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[10-Q] CENTRAL PACIFIC FINANCIAL CORP Quarterly Earnings Report

Filing Impact
(Neutral)
Filing Sentiment
(Neutral)
Form Type
10-Q
Rhea-AI Filing Summary

Central Pacific Financial Corp. (CPF) reported Q3 2025 results. Net income was $18,574 thousand and diluted EPS was $0.69, up from $13,305 thousand and $0.49 a year ago. Net interest income rose to $61,301 thousand as lower deposit and debt costs reduced total interest expense to $18,658 thousand. The provision for credit losses was $4,157 thousand.

Noninterest income totaled $13,507 thousand, led by service charges and fees. Operating expenses were $47,009 thousand, reflecting investments in software and personnel.

On the balance sheet, loans (net) were $5,306,809 thousand and deposits were $6,577,684 thousand. Equity was $588,066 thousand, aided by an improvement in accumulated other comprehensive loss to $92,056 thousand. The company paid a $0.27 per share dividend during the quarter and repurchased 78,255 shares. Shares outstanding were 26,903,512 as of September 30, 2025; 26,827,512 were outstanding as of October 16, 2025.

For the nine months, net income was $54,605 thousand and diluted EPS was $2.01, with operating cash flow of $76,948 thousand and net cash used in financing of $120,238 thousand.

Positive
  • None.
Negative
  • None.

Insights

Q3 earnings improved on lower funding costs and stable fees.

CPF delivered higher profitability in Q3 2025 as net interest income reached $61.3M with total interest expense of $18.7M, down year over year. Fee lines, including service charges and other fees, supported total other income of $13.5M. Credit provisioning was $4.2M, consistent with a cautious stance.

On balance sheet, loans (net) were $5.31B and deposits were $6.58B. Equity rose to $588.1M with a smaller AOCI loss, indicating mark-to-market recovery in securities and hedges. The company returned capital via a $0.27 dividend and share repurchases.

Key items to track from the disclosed period include expense trajectory for software and personnel, deposit mix costs, and provision levels tied to economic forecasts. Subsequent filings may provide more color on margin sustainability and credit trends.

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Table of Contents

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

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2025

or

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

For the transition period from               to              

Commission File Number: 001-31567

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

Hawaii99-0212597
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 
220 South King Street, Honolulu, Hawaii 96813
(Address of principal executive offices) (Zip code)
 
(808) 544-0500
(Registrant's telephone number, including area code)

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

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

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

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

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

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

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

The number of shares outstanding of registrant's common stock, no par value, on October 16, 2025 was 26,827,512 shares.

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

Table of Contents
 Page
Part I.
Financial Information
3
Item 1.
Financial Statements (Unaudited)
Consolidated Balance Sheets - September 30, 2025 and December 31, 2024
3
Consolidated Statements of Income - Three and nine months ended September 30, 2025 and 2024
4
Consolidated Statements of Comprehensive Income - Three and nine months ended September 30, 2025 and 2024
5
Consolidated Statements of Changes in Equity - Three and nine months ended September 30, 2025 and 2024
6
Consolidated Statements of Cash Flows - Nine months ended September 30, 2025 and 2024
8
Notes to Consolidated Financial Statements
9
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
46
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
75
Item 4.
Controls and Procedures
75
Part II.
Other Information
76
Item 1.
Legal Proceedings
76
Item 1A.
Risk Factors
76
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
76
Item 5.
Other Information
77
Item 6.
Exhibits
77
Signatures
 
78

2
Table of Contents
PART I.   FINANCIAL INFORMATION

Item 1. Financial Statements

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

As of
(dollars in thousands)September 30,
2025		December 31,
2024
Assets  
Cash and due from financial institutions$102,859 $77,774 
Interest-bearing deposits in other financial institutions207,034 303,167 
Investment securities:
Debt securities available-for-sale, at fair value758,683 737,658 
Debt securities held-to-maturity, at amortized cost; fair value of: $500,859 as of September 30, 2025 and $506,681 as of December 31, 2024
570,886 596,930 
Total investment securities1,329,569 1,334,588 
Loans held for sale1,557 5,662 
Loans5,367,202 5,332,852 
Less: allowance for credit losses(60,393)(59,182)
Loans, net of allowance for credit losses5,306,809 5,273,670 
Premises and equipment, net100,992 104,342 
Accrued interest receivable25,232 23,378 
Investment in unconsolidated entities52,987 52,417 
Mortgage servicing rights, net8,459 8,473 
Bank-owned life insurance179,743 176,216 
Federal Home Loan Bank of Des Moines ("FHLB") and Federal Reserve Bank ("FRB") stock25,215 6,929 
Right-of-use lease assets25,570 30,824 
Other assets55,452 74,656 
Total assets$7,421,478 $7,472,096 
Liabilities and Equity  
Deposits:  
Noninterest-bearing demand$1,903,614 $1,888,937 
Interest-bearing demand1,340,725 1,338,719 
Savings and money market2,292,881 2,329,170 
Time1,040,464 1,087,185 
Total deposits6,577,684 6,644,011 
Long-term debt, net of unamortized debt issuance costs131,527 156,345 
Lease liabilities26,288 32,025 
Accrued interest payable8,604 10,051 
Other liabilities89,309 91,279 
Total liabilities6,833,412 6,933,711 
Contingent liabilities and other commitments (see Note 17)
Equity:  
Preferred stock, no par value, authorized 1,000,000 shares;
issued and outstanding: none as of September 30, 2025 and December 31, 2024
— — 
Common stock, no par value, authorized 185,000,000 shares;
issued and outstanding: 26,903,512 as of September 30, 2025 and 27,065,570 as of December 31, 2024
397,479 404,494 
Additional paid-in capital106,675 105,054 
Retained earnings175,968 143,259 
Accumulated other comprehensive loss(92,056)(114,422)
Total equity588,066 538,385 
Total liabilities and equity$7,421,478 $7,472,096 

See accompanying notes to consolidated financial statements.
3
Table of Contents

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands, except per share data)2025202420252024
Interest income:    
Interest and fees on loans$67,222 $65,469 $197,009 $192,710 
Interest and dividends on investment securities:
Taxable investment securities9,776 8,975 29,448 24,652 
Tax-exempt investment securities709 551 2,126 1,804 
Interest on deposits in other financial institutions1,857 2,775 5,595 8,589 
Dividend income on FHLB and FRB stock395 127 1,107 384 
Total interest income79,959 77,897 235,285 228,139 
Interest expense:    
Interest on deposits:    
Demand490 484 1,385 1,473 
Savings and money market8,898 10,235 26,174 27,655 
Time7,410 11,040 23,133 36,203 
Interest on short-term borrowings— — — 1 
Interest on long-term debt1,860 2,287 5,797 6,848 
Total interest expense18,658 24,046 56,489 72,180 
Net interest income61,301 53,851 178,796 155,959 
Provision for credit losses 4,157 2,833 13,316 9,008 
Net interest income after provision for credit losses57,144 51,018 165,480 146,951 
Other operating income:    
Mortgage banking income958 822 2,299 2,475 
Service charges on deposit accounts2,330 2,167 6,601 6,405 
Other service charges and fees6,472 5,947 18,195 17,077 
Income from fiduciary activities1,547 1,447 4,672 4,331 
Income from bank-owned life insurance1,879 1,897 4,636 4,653 
Net loss on sales of investment securities(30)— (30)— 
Other351 454 1,243 1,158 
Total other operating income13,507 12,734 37,616 36,099 
Other operating expense:    
Salaries and employee benefits24,749 22,299 69,264 64,280 
Net occupancy4,598 4,612 13,243 13,809 
Computer software5,151 4,590 15,185 13,258 
Legal and professional services2,669 2,460 8,340 7,286 
Equipment867 972 2,899 2,977 
Advertising730 889 2,449 2,704 
Communication791 740 2,725 2,234 
Other7,454 10,125 18,922 21,866 
Total other operating expense47,009 46,687 133,027 128,414 
Income before income taxes23,642 17,065 70,069 54,636 
Income tax expense5,068 3,760 15,464 12,569 
Net income$18,574 $13,305 $54,605 $42,067 
Per common share data:    
Basic earnings per share$0.69 $0.49 $2.02 $1.55 
Diluted earnings per share$0.69 $0.49 $2.01 $1.55 
Basic weighted average shares outstanding26,968,163 27,064,035 27,014,059 27,054,737 
Diluted weighted average shares outstanding27,083,280 27,194,625 27,118,824 27,137,985 

See accompanying notes to consolidated financial statements.
4
Table of Contents

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2025202420252024
Net income$18,574 $13,305 $54,605 $42,067 
Other comprehensive income, net of tax:
Net change in unrealized losses on available-for-sale investment securities8,670 19,942 21,653 15,036 
Reclassification adjustment for loss on sale of investment securities22 — 22 — 
Amortization of unrealized losses on investment securities transferred to held-to-maturity1,339 1,413 3,787 3,993 
Net change in fair value of derivatives(429)(3,177)(3,096)(946)
Supplemental Executive Retirement Plans— (1)— (1)
Total other comprehensive income (loss), net of tax9,602 18,177 22,366 18,082 
Comprehensive income$28,176 $31,482 $76,971 $60,149 

