0%, from December 31, 2025. The increase was primarily driven by increases in commercial mortgage loans of $83.3 million and construction loans of $16.6 million, partially offset by a decrease in consumer loans of $8.3 million. During the three months ended March 31, 2026, the Company purchased $15.8 million in U.S. Mainland consumer automobile loans, which were largely offset by portfolio runoff.
Previous wording
Nonperforming assets totaled $14.3 million, or 0.19% of total assets as of September 30, 2025, compared to $11.0 million, or 0.15% of total assets as of December 31, 2024. The increase in nonperforming assets was primarily driven by additions to nonaccrual loans totaling $9.1 million, partially offset by $1.5 million in repayments, $2.2 million in loans returned to accrual status, and $2.1 million in net charge-offs, valuation adjustments and other reductions.
Current wording
Nonperforming assets totaled $14.5 million, or 0.19% of total assets as of March 31, 2026, compared to $14.4 million, or 0.19% of total assets as of December 31, 2025.
Previous wording
The Company's ratio of classified assets and other real estate owned to Tier 1 capital plus the ACL was 7.86% as of September 30, 2025, which increased from 3.17% as of December 31, 2024.
Current wording
The Company's ratio of classified assets and other real estate owned to Tier 1 capital plus the ACL was 11.82% as of March 31, 2026, which increased from 8.56% as of December 31, 2025.
Previous wording
The Company's ACL on loans totaled $60.4 million as of September 30, 2025, compared to $59.2 million as of December 31, 2024 and $61.6 million as of September 30, 2024.
Current wording
The Company's ACL on loans totaled $59.9 million as of March 31, 2026, compared to $59.6 million as of December 31, 2025 and $60.5 million as of March 31, 2025.
Previous wording
During the three months ended September 30, 2025, the Company recorded a provision for credit losses on loans of $3.4 million and net charge-offs of $2.7 million. During the same period in 2024, the Company recorded a provision of $3.0 million and net charge-offs of $3.6 million.
Current wording
During the three months ended March 31, 2026, the Company recorded a provision for credit losses on loans of $2.7 million and net charge-offs of $2.4 million. During the same period in 2025, the Company recorded a provision of $3.9 million and net charge-offs of $2.6 million.
Previous wording
The ACL as a percentage of total loans was 1.13% as of September 30, 2025, compared to 1.11% as of December 31, 2024 and, 1.15% as of September 30, 2024.
Current wording
The ACL as a percentage of total loans was 1.13% as of March 31, 2026, compared to 1.13% as of December 31, 2025 and 1.13% as of March 31, 2025.
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Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The Company's pre-provision net revenue ("PPNR"), a non-GAAP financial measure that excludes the provision for credit losses and income tax expense from net income, was $27.8 million for the three months ended September 30, 2025, compared to $19.9 million for the same period in 2024. The Company's PPNR for the nine months ended September 30, 2025 was