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

(dollars in thousands, 
except per share data)		Common
Shares
Outstanding		Preferred
Stock		Common
Stock		Additional Paid-In CapitalRetained EarningsAccum.
Other
Comp.
Loss		Total
Balance at December 31, 202427,065,570 $— $404,494 $105,054 $143,259 $(114,422)$538,385 
Net income— — — — 17,760 — 17,760 
Other comprehensive income— — — — — 10,857 10,857 
Cash dividends paid ($0.27 per share)
— — — — (7,327)— (7,327)
Common stock repurchased and retired and other related costs(77,316)— (2,094)— — — (2,094)
Share-based compensation 73,335 — — (205)— — (205)
Balance at March 31, 202527,061,589 — 402,400 104,849 153,692 (103,565)557,376 
Net income— — — — 18,271 — 18,271 
Other comprehensive income— — — — — 1,907 1,907 
Cash dividends paid ($0.27 per share)
— — — — (7,287)— (7,287)
Common stock repurchased and retired and other related costs(103,077)— (2,577)— — — (2,577)
Share-based compensation22,924 — — 1,184 — — 1,184 
Balance at June 30, 202526,981,436 — 399,823 106,033 164,676 (101,658)568,874 
Net income— — — — 18,574 — 18,574 
Other comprehensive income— — — — — 9,602 9,602 
Cash dividends paid ($0.27 per share)
— — — — (7,282)— (7,282)
Common stock repurchased and retired and other related costs(78,255)— (2,344)— — — (2,344)
Share-based compensation331 — — 642 — — 642 
Balance at September 30, 202526,903,512 $— $397,479 $106,675 $175,968 $(92,056)$588,066 

(dollars in thousands, 
except per share data)		Common
Shares
Outstanding		Preferred
Stock		Common
Stock		Additional Paid-In CapitalRetained EarningsAccum.
Other
Comp.
Loss		Total
Balance at December 31, 202327,045,033 $— $405,439 $102,982 $117,990 $(122,596)$503,815 
Net income— — — — 12,945 — 12,945 
Other comprehensive loss— — — — — (1,727)(1,727)
Cash dividends paid ($0.26 per share)
— — — — (7,033)— (7,033)
Common stock repurchased and retired and other related costs(49,960)— (945)— — — (945)
Share-based compensation47,253 — — 148 — — 148 
Balance at March 31, 202427,042,326 — 404,494 103,130 123,902 (124,323)507,203 
Net income— — — — 15,817 — 15,817 
Other comprehensive income— — — — — 1,632 1,632 
Cash dividends paid ($0.26 per share)
— — — — (7,036)— (7,036)
Share-based compensation21,318 — — 1,031 — — 1,031 
Balance at June 30, 202427,063,644 — 404,494 104,161 132,683 (122,691)518,647 
Net income— — — — 13,305 — 13,305 
Other comprehensive income— — — — — 18,177 18,177 
Cash dividends paid ($0.26 per share)
— — — — (7,037)— (7,037)
Share-based compensation857 — — 633 — — 633 
Balance at September 30, 202427,064,501 $— $404,494 $104,794 $138,951 $(104,514)$543,725 

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

(dollars in thousands, 
except per share data)		Common
Shares
Outstanding		Preferred
Stock		Common
Stock		Additional Paid-In CapitalRetained EarningsAccum.
Other
Comp.
Loss		Total
Balance at December 31, 202427,065,570 $— $404,494 $105,054 $143,259 $(114,422)$538,385 
Net income— — — — 54,605 — 54,605 
Other comprehensive income— — — — — 22,366 22,366 
Cash dividends paid ($0.81 per share)
— — — — (21,896)— (21,896)
Common stock repurchased and retired and other related costs(258,648)— (7,015)— — — (7,015)
Share-based compensation96,590 — — 1,621 — — 1,621 
Balance at September 30, 202526,903,512 $— $397,479 $106,675 $175,968 $(92,056)$588,066 

(dollars in thousands, 
except per share data)		Common
Shares
Outstanding		Preferred
Stock		Common
Stock		Additional Paid-In CapitalRetained EarningsAccum.
Other
Comp.
Loss		Total
Balance at December 31, 202327,045,033 $— $405,439 $102,982 $117,990 $(122,596)$503,815 
Net income— — — — 42,067 — 42,067 
Other comprehensive income— — — — — 18,082 18,082 
Cash dividends paid ($0.78 per share)
— — — — (21,106)— (21,106)
Common stock repurchased and retired and other related costs(49,960)— (945)— — — (945)
Share-based compensation69,428 — — 1,812 — — 1,812 
Balance at September 30, 202427,064,501 $— $404,494 $104,794 $138,951 $(104,514)$543,725 

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

Nine Months Ended September 30,
(dollars in thousands)20252024
Cash flows from operating activities:  
Net income$54,605 $42,067 
Adjustments to reconcile net income to net cash provided by operating activities: 
Provision for credit losses13,316 9,008 
Depreciation and amortization of premises and equipment5,357 5,133 
Loss on disposal of premises and equipment2,002 55 
Cash flows from operating leases(3,842)(4,246)
Amortization of mortgage servicing rights607 583 
Net (accretion of discount) amortization of premium on investment securities(918)1,558 
Share-based compensation1,621 1,812 
Net loss (gain) on sales of investment securities30 — 
Net gain on sales of residential mortgage loans(909)(923)
Proceeds from sales of loans held for sale61,600 47,771 
Originations of loans held for sale(56,586)(46,679)
Equity in the (earnings) losses of unconsolidated entities(37)24 
Distributions from unconsolidated entities878 — 
Net increase in cash surrender value of bank-owned life insurance(5,781)(4,653)
Deferred income tax expense(853)13,369 
Net tax expense from share-based compensation137 191 
Net change in other assets and liabilities5,721 (858)
Net cash provided by operating activities76,948 64,212 
Cash flows from investing activities:  
Purchases of investment securities available-for-sale(50,592)(95,533)
Proceeds from maturities, prepayments and calls of investment securities available-for-sale59,043 38,819 
Proceeds from sales of investment securities available-for-sale1,480 — 
Proceeds from maturities, prepayments and calls of investment securities held-to-maturity30,557 30,987 
Net loan payments received55,298 111,592 
Purchases of loan portfolios(99,592)(27,115)
Purchases of bank-owned life insurance(1,027)(2,803)
Proceeds from bank-owned life insurance death benefits3,281 2,248 
Net purchases of premises and equipment(3,761)(13,579)
Contributions to unconsolidated entities(4,159)(17,930)
Net purchases of FHLB and FRB stock(18,286)(136)
Net cash (used in) provided by investing activities(27,758)26,550 
Cash flows from financing activities:  
Net decrease in deposits(66,327)(264,579)
Repayments of long-term debt(25,000)— 
Cash dividends paid on common stock(21,896)(21,106)
Repurchases of common stock and other related costs(7,015)(945)
Net cash used in financing activities(120,238)(286,630)
Net decrease in cash and cash equivalents(71,048)(195,868)
Cash and cash equivalents at beginning of period380,941 522,437 
Cash and cash equivalents at end of period$309,893 $326,569 


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

Nine Months Ended September 30,
(dollars in thousands)20252024
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest expense paid$57,936 $78,148 
Income taxes paid, net7,429 — 
Supplemental disclosure of non-cash information:
Lease liabilities arising from obtaining right-of-use lease assets2,451 6,187 
Amortization of unrealized losses on investment securities transferred to held-to-maturity at fair value5,143 5,425 

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

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

Allowance for Credit Losses on Loans

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

The ACL on loans represents management's estimate of expected credit losses over the life of the Company’s loan portfolio as of a given balance sheet date. Management estimates the ACL balance using relevant internal and external information, including historical experience, current conditions, and reasonable and supportable forecasts of future economic conditions. When future forecasts are no longer supportable, management reverts to historical loss data.

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

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

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

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

Commercial and industrial loans

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

Construction loans

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

Commercial real estate loans - Multi-family

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

Commercial real estate loans - Others

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

Residential mortgage loans

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

Home equity lines of credit

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

Consumer loans

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

During second quarter of 2025, the Company updated its ACL model to combine revolving and non-revolving consumer loans under the DCF methodology due to immateriality of the revolving loan portfolio. The impact of this update was immaterial.

Purchased consumer loans

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

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

SegmentExpected Credit Loss MethodologyHistorical Look-Back Period
Economic Forecast Length
Reversion Method
Commercial and industrialDCF2008 to presentOne yearOne year
(straight-line
basis)
ConstructionDCF
Commercial real estate - Multi-familyDCF
Commercial real estate - All othersDCF
Residential mortgageDCF
Home equityDCF
ConsumerDCF
Consumer - PurchasedWARM

During the third quarter of 2023, the Company updated its methodology for measuring expected credit losses from the Probability of Default/Loss Given Default ("PD/LGD") and Loss-Rate Migration approaches to the Discounted Cash Flow ("DCF") methodology for all segments, except for Small Business Administration Paycheck Protection Program ("SBA PPP") loans and purchased consumer loans. The Company believes the DCF methodology provides better alignment with the Current Expected Credit Losses ("CECL") standard by incorporating more granular assumptions and forward-looking forecasts.

The DCF analysis is performed using an industry-leading software platform and leverages historical data from 2008 to present. The Company uses the Moody's baseline forecast, which includes a one-year economic forecast period, followed by a one-year, straight-line reversion to the historical averages of the macroeconomic variables used. During the second quarter of 2025, the Company updated its forecast models to incorporate post-COVID-19 pandemic data, while continuing to exclude periods impacted by the COVID-19 pandemic period due to abnormal and volatile behavior.

For purchased consumer loans, the Company applies the Remaining Life methodology, also known as the Weighted Average Remaining Maturity or ("WARM") methodology, due to the pooled nature of this portfolio.

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

Discounted Cash Flow

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

Remaining Life or Weighted Average Remaining Maturity

Under the Remaining Life, or WARM methodology, lifetime expected credit losses are calculated by applying a historical loss rate over this remaining life of the loan pool. The remaining life is adjusted for expected prepayments. This method is used for pooled portfolios where individual loan-level modeling is not practical.

Impact of Recently Issued Accounting Pronouncements on Future Filings

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures". ASU 2023-09 enhances income tax disclosure requirements by requiring public business entities to provide expanded information in the rate reconciliation, including specific categories and additional qualitative detail, as well as disaggregated disclosures about income taxes paid by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024, with early adoption permitted, and are to be applied on a prospective basis. The Company adopted ASU 2023‑09 effective January 1, 2025, which did not have a material impact on its consolidated financial statements. The Company will include the new disclosures in its Annual Report on Form 10‑K for the year ending December 31, 2025.

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

In July 2025, the FASB issued ASU 2025‑05, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets," which introduces a practical expedient for current accounts receivable and contract assets under ASC Topic 606. The practical expedient, if elected, allows entities to assume that current economic conditions at the reporting date remain unchanged over the related asset’s remaining life. The amendments, which are to be applied prospectively, are effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years, with early adoption permitted. The Company does not expect a material impact on its consolidated financial statements from adopting ASU 2025‑05 during the first quarter of 2026.

In September 2025, the FASB issued ASU 2025‑06, "Intangibles—Goodwill and Other—Internal‑Use Software (Subtopic 350‑40): Targeted Improvements to the Accounting for Internal‑Use Software," which clarifies and modernizes the guidance for costs related to internal‑use software. The amendments remove references to project stages and clarify the capitalization threshold for software development costs. ASU 2025‑06 is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

In September 2025, the FASB issued ASU 2025‑07, "Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract." The ASU introduces a scope exception from derivative accounting for certain non-exchange-traded contracts with underlyings based on the operations or activities specific to one of the parties to the contract, such as ESG-linked metrics or litigation funding arrangements. Additionally, the ASU clarifies that share-based noncash consideration received from a customer for the transfer of goods or services should initially be accounted for under Topic 606, with other guidance (e.g., Topic 815 or Topic 321) applied only when the right to receive or retain such consideration becomes unconditional. ASU 2025-07 is effective for fiscal years beginning after December 15, 2026, and interim periods within those fiscal years, with early adoption permitted. Entities may apply the guidance prospectively to new contracts or on a modified retrospective basis through a cumulative-effect adjustment to opening retained earnings in the year of adoption. The Company does not expect a material impact on its consolidated financial statements from adopting ASU 2025‑07 during the first quarter of 2027.

2. INVESTMENT SECURITIES

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

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Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueACL
(dollars in thousands)
September 30, 2025
Available-for-sale:    
Debt securities:    
States and political subdivisions$141,949 $78 $(25,780)$116,247 $— 
U.S. Treasury and other government-sponsored entities and agencies101,244 1,056 (1,539)100,761 — 
Collateralized loan obligations40,973 48 (118)40,903 — 
Mortgage-backed securities:    
Residential - U.S. government-sponsored entities and agencies454,994 2,466 (40,905)416,555 — 
Residential - Non-government agencies16,479 205 (721)15,963 — 
Commercial - U.S. government-sponsored entities and agencies79,722 360 (11,828)68,254 — 
Total available-for-sale investment securities$835,361 $4,213 $(80,891)$758,683 $— 

Amortized CostGross Unrecognized GainsGross Unrecognized LossesFair ValueACL
(dollars in thousands)
September 30, 2025
Held-to-maturity:
Debt securities:
States and political subdivisions$41,956 $— $(8,416)$33,540 $— 
Mortgage-backed securities:
Residential - U.S. government-sponsored entities and agencies528,930 137 (61,748)467,319 — 
Total held-to-maturity investment securities$570,886 $137 $(70,164)$500,859 $— 

Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueACL
(dollars in thousands)
December 31, 2024
Available-for-sale:    
Debt securities:    
States and political subdivisions$147,014 $2 $(30,183)$116,833 $— 
U.S. Treasury and other government-sponsored entities and agencies83,861 81 (2,742)81,200 — 
Collateralized loan obligations31,254 — (114)31,140 — 
Mortgage-backed securities: 
Residential - U.S. government-sponsored entities and agencies472,476 42 (58,047)414,471 — 
Residential - Non-government agencies17,836 151 (1,061)16,926 — 
Commercial - U.S. government-sponsored entities and agencies81,400 76 (14,315)67,161 — 
Commercial - Non-government agencies9,933 — (6)9,927 — 
Total available-for-sale investment securities$843,774 $352 $(106,468)$737,658 $— 

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Amortized CostGross Unrecognized GainsGross Unrecognized LossesFair ValueACL
(dollars in thousands)
December 31, 2024
Held-to-maturity:
Debt securities:
States and political subdivisions$42,016 $— $(8,884)$33,132 $— 
Mortgage-backed securities:
Residential - U.S. government-sponsored entities and agencies554,914 — (81,365)473,549 — 
Total held-to-maturity investment securities$596,930 $— $(90,249)$506,681 $— 

The Company did not transfer any investment securities that were classified as AFS to HTM during the three and nine months ended September 30, 2025 and 2024.

During the three and nine months ended September 30, 2025, the Company recorded amortization of unrecognized losses on investment securities transferred from AFS to HTM totaling $1.8 million and $5.1 million, respectively. During the three and nine months ended September 30, 2024, the Company recorded $1.9 million and $5.4 million, respectively, in amortization of unrecognized losses related to such transfers.

The Company elected to not estimate credit losses on accrued interest receivable, as any uncollectible accrued interest receivable is written off in a timely manner. Accrued interest receivable on investment securities is reported together with accrued interest receivable on loans and other assets in the consolidated balance sheets. As of September 30, 2025 and December 31, 2024, accrued interest receivable on investment securities totaled $5.0 million and $4.8 million, respectively.

The amortized cost, estimated fair value and weighted average yield of the Company's AFS and HTM investment securities as of September 30, 2025, are presented below, grouped by contractual maturity. Expected maturities may differ from contractual maturities due to the issuer's option to call or prepay obligations, with or without penalties. Securities that are not due at a single maturity date, such as mortgage-backed securities and other asset-backed investments, are presented separately.

(dollars in thousands)Amortized CostFair Value
Weighted Average Yield (1)
September 30, 2025
Available-for-sale:
Debt securities:
Due in one year or less$3,992 $4,062 5.87 %
Due after one year through five years39,214 39,312 4.13 
Due after five years through ten years62,232 61,107 3.69 
Due after ten years137,755 112,527 2.83 
Collateralized loan obligations40,973 40,903 5.78 
Mortgage-backed securities:
Residential - U.S. government-sponsored entities and agencies454,994 416,555 2.99 
Residential - Non-government agencies16,479 15,963 4.46 
Commercial - U.S. government-sponsored entities and agencies79,722 68,254 2.74 
Total available-for-sale securities$835,361 $758,683 3.26 %

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(dollars in thousands)Amortized CostFair Value
Weighted Average Yield (1)
September 30, 2025
Held-to-maturity:  
Debt securities:
Due after ten years$41,956 $33,540 2.26 %
Mortgage-backed securities:  
Residential - U.S. government-sponsored entities and agencies528,930 467,319 1.86 
Total held-to-maturity securities$570,886 $500,859 1.89 %

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

During the three and nine months ended September 30, 2025, the Company sold five AFS debt securities issued by state and political subdivisions. The investment securities had a cost basis of $1.5 million and were sold at a gross loss of $30 thousand.

Investment securities with carrying values totaling $747.7 million and $756.0 million as of September 30, 2025 and December 31, 2024, respectively, were pledged to secure public deposits, borrowings from the Federal Reserve Bank and other financial obligations.

As of September 30, 2025 and December 31, 2024, the Company did not hold investment securities of any one issuer, other than the U.S. Government and its agencies, that exceeded 10% of shareholders' equity.

The following tables summarize AFS and HTM investment securities that were in a loss position as of the dates presented. The data is aggregated by major security type and the length of time the securities have been in a continuous loss position.

There were a total of 183 and 218 AFS investment securities that were in an unrealized loss position, without an ACL, as of September 30, 2025 and December 31, 2024, respectively. There were a total of 81 and 83 HTM investment securities that were in an unrecognized loss position, without an ACL, as of September 30, 2025 and December 31, 2024, respectively.

Less Than 12 Months12 Months or LongerTotal
(dollars in thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
September 30, 2025
Available-for-sale:
Debt securities:      
States and political subdivisions$— $— $107,238 $(25,780)$107,238 $(25,780)
U.S. Treasury and other government-sponsored entities and agencies21,728 (81)12,189 (1,458)33,917 (1,539)
Collateralized loan obligations31,084 (118)— — 31,084 (118)
Mortgage-backed securities:      
Residential - U.S. government-sponsored entities and agencies— — 266,084 (40,905)266,084 (40,905)
Residential - Non-government agencies4,860 (1)7,194 (720)12,054 (721)
Commercial - U.S. government-sponsored entities and agencies— — 49,636 (11,828)49,636 (11,828)
Total$57,672 $(200)$442,341 $(80,691)$500,013 $(80,891)

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Less Than 12 Months12 Months or LongerTotal
(dollars in thousands)Fair ValueUnrecognized LossesFair ValueUnrecognized LossesFair ValueUnrecognized Losses
September 30, 2025
Held-to-maturity:
Debt securities:
States and political subdivisions$— $— $33,540 $(8,416)$33,540 $(8,416)
Mortgage-backed securities:
Residential - U.S. government-sponsored entities and agencies— — 456,209 (61,748)456,209 (61,748)
Total$— $— $489,749 $(70,164)$489,749 $(70,164)

Less Than 12 Months12 Months or LongerTotal
(dollars in thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
December 31, 2024
Available-for-sale:
Debt securities:      
States and political subdivisions$4,967 $(85)$107,267 $(30,098)$112,234 $(30,183)
U.S. Treasury and other government-sponsored entities and agencies56,139 (803)12,971 (1,939)69,110 (2,742)
Collateralized loan obligations31,140 (114)— — 31,140 (114)
Mortgage-backed securities:      
Residential - U.S. government-sponsored entities and agencies135,224 (2,254)260,575 (55,793)395,799 (58,047)
Residential - Non-government agencies5,270 (100)7,606 (961)12,876 (1,061)
Commercial - U.S. government-sponsored entities and agencies12,469 (90)48,304 (14,225)60,773 (14,315)
Commercial - Non-government agencies9,927 (6)— — 9,927 (6)
Total$255,136 $(3,452)$436,723 $(103,016)$691,859 $(106,468)

Less Than 12 Months12 Months or LongerTotal
(dollars in thousands)Fair ValueUnrecognized LossesFair ValueUnrecognized LossesFair ValueUnrecognized Losses
December 31, 2024
Held-to-maturity:
Debt securities:
States and political subdivisions$— $— $33,132 $(8,884)$33,132 $(8,884)
Mortgage-backed securities:
Residential - U.S. government-sponsored entities and agencies7,470 (19)466,079 (81,346)473,549 (81,365)
Total$7,470 $(19)$499,211 $(90,230)$506,681 $(90,249)

Investment securities in an unrealized or unrecognized loss position are evaluated at least quarterly to determine whether a credit loss exists. This evaluation includes a review of changes in the investment securities' credit ratings issued by major rating agencies and assessments of the issuers' financial condition. For mortgage-related securities, the Company also considers delinquency and loss data related to the underlying collateral, changes in subordination levels for the Company's position within the repayment structure, and remaining credit enhancement relative to projected credit losses.

The Company has reviewed its AFS and HTM investment securities that are in an unrealized or unrecognized loss position and determined that the losses are not related to credit quality, but are primarily attributable to changes in interest rates and volatility
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in the financial markets since the time of purchase. All of the investment securities in a loss position continue to be rated investment grade by one or more major rating agencies.

As of September 30, 2025 and December 31, 2024, the Company does not intend to sell the AFS and HTM securities in a loss position and it is unlikely to be required to sell these securities before recovery of its amortized cost basis, which may occur at maturity. Accordingly, the Company has not recorded an ACL on these securities.

3. LOANS AND CREDIT QUALITY

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

(dollars in thousands)September 30, 2025December 31, 2024
Commercial and industrial$608,814 $606,936 
Construction217,610 145,211 
Residential mortgage1,839,535 1,892,520 
Home equity610,889 676,982 
Commercial mortgage1,613,187 1,500,680 
Consumer477,167 510,523 
Loans, net of deferred fees and costs$5,367,202 $5,332,852 

Interest income on loans is accrued at the contractual rate of interest based on the unpaid principal balance. The Company has elected to not measure an estimate of credit losses on accrued interest receivable, as any uncollectible accrued interest receivable are written off in a timely manner. Accrued interest receivable on loans is reported together with accrued interest receivable on investment securities and other assets in the consolidated balance sheets. As of September 30, 2025 and December 31, 2024, accrued interest receivable on loans totaled $18.3 million and $17.5 million, respectively.

During the three months ended March 31, 2025, the Company reclassified $58.3 million in consumer loans to the commercial and industrial loan class. This reclassification was based on the loans' structure and characteristics, which more closely aligned with commercial and industrial lending criteria.

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

Purchased Loans

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

(dollars in thousands)Three Months Ended September 30,Nine Months Ended September 30,
Purchases of U.S. Mainland consumer - automobile:2025202420252024
Outstanding balance$33,297 $14,731 $97,524 $27,115 
Premium832 921 2,068 1,168 
Purchase price$34,129 $15,652 $99,592 $28,283 

Collateral-Dependent Loans

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. These loans are individually evaluated to determine expected credit losses.

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The following tables present the amortized cost basis of collateral-dependent loans by class and the related ACL allocated to these loans as of the dates presented:

(dollars in thousands)Secured by
1-4 Family
Residential
Properties		Allocated
ACL
September 30, 2025
Residential mortgage$11,413 $— 
Home equity2,119 — 
Total$13,532 $— 

(dollars in thousands)Secured by
1-4 Family
Residential
Properties		Allocated
ACL
December 31, 2024
Residential mortgage$9,044 $— 
Home equity952 — 
Total$9,996 $— 

Foreclosure Proceedings

As of September 30, 2025 and December 31, 2024, the Company did not own any foreclosed properties. The Company did not sell any foreclosed properties during the three and nine months ended September 30, 2025 and 2024.

The Company had $9.6 million and $3.9 million of residential mortgage and home equity loans collateralized by residential real estate properties that were in the process of foreclosure as of September 30, 2025 and December 31, 2024, respectively.

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

Nonaccrual and Past Due Loans

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

(dollars in thousands)Accruing
Loans
30 - 59 Days
Past Due		Accruing
Loans
60 - 89 Days
Past Due		Accruing
Loans
90+ Days
Past Due		Nonaccrual
Loans		Total
Past Due
and
Nonaccrual		Loans Not
Past Due		Total LoansNonaccrual
Loans
With
No ACL
September 30, 2025
Commercial and industrial$940 $821 $— $357 $2,118 $606,696 $608,814 $160 
Construction— — — — — 217,610 217,610 — 
Residential mortgage— 1,015 1,159 11,413 13,587 1,825,948 1,839,535 11,413 
Home equity175 758 — 2,119 3,052 607,837 610,889 2,119 
Commercial mortgage831 — — — 831 1,612,356 1,613,187 — 
Consumer3,460 1,322 349 430 5,561 471,606 477,167 — 
Total$5,406 $3,916 $1,508 $14,319 $25,149 $5,342,053 $5,367,202 $13,692 

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(dollars in thousands)Accruing
Loans
30 - 59 Days
Past Due		Accruing
Loans
60 - 89 Days
Past Due		Accruing
Loans
90+ Days
Past Due		Nonaccrual
Loans		Total
Past Due
and
Nonaccrual		Loans Not
Past Due		Total LoansNonaccrual
Loans
With
No ACL
December 31, 2024
Commercial and industrial$2,978 $210 $— $414 $3,602 $603,334 $606,936 $— 
Construction— — — — — 145,211 145,211 — 
Residential mortgage8,880 3,316 323 9,044 21,563 1,870,957 1,892,520 9,044 
Home equity943 485 78 952 2,458 674,524 676,982 952 
Commercial mortgage— — — — — 1,500,680 1,500,680 — 
Consumer5,255 1,444 373 608 7,680 502,843 510,523 — 
Total$18,056 $5,455 $774 $11,018 $35,303 $5,297,549 $5,332,852 $9,996 

Loan Modifications for Borrowers Experiencing Financial Difficulty

The Company did not execute any material loan modifications, either individually or in the aggregate, for borrowers experiencing financial difficulty during the three and nine months ended September 30, 2025 and 2024.

Credit Quality Indicators

The Company categorizes loans into risk ratings based on the evaluation of the borrower's ability to meet debt obligations such as: current financial information, historical payment experience, credit documentation, publicly available information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans by credit risk. This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed regularly on an ongoing basis. The Company uses the following definitions for risk rating of loans.

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

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

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

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

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

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

(dollars in thousands)Amortized Cost of Term Loans by Year of OriginationAmortized Cost of Revolving Loans
September 30, 202520252024202320222021PriorTotal
Commercial and industrial:
Risk Rating
Pass$49,927 $181,982 $41,427 $60,834 $51,465 $120,034 $97,335 $603,004 
Special Mention— — 1,076 — — — 862 1,938 
Substandard— 3,231 422 — 85 124 10 3,872 
Subtotal49,927 185,213 42,925 60,834 51,550 120,158 98,207 608,814 
Construction:
Risk Rating
Pass42,890 19,092 51,045 45,923 17,814 40,846 — 217,610 
Subtotal42,890 19,092 51,045 45,923 17,814 40,846 — 217,610 
Residential mortgage:
Risk Rating
Pass53,078 77,955 83,662 241,205 565,322 804,866 — 1,826,088 
Substandard— — 249 1,599 1,312 10,287 — 13,447 
Subtotal53,078 77,955 83,911 242,804 566,634 815,153 — 1,839,535 
Home equity:
Risk Rating
Pass301 997 11,063 25,737 16,986 32,179 521,507 608,770 
Substandard— — 1,185 — — 934 — 2,119 
Subtotal301 997 12,248 25,737 16,986 33,113 521,507 610,889 
Commercial mortgage:
Risk Rating
Pass188,748 145,868 94,584 197,427 215,995 691,734 5,871 1,540,227 
Special Mention— — 617 30,000 — 475 — 31,092 
Substandard— 33,231 — — 1,390 7,247 — 41,868 
Subtotal188,748 179,099 95,201 227,427 217,385 699,456 5,871 1,613,187 
Consumer:
Risk Rating
Pass72,953 94,023 61,288 112,369 79,008 20,943 35,804 476,388 
Substandard63 35 79 109 72 421 — 779 
Subtotal73,016 94,058 61,367 112,478 79,080 21,364 35,804 477,167 
Total$407,960 $556,414 $346,697 $715,203 $949,449 $1,730,090 $661,389 $5,367,202 

(dollars in thousands)Gross Charge-Offs by Year of Origination
Nine Months Ended September 30, 202520252024202320222021PriorTotal
Commercial and industrial$74 $2,152 $207 $876 $231 $969 $4,509 
Consumer105 874 538 4,733 1,630 785 8,665 
Gross charge-offs$179 $3,026 $745 $5,609 $1,861 $1,754 $13,174 

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(dollars in thousands)Amortized Cost of Term Loans by Year of OriginationAmortized Cost of Revolving Loans
December 31, 202420242023202220212020PriorTotal
Commercial and industrial:
Risk Rating
Pass$167,816 $58,905 $69,576 $57,354 $21,827 $142,546 $81,876 $599,900 
Special Mention— — — 2,539 — — — 2,539 
Substandard3,372 110 922 11 — 82 — 4,497 
Subtotal171,188 59,015 70,498 59,904 21,827 142,628 81,876 606,936 
Construction:
Risk Rating
Pass10,141 33,646 35,398 19,217 11,754 34,937 118 145,211 
Subtotal10,141 33,646 35,398 19,217 11,754 34,937 118 145,211 
Residential mortgage:
Risk Rating
Pass85,844 89,118 259,516 589,118 393,633 465,032 — 1,882,261 
Substandard— — 1,599 616 1,855 6,189 — 10,259 
Subtotal85,844 89,118 261,115 589,734 395,488 471,221 — 1,892,520 
Home equity:
Risk Rating
Pass1,060 11,787 28,687 18,277 8,406 25,235 582,499 675,951 
Substandard— — — — — 1,031 — 1,031 
Subtotal1,060 11,787 28,687 18,277 8,406 26,266 582,499 676,982 
Commercial mortgage:
Risk Rating
Pass180,391 95,323 235,344 223,724 111,399 635,255 5,731 1,487,167 
Special Mention— 621 — 2,506 — 2,930 — 6,057 
Substandard— — — — — 7,456 — 7,456 
Subtotal180,391 95,944 235,344 226,230 111,399 645,641 5,731 1,500,680 
Consumer:
Risk Rating
Pass95,971 60,771 173,097 92,976 20,838 14,466 51,422 509,541 
Substandard21 90 162 144 27 478 60 982 
Subtotal95,992 60,861 173,259 93,120 20,865 14,944 51,482 510,523 
Total$544,616 $350,371 $804,301 $1,006,482 $569,739 $1,335,637 $721,706 $5,332,852 

(dollars in thousands)Gross Charge-Offs by Year of Origination
Nine Months Ended September 30, 202420242023202220212020PriorTotal
Commercial and industrial$69 $150 $241 $203 $33 $1,168 $1,864 
Residential mortgage— — 175 — — 208 383 
Consumer75 518 7,944 3,243 408 951 13,139 
Gross charge-offs$144 $668 $8,360 $3,446 $441 $2,327 $15,386 

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

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

(dollars in thousands) 
Three Months Ended September 30, 2025Commercial and IndustrialConstructionResidential MortgageHome EquityCommercial MortgageConsumerTotal
Beginning balance$7,240 $3,363 $13,878 $1,049 $20,265 $13,816 $59,611 
Provision (credit) for credit losses on loans516 603 303 105 299 1,614 3,440 
Gross charge-offs(1,071)— — — — (2,824)(3,895)
Gross recoveries204 — 8 9 — 1,016 1,237 
Net (charge-offs) recoveries(867)— 8 9 — (1,808)(2,658)
Ending balance$6,889 $3,966 $14,189 $1,163 $20,564 $13,622 $60,393 

(dollars in thousands)
Three Months Ended September 30, 2024Commercial and IndustrialConstructionResidential MortgageHome EquityCommercial MortgageConsumerTotal
Beginning balance$7,071 $3,798 $15,389 $3,829 $17,337 $14,801 $62,225 
Provision (credit) for credit losses on loans617 (1,230)1,052 (1,360)1,204 2,757 3,040 
Gross charge-offs(663)— (99)— — (3,956)(4,718)
Gross recoveries158 — 8 — — 934 1,100 
Net (charge-offs) recoveries(505)— (91)— — (3,022)(3,618)
Ending balance$7,183 $2,568 $16,350 $2,469 $18,541 $14,536 $61,647 

(dollars in thousands)
Nine Months Ended September 30, 2025Commercial and IndustrialConstructionResidential MortgageHome EquityCommercial MortgageConsumerTotal
Beginning balance$7,113 $2,316 $15,267 $2,335 $18,882 $13,269 $59,182 
Provision (credit) for credit losses on loans3,715 1,647 (1,103)(1,193)1,682 6,407 11,155 
Gross charge-offs(4,509)— — — — (8,665)(13,174)
Gross recoveries570 3 25 21 — 2,611 3,230 
Net (charge-offs) recoveries(3,939)3 25 21 — (6,054)(9,944)
Ending balance$6,889 $3,966 $14,189 $1,163 $20,564 $13,622 $60,393 

(dollars in thousands)
Nine Months Ended September 30, 2024Commercial and IndustrialConstructionResidential MortgageHome EquityCommercial MortgageConsumerTotal
Beginning balance$7,181 $4,004 $14,626 $3,501 $17,543 $17,079 $63,934 
Provision (credit) for credit losses on loans1,488 (1,436)2,082 (1,038)998 7,515 9,609 
Gross charge-offs(1,864)— (383)— — (13,139)(15,386)
Gross recoveries378 — 25 6 — 3,081 3,490 
Net (charge-offs) recoveries(1,486)— (358)6 — (10,058)(11,896)
Ending balance$7,183 $2,568 $16,350 $2,469 $18,541 $14,536 $61,647 

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

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2025202420252024
Beginning balance$4,014 $3,312 $2,570 $3,706 
Provision (credit) for off-balance sheet credit exposures717 (207)2,161 (601)
Ending balance$4,731 $3,105 $4,731 $3,105 

5. INVESTMENTS IN UNCONSOLIDATED ENTITIES

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

(dollars in thousands)September 30, 2025December 31, 2024
Investments in low-income housing tax credit partnerships, net of amortization$50,141 $48,730 
Investments in common securities of statutory trusts1,547 1,547 
Investments in affiliates113 90 
Other1,186 2,050 
Total$52,987 $52,417 

As of September 30, 2025 and December 31, 2024, the Company had total commitments of $69.5 million and $63.5 million , respectively, to fund low-income housing tax credit ("LIHTC") partnerships.

Unfunded commitments related to LIHTC partnerships totaled $21.2 million and $19.1 million as of September 30, 2025 and December 31, 2024, respectively. These amounts were included in other liabilities in the Company's consolidated balance sheets.

The Company accounts for its LIHTC investments using the proportional amortization method, and these investments are reported in investments in unconsolidated entities in the Company's consolidated balance sheets.

The following table presents the expected payments for unfunded commitments related to LIHTC and other partnership investments as of September 30, 2025. The table includes expected funding for the remainder of fiscal year 2025, the next five succeeding fiscal years, and all years thereafter:

(dollars in thousands)
Year Ending December 31, LIHTCOtherTotal
2025 (remainder)$8,286 $553 $8,839 
20267,564 — 7,564 
20272,658 — 2,658 
20282,306 — 2,306 
202936 — 36 
203030 — 30 
Thereafter306 — 306 
Total unfunded commitments$21,186 $553 $21,739 

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

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2025202420252024
Proportional amortization method:
Amortization expense recognized in income tax expense$1,537 $1,012 $4,604 $2,372 
Tax credits recognized in income tax expense1,798 1,155 5,386 2,756 

In 2021, the Company committed $2.0 million to the JAM FINTOP Banktech Fund, L.P. ("JAM FINTOP"). The Company does not have the ability to exercise significant influence over the JAM FINTOP, and the investment does not have a readily determinable fair value. Accordingly, the Company determined that the cost method of accounting for the investment was appropriate.

During the third quarter of 2025, the Company received a distribution of proceeds from the sale of one of JAM FINTOP's portfolio companies of $0.9 million. The proceeds were treated as a return on capital and applied against the cost basis of the investment in JAM FINTOP.

The Company had unfunded commitments related to the investment of $0.6 million, and $0.8 million as of September 30, 2025 and December 31, 2024, respectively. These amounts are included in other liabilities in the Company's consolidated balance sheets.

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6. MORTGAGE SERVICING RIGHTS

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

(dollars in thousands)September 30, 2025December 31, 2024
Mortgage loan portfolio serviced for:
Federal National Mortgage Association$720,975 $720,070 
Federal Home Loan Mortgage Corporation437,283 457,228 
Federal Home Loan Bank352 444 
Total loans serviced for others$1,158,610 $1,177,742 

The following tables present changes in mortgage servicing rights for the periods presented:

(dollars in thousands)
Balance at June 30, 2025$8,436 
Additions233 
Amortization(210)
Balance at September 30, 2025$8,459 
Balance at June 30, 2024$8,636 
Additions90 
Amortization(213)
Balance at September 30, 2024$8,513 

(dollars in thousands)
Balance at December 31, 2024$8,473 
Additions593 
Amortization(607)
Balance at September 30, 2025$8,459 
Balance at December 31, 2023$8,696 
Additions400 
Amortization(583)
Balance at September 30, 2024$8,513 

The Company measures its mortgage servicing rights ("MSRs") using the amortization method, amortizing MSRs proportionally over the period of expected net servicing income. New MSRs and amortization are reported within mortgage banking income, while ancillary income is recorded in other operating income. MSRs are recognized when loans are sold with servicing retained and pooled by similar characteristics.

MSRs are initially recorded at fair value determined by a discounted cash flow model prepared by a third-party service provider using market-based assumptions at origination. Subsequent impairment assessments are performed at each reporting period and use current market assumptions. Key assumptions include mortgage prepayment speeds, discount rates, servicing income, and costs. These inputs are subjective and require management judgment. Changes in assumptions are made to reflect evolving market trends and loan product types.

MSRs are classified as Level 3 assets in the fair value hierarchy due to significant unobservable inputs. The Company’s valuation techniques rely on discounted cash flow models reflecting expected cash flows, prepayment behavior, and cost structures. Changes in prepayment speeds driven by interest rates, home prices, and borrower behavior can materially impact
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MSR fair values. Lower interest rates generally increase prepayments, reducing MSR value, while higher rates decrease prepayments and potentially increase MSR value.

Fair value measurements and related assumptions are reviewed periodically and validated against market data and third-party valuations.

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

(dollars in thousands)September 30, 2025December 31, 2024
Fair market value, beginning of year$12,387 $12,185 
Fair market value, end of period11,454 12,387 
Weighted average discount rate9.5 %9.5 %
Weighted average prepayment speed assumption11.8 10.2 

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

7. DERIVATIVES

The Company utilizes both designated and undesignated derivative financial instruments to manage exposure to interest rate fluctuations. All derivatives are measured at fair value and reported in other assets or other liabilities on the consolidated balance sheets, depending on their position.

For derivative instruments that are designated as cash flow hedging instruments, the effective portion of the changes in the fair value of the derivative is recorded in accumulated other comprehensive income (loss) ("AOCI"), net of tax, until the hedged cash flows impact earnings. Any ineffective portion of the hedge is immediately recognized in current period earnings.

For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivative are included in current period earnings.

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

Interest Rate Lock and Forward Sale Commitments

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

As of September 30, 2025, the Company had no interest rate lock commitments outstanding. The Company had $0.5 million in interest rate lock commitments outstanding as of December 31, 2024.

As of September 30, 2025, the Company had $1.6 million forward sale commitments outstanding. The Company had $4.9 million in forward sale commitments outstanding as of December 31, 2024.

Risk Participation Agreements

The Company may enter into credit risk participation agreements ("RPA") with financial institution counterparties related to interest rate swaps on participation loans. The RPAs entered into by us and a participant bank provide credit protection to the
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financial institution counterparties should the borrowers fail to perform on their interest rate derivative contracts with the financial institutions.

RPAs are accounted for as undesignated derivatives and are measured at fair value, with changes in fair value recorded in current period earnings.

The Company had RPAs with total notional amounts of $51.4 million and $35.2 million as of September 30, 2025 and December 31, 2024, respectively. The fair value of the RPAs was insignificant to the consolidated financial statements as of September 30, 2025 and December 31, 2024.

Back-to-Back Swap Agreements

The Company has established a program in which it originates variable-rate loans and simultaneously enters into variable-to-fixed interest rate swaps with borrowers. To offset interest rate exposure, the Company also enters into equal and opposite swap agreements with third-party financial institutions. These back-to-back swap agreements are designed to economically offset each other, allowing the Company to maintain a variable rate loan while providing the borrower with fixed-rate payments.

The Company's net cash flow from these arrangements equals the interest income earned on the variable-rate loan. These back-to-back swap agreements are considered free-standing derivatives and are recorded at fair value in either other assets or other liabilities on the Company's consolidated balance sheet. Changes in fair value are recognized in current period earnings.

As of September 30, 2025, the Company had entered into swap agreements with borrowers totaling $61.1 million in notional amount, compared to $50.2 million as of December 31, 2024. These were offset by swap agreements with third-party financial institutions for the same notional amounts. The Company received $7.9 million and $12.9 million in counter-party cash collateral related to the back-to-back swap agreements as of September 30, 2025 and December 31, 2024, respectively.

Interest Rate Swap

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

During the second quarter of 2025, a $1.0 million municipal debt security underlying the hedge was called, resulting in a partial termination of the interest rate swap and a reduction of the notional amount to $114.6 million. All other terms of the interest rate swap remained unchanged.

The interest rate swap is carried at fair value on the Company’s consolidated balance sheet, recorded in other assets (if the fair value is positive) or other liabilities (if the fair value is negative). The changes in the fair value of the interest rate swap are recognized in interest income. Unrealized gains or losses on the hedged municipal securities, attributable to changes in benchmark interest rates, are recorded as adjustments to the carrying value of the hedged debt securities and offset in the same interest income line item.

The Company uses the long-haul method to assess hedge effectiveness, which is a statistical regression analysis that consists of historical observations of prior period periodic changes in fair value of both the hedge and the hedged item. The assessment is based on the Federal Funds benchmark interest rate component of the hedged item only with changes in credit unhedged. The assessment is performed on a quarterly basis. As of September 30, 2025, the hedge was determined to be highly effective, and the Company expects the hedge to remain effective for the duration of the swap.

During the three months ended September 30, 2025 and 2024, the Company recorded $0.7 million and $1.1 million, respectively, in interest income on taxable investment securities related to the swap. For the nine months ended September 30, 2025 and 2024, the Company recorded $2.1 million and $1.9 million, respectively, in interest income from the swap.

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

Derivative Financial Instruments Not Designated as Hedging InstrumentsAsset DerivativesLiability Derivatives
Fair Value atFair Value at
(dollars in thousands)Balance Sheet LocationSeptember 30,
2025		December 31,
2024		September 30,
2025		December 31,
2024
Interest rate lock and forward sale commitmentsOther assets / other liabilities$— $46 $16 $4 
Risk participation agreementsOther assets / other liabilities— — 3 — 
Back-to-back swap agreementsOther assets / other liabilities3,123 3,840 3,123 3,840 
Derivative Financial Instruments Designated as Hedging InstrumentsAsset DerivativesLiability Derivatives
Fair Value atFair Value at
(dollars in thousands)Balance Sheet LocationSeptember 30,
2025		December 31,
2024		September 30,
2025		December 31,
2024
Interest rate swapOther assets / other liabilities$4,344 $8,382 $— $— 

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

Derivative Financial Instruments
Not Designated as Hedging Instruments		Location of Gain (Loss)
Recognized in
Earnings on Derivatives		Amount of Gain (Loss)
Recognized in
Earnings on Derivatives
(dollars in thousands)
Three Months Ended September 30, 2025  
Interest rate lock and forward sale commitmentsMortgage banking income$(16)
Back-to-back swap agreementsOther service charges and fees49 
Three Months Ended September 30, 2024 
Interest rate lock and forward sale commitmentsMortgage banking income1 
Loans held for saleOther income17 

Derivative Financial Instruments
Not Designated as Hedging Instruments		Location of Gain (Loss)
Recognized in
Earnings on Derivatives		Amount of Gain (Loss)
Recognized in
Earnings on Derivatives
(dollars in thousands)
Nine Months Ended September 30, 2025 
Interest rate lock and forward sale commitmentsMortgage banking income$(59)
Loans held for saleOther income78 
Back-to-back swap agreementsOther service charges and fees225 
Nine Months Ended September 30, 2024 
Interest rate lock and forward sale commitmentsMortgage banking income32 
Back-to-back swap agreementsOther service charges and fees80 

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Derivative Financial Instruments
Designated as Hedging Instruments		Location of Gain (Loss)
Recognized in
Earnings on Derivatives		Amount of Gain (Loss)
Recognized in
Earnings on Derivatives
(dollars in thousands)
Three Months Ended September 30, 2025
Interest rate swapInterest income$675 
Three Months Ended September 30, 2024
Interest rate swapInterest income1,148 

Derivative Financial Instruments
Designated as Hedging Instruments		Location of Gain (Loss)
Recognized in
Earnings on Derivatives		Amount of Gain (Loss)
Recognized in
Earnings on Derivatives
(dollars in thousands)
Nine Months Ended September 30, 2025
Interest rate swapInterest income$2,142 
Nine Months Ended September 30, 2024
Interest rate swapInterest income1,924 

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

Line Item in the Consolidated Balance Sheets


(dollars in thousands)September 30, 2025December 31, 2024
Investment securities, available-for-sale:
Carrying Amount of the Hedged Assets$91,038 $88,777 
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets(4,600)(8,805)

8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT

The following table presents the Company's long-term debt, which is based on original maturity and consists of advances under the arrangement with Federal Home Loan Bank of Des Moines, junior subordinated debentures and subordinated notes as of the dates presented. These borrowing agreements may include customary financial covenants, with which the Company was in compliance as of September 30, 2025.

(dollars in thousands)September 30, 2025December 31, 2024
Long-term debt:
Federal Home Loan Bank long-term advances$25,000 $50,000 
Junior subordinated debentures51,547 51,547 
Subordinated notes, net of unamortized debt issuance costs54,980 54,798 
Total$131,527 $156,345 

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

(dollars in thousands)
Year Ending December 31,
2025 (remainder)$— 
2026— 
2027— 
202825,000 
2029— 
203055,000 
Thereafter51,547 
Total$131,547 

Federal Home Loan Bank Advances and Other Borrowings

The Bank is a member of the Federal Home Loan Bank of Des Moines (the "FHLB"). As of September 30, 2025, the Bank maintained a $1.59 billion line of credit, compared to $1.76 billion as of December 31, 2024. The undrawn amount under this arrangement was $1.47 billion as of September 30, 2025, compared to $1.63 billion as of December 31, 2024. There were no short-term borrowings outstanding under this arrangement as of September 30, 2025 and December 31, 2024.

As of September 30, 2025, there was a $25.0 million long-term advance under the FHLB arrangement bearing an interest rate of 4.02%. There were $50.0 million in long-term advances under the FHLB arrangement bearing interest rates between 4.02% and 4.62% as of December 31, 2024.

The FHLB also provides standby letters of credit on behalf of the Bank to secure certain public deposits. If the FHLB is required to make a payment under a standby letter of credit, the amount is converted to an advance. As of September 30, 2025, standby letters of credit under this arrangement totaled $95.6 million, compared to $83.6 million as of December 31, 2024. These letters of credit reduce the available borrowing capacity under the total line of credit, similar to outstanding advances.

In accordance with the collateral provisions of the Advances, Security and Deposit Agreement with the FHLB, the Bank pledged certain real estate loans with a carrying value of approximately $2.79 billion and $3.14 billion as of September 30, 2025 and December 31, 2024, respectively, as collateral for the FHLB advances and standby letters of credit.

The Bank also had access to the Federal Reserve Discount Window, with additional unused borrowing capacity of $209.2 million and $232.1 million as of September 30, 2025 and December 31, 2024, respectively. Certain commercial and commercial real estate loans with a par value totaling $100.1 million and $128.3 million as of September 30, 2025 and December 31, 2024, respectively, were pledged to the Federal Reserve as collateral on the line of credit. In addition, investment securities with a par value of $174.8 million and $184.3 million as of September 30, 2025 and December 31, 2024, respectively, were pledged to the Federal Reserve in support of the line of credit. The Federal Reserve does not have the right to sell or repledge these assets.

Additionally, the Bank had unused unsecured credit lines with other lenders totaling $75.0 million that was available as of September 30, 2025 and December 31, 2024.

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Junior Subordinated Debentures

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

(dollars in thousands)
Name of TrustSeptember 30, 2025December 31, 2024Interest Rate
CPB Capital Trust IV$30,928 $30,928 
Three-month CME Term SOFR + tenor spread adjustment of 0.26% + 2.45%
CPB Statutory Trust V20,619 20,619 
Three-month CME Term SOFR + tenor spread adjustment of 0.26% + 1.87%
Total$51,547 $51,547 

In September 2004, the Company established CPB Capital Trust IV ("Trust IV"), a wholly-owned statutory trust. Trust IV issued $30.0 million in floating rate trust preferred securities, bearing interest at three-month LIBOR plus 2.45%, with a maturity date of December 15, 2034. The principal assets of Trust IV consist of $30.9 million in the Company's junior subordinated debentures, which carry identical interest rate and maturity terms. Trust IV issued $0.9 million in common securities to the Company.

In December 2004, the Company formed CPB Statutory Trust V ("Trust V"), another wholly-owned statutory trust. Trust V issued $20.0 million in floating rate trust preferred securities, bearing interest at three-month LIBOR plus 1.87%, also maturing on December 15, 2034. The principal assets of Trust V include $20.6 million in the Company's junior subordinated debentures, with matching interest rate and maturity terms. Trust V issued $0.6 million in common securities to the Company.

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

The trust preferred securities, the junior subordinated debentures, and the common securities issued by Trusts IV and V are redeemable in whole or in part on any interest payment date, or in whole but not in part within 90 days following the occurrence of certain specified 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 elect to defer interest payments on the junior subordinated debentures for up to 20 consecutive quarterly periods without triggering default or penalty. This would result in a corresponding deferral of distribution payments on the related trust preferred securities.

Under applicable regulatory guidelines and interpretations, the junior subordinated debentures qualify for inclusion in Tier 1 capital, subject to certain limitations.

Subordinated Notes

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

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

On October 20, 2020, the Company completed a $55.0 million private placement of ten-year fixed-to-floating rate subordinated notes, intended to support regulatory capital ratios and for general corporate purposes. At the end of the fourth quarter of 2020, the Company exchanged the privately placed notes for registered notes with identical terms and aggregate principal amount.

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The subordinated notes bear a fixed interest rate of 4.75% for the first five years, through but excluding November 1, 2025. Beginning November 1, 2025, the interest rate will reset quarterly to the then current three-month Secured Overnight Financing Rate ("SOFR"), as published by the Federal Reserve Bank of New York, plus 456 basis points. The subordinated notes are callable on any quarterly interest payment date on or after November 1, 2025. 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.

Under current regulatory guidelines and interpretations, the subordinated notes qualify for inclusion in Tier 2 capital, subject to certain applicable limitations.

As of September 30, 2025, the subordinated notes had a carrying value of $55.0 million, net of unamortized debt issuance costs of $20 thousand, compared to a carrying value of $54.8 million and $0.2 million in unamortized debt issuance costs as of December 31, 2024.

9. REVENUE FROM CONTRACTS WITH CUSTOMERS

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

Three Months Ended September 30, 2025Three Months Ended September 30, 2024
(dollars in thousands)In-ScopeOut-of-ScopeTotalIn-ScopeOut-of-ScopeTotal
Other operating income:
Mortgage banking income$297 $661 $958 $352 $470 $822 
Service charges on deposit accounts2,330 — 2,330 2,167 — 2,167 
Other service charges and fees5,914 558 6,472 5,234 713 5,947 
Income from fiduciary activities1,547 — 1,547 1,447 — 1,447 
Income from bank-owned life insurance— 1,879 1,879 — 1,897 1,897 
Net (losses) gains on sales of investment securities— (30)(30)— — — 
Other— 351 351 — 454 454 
Total other operating income$10,088 $3,419 $13,507 $9,200 $3,534 $12,734 


Nine Months Ended September 30, 2025Nine Months Ended September 30, 2024
(dollars in thousands)In-ScopeOut-of-ScopeTotalIn-ScopeOut-of-ScopeTotal
Other operating income:
Mortgage banking income$736 $1,563 $2,299 $626 $1,849 $2,475 
Service charges on deposit accounts6,601 — 6,601 6,405 — 6,405 
Other service charges and fees16,372 1,823 18,195 15,252 1,825 17,077 
Income from fiduciary activities4,672 — 4,672 4,331 — 4,331 
Income from bank-owned life insurance— 4,636 4,636 — 4,653 4,653 
Net (losses) gains on sales of investment securities— (30)(30)— — — 
Other— 1,243 1,243 — 1,158 1,158 
Total other operating income$28,381 $9,235 $37,616 $26,614 $9,485 $36,099 

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10. SHARE-BASED COMPENSATION

Restricted and Performance Stock Units

Under the Company's 2023 Stock Compensation Plan, restricted stock units ("RSUs") and performance stock units ("PSUs") were awarded to certain non-officer directors and management personnel. These awards typically vest over two-, three- or five-year periods from the grant date and are subject to forfeiture until performance and employment conditions are achieved.

Compensation expense is generally measured based on the market price of the Company's stock on the grant date, and is recognized over the applicable vesting period.

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

(dollars in thousands, except per share data)SharesWeighted Average Grant Date Fair Value Per ShareFair Value of RSUs and PSUs That Vested During the Period
Non-vested RSUs and PSUs, beginning of period284,151 $22.48 
Changes during the period:  
Granted108,246 30.12 
Forfeited(1,763)29.05 
Vested(102,355)25.45 $3,032 
Non-vested RSUs and PSUs, end of period288,279 24.22 

11. SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS

The Bank established Supplemental Executive Retirement Plans ("SERP") in 1995, 2001, 2004 and 2006, to provide supplemental retirement benefits to certain current and former officers of the Company. On December 31, 2002, the 1995 and 2001 SERPs were curtailed. Additionally, as part of the September 2004 merger with CB Bancshares, Inc. ("CBBI"), the Company assumed CBBI's SERP obligations.

The projected benefit obligation of the unfunded SERPs is recorded in other liabilities on the Company's consolidated balance sheets. As of September 30, 2025, the projected benefit obligation was $8.7 million, compared to $8.8 million as of December 31, 2024. The Company expects to pay approximately $0.6 million in benefit payments under the SERPs in the next 12 months.

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

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2025202420252024
Interest cost$113 $107 $341 $323 
Net periodic benefit cost$113 $107 $341 $323 

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

12. OPERATING LEASES

The Company leases certain land and buildings for its bank branches and ATMs. Some leases include renewal options, which are evaluated and included in the measurement of right-of-use ("ROU") assets and lease liabilities when it is reasonably certain that the options will be exercised, in accordance with ASC 842, "Leases."

All leases are classified as operating leases. Several leases contain variable payments, primarily related to common area maintenance costs and Hawaii state tax rates.

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The Company has elected the short-term exemption, for leases with terms of 12 months or less. Such leases are excluded from the calculation of the ROU assets and lease liabilities and are not included on the Company's balance sheets. The Company has also elected to account for lease and non-lease components as a single lease component for all classes of underlying assets.

The most significant assumption in applying ASC 842 is the discount rate. Because most lease agreements do not specify an implicit interest rate, the Company estimates the discount rate using the collateralized borrowing rate it would pay for a loan with a similar term.

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

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2025202420252024
Lease cost:
Operating lease cost$1,316 $1,605 $3,959 $4,345 
Variable lease cost727 484 1,989 2,346 
Total lease cost$2,043 $2,089 $5,948 $6,691 
Other information:
Operating cash flows from operating leases$(1,283)$(1,564)$(3,842)$(4,246)
Weighted-average remaining lease term - operating leases 9.38 years10.53 years9.38 years10.53 years
Weighted-average discount rate - operating leases4.15 %4.04 %4.15 %4.04 %

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

(dollars in thousands)Undiscounted Cash FlowsLease Liability ExpenseLease Liability Reduction
Year Ending December 31,
2025 (remainder)$1,197 $266 $931 
20264,816 964 3,852 
20274,048 827 3,221 
20283,314 711 2,603 
20292,894 612 2,282 
20302,921 516 2,405 
Thereafter12,849 1,855 10,994 
Total $32,039 $5,751 $26,288 

During the third quarter of 2025, as part of a strategic consolidation of the Company's Operations Center into its main headquarters, the Company terminated its lease for the Operations Center, which was originally scheduled to run through 2038. As a result of the lease termination, the Company recognized a reduction of the ROU asset of $4.7 million, a reduction of the ROU liability of $4.1 million, and a credit of $0.6 million to other operating expense.

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

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2025202420252024
Total rental income recognized$402 $519 $1,351 $1,539 

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

(dollars in thousands)
Year Ending December 31,
2025 (remainder)$364 
20261,304 
20271,252 
2028841 
2029680 
2030533 
Thereafter759 
Total $5,733 

13. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

(dollars in thousands)Before TaxTax EffectNet of Tax
Three Months Ended September 30, 2025   
Net change in fair value of investment securities:   
Net unrealized gains on AFS investment securities arising during the period$11,774 $3,104 $8,670 
Less: Reclassification adjustments from AOCI realized in net income30 8 22 
Less: Amortization of unrealized losses on investment securities transferred to HTM1,818 479 1,339 
Net change in fair value of investment securities13,622 3,591 10,031 
Net change in fair value of derivatives:
Net unrealized losses arising during the period(583)(154)(429)
Other comprehensive income$13,039 $3,437 $9,602 

(dollars in thousands)Before TaxTax EffectNet of Tax
Three Months Ended September 30, 2024   
Net change in fair value of investment securities:   
Net unrealized gains on AFS investment securities arising during the period$27,092 $7,150 $19,942 
Less: Amortization of unrealized losses on investment securities transferred to HTM1,920 507 1,413 
Net change in fair value of investment securities29,012 7,657 21,355 
Net change in fair value of derivatives:
Net unrealized losses arising during the period(4,317)(1,140)(3,177)
SERP:   
Amortization of net actuarial gain(2)(1)(1)
Other comprehensive income$24,693 $6,516 $18,177 

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(dollars in thousands)Before TaxTax EffectNet of Tax
Nine Months Ended September 30, 2025   
Net change in fair value of investment securities:   
Net unrealized gains on AFS investment securities arising during the period$29,408 $7,755 $21,653 
Less: Reclassification adjustments from AOCI realized in net income30 8 22 
Less: Amortization of unrealized losses on investment securities transferred to HTM5,143 1,356 3,787 
Net change in fair value of investment securities34,581 9,119 25,462 
Net change in fair value of derivatives:
Net unrealized losses arising during the period(4,205)(1,109)(3,096)
Other comprehensive income$30,376 $8,010 $22,366 

(dollars in thousands)Before TaxTax EffectNet of Tax
Nine Months Ended September 30, 2024   
Net change in fair value of investment securities:   
Net unrealized gains on AFS investment securities arising during the period$20,427 $5,391 $15,036 
Less: Amortization of unrealized losses on investment securities transferred to HTM5,425 1,432 3,993 
Net change in fair value of investment securities25,852 6,823 19,029 
Net change in fair value of derivatives:
Net unrealized losses arising during the period$(1,286)$(340)$(946)
SERP:   
Amortization of net actuarial gain(2)(1)(1)
Other comprehensive income$24,564 $6,482 $18,082 


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

(dollars in thousands)Investment SecuritiesDerivativesSERPAOCI
Three Months Ended September 30, 2025   
Balance at beginning of period$(106,060)$3,827 $575 $(101,658)
Other comprehensive income (loss) before reclassifications8,670 (429)— 8,241 
Reclassification adjustments from AOCI1,361 — — 1,361 
Total other comprehensive income (loss)10,031 (429)— 9,602 
Balance at end of period$(96,029)$3,398 $575 $(92,056)

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(dollars in thousands)Investment SecuritiesDerivativesSERPAOCI
Three Months Ended September 30, 2024   
Balance at beginning of period$(130,248)$7,260 $297 $(122,691)
Other comprehensive income (loss) before reclassifications19,942 (3,177)— 16,765 
Reclassification adjustments from AOCI1,413 — (1)1,412 
Total other comprehensive income (loss)21,355 (3,177)(1)18,177 
Balance at end of period$(108,893)$4,083 $296 $(104,514)

(dollars in thousands)Investment SecuritiesDerivativesSERPAOCI
Nine Months Ended September 30, 2025   
Balance at beginning of period$(121,491)$6,494 $575 $(114,422)
Other comprehensive income (loss) before reclassifications21,653 (3,096)— 18,557 
Reclassification adjustments from AOCI3,809 — — 3,809 
Total other comprehensive income (loss)25,462 (3,096)— 22,366 
Balance at end of period$(96,029)$3,398 $575 $(92,056)

(dollars in thousands)Investment SecuritiesDerivativesSERPAOCI
Nine Months Ended September 30, 2024   
Balance at beginning of period$(127,922)$5,029 $297 $(122,596)
Other comprehensive (loss) income before reclassifications15,036 (946)— 14,090 
Reclassification adjustments from AOCI3,993 — (1)3,992 
Total other comprehensive (loss) income19,029 (946)(1)18,082 
Balance at end of period$(108,893)$4,083 $296 $(104,514)


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

Amount Reclassified from AOCIAffected Line Item in the Statement Where Net Income is Presented
(dollars in thousands)Three Months Ended September 30,
Details about AOCI Components20252024
Sale of AFS investment securities:
Realized loss on sale of AFS investment securities$30 $— Net loss on sale of investment securities
Tax effect(8)— Income tax benefit
Net of tax22 — 
Amortization of unrealized losses on investment securities transferred to HTM:
Amortization$1,818 $1,920 Interest and dividends on investment securities
Tax effect(479)(507)Income tax benefit
Net of tax1,339 1,413 
SERP:   
Amortization of net actuarial gain— (2)Other operating expense - other
Tax effect— 1 Income tax expense
Net of tax— (1)
Total reclassification adjustments from AOCI for the period, net of tax$1,361 $1,412 

Amount Reclassified from AOCIAffected Line Item in the Statement Where Net Income is Presented
(dollars in thousands)Nine Months Ended September 30,
Details about AOCI Components20252024
Sale of AFS investment securities:
Realized loss on sale of AFS investment securities$30 $— Net loss on sale of investment securities
Tax effect(8)— Income tax benefit
Net of tax22 — 
Amortization of unrealized losses on investment securities transferred to HTM:
Amortization$5,143 $5,425 Interest and dividends on investment securities
Tax effect(1,356)(1,432)Income tax benefit
Net of tax3,787 3,993 
SERP:   
Amortization of net actuarial gain— (2)Other operating expense - other
Tax effect— 1 Income tax expense
Net of tax— (1)
Total reclassification adjustments from AOCI for the period, net of tax$3,809 $3,992 
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14. EARNINGS PER SHARE

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

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands, except per share data)2025202420252024
Net income$18,574 $13,305 $54,605 $42,067 
Weighted average common shares outstanding - basic26,968,163 27,064,035 27,014,059 27,054,737 
Dilutive effect of employee stock options and awards115,117 130,590 104,765 83,248 
Weighted average common shares outstanding - diluted27,083,280 27,194,625 27,118,824 27,137,985 
Basic earnings per share$0.69 $0.49 $2.02 $1.55 
Diluted earnings per share$0.69 $0.49 $2.01 $1.55 
Anti-dilutive employee stock options and awards— — 309 62 

15. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Disclosures about Fair Value of Financial Instruments

The following summarizes the methods and assumptions used to estimate the fair values of the Company's financial instruments:

Short-Term Financial Instruments

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

Investment Securities

Fair values of investment securities are determined using market price quotations provided by third-party pricing services, which apply pricing models supported by current market data. Where quoted market prices are unavailable, fair values are based on comparable securities.

Loans

Fair values of loans are estimated using discounted cash flows models applied to portfolios of loans with similar financial characteristics including the type of loan, interest terms and repayment history. Cash flows are discounted using estimated market rates that reflect credit and interest rate risks. These rates are derived from market data and borrower-specific information. The weighted average discount rate used in the valuation of loans was 6.41% as of September 30, 2025, and 7.07% as of December 31, 2024. Fair value measurements are based on the exit price notion, in accordance with ASU 2016-01.

Loans Held for Sale

Fair values of loans classified as held for sale are generally based upon quoted prices for similar assets in active markets, acceptance of firm offer letters with agreed upon purchase prices, discounted cash flow models that take into account market observable assumptions, or independent appraisals of the underlying collateral securing the loans.

Loans transferred from held-for-investment to held-for-sale are reported at fair value, net of estimated selling costs on the consolidated balance sheets.

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Mortgage Servicing Rights

MSRs are initially recorded at fair value determined by a discounted cash flow model prepared by a third-party service provider using market-based assumptions at origination. Subsequent impairment assessments are performed at each reporting period and use current market assumptions. Key assumptions include mortgage prepayment speeds, discount rates, servicing income, and costs. These inputs are subjective and require management judgment. Changes in assumptions are made to reflect evolving market trends and loan product types.

MSRs are classified as Level 3 assets in the fair value hierarchy due to significant unobservable inputs. The Company’s valuation techniques rely on discounted cash flow models reflecting expected cash flows, prepayment behavior, and cost structures. Fair value measurements and related assumptions are reviewed periodically and validated against market data and third-party valuations.

Deposit Liabilities

For deposits with no stated maturity, such as noninterest-bearing demand deposits and interest-bearing demand and savings accounts, fair value equals the carrying amount, representing the amount payable on demand.

For time deposits, fair value is estimated by discounting future cash flows using rates currently offered for FHLB advances of similar remaining maturities. The weighted average discount rate used in the valuation of time deposits was 4.09% as of September 30, 2025 and 4.50% as of December 31, 2024.

Long-Term Debt

Fair values of long-term debt are estimated by discounting scheduled cash flows over the contractual borrowing period using estimated market rates for similar borrowing arrangements. The weighted average discount rate used in the valuation of long-term debt was 6.76% as of September 30, 2025 and 6.68% as of December 31, 2024.

Derivatives

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

Off-Balance Sheet Financial Instruments

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

Limitations of Fair Value Estimates

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

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Fair value estimates are limited to existing on- and off-balance sheet financial instruments and do not include the estimated value of future business or non-financial assets and liabilities such as deferred tax assets and premises and equipment.

(dollars in thousands)  Fair Value Measurement Using
September 30, 2025Carrying
Amount		Estimated
Fair Value		Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Financial assets:     
Cash and due from financial institutions$102,859 $102,859 $102,859 $— $— 
Interest-bearing deposits in other financial institutions207,034 207,034 207,034 — — 
Investment securities1,329,569 1,259,542 61,250 1,191,479 6,813 
Loans held for sale1,557 1,557 — 1,557 — 
Loans5,367,202 5,079,899 — — 5,079,899 
Mortgage servicing rights8,459 11,454 — — 11,454 
Accrued interest receivable25,232 25,232 872 4,704 19,656 
Financial liabilities:     
Deposits:     
Noninterest-bearing demand1,903,614 1,903,614 1,903,614 — — 
Interest-bearing demand and savings and money market3,633,606 3,633,606 3,633,606 — — 
Time1,040,464 1,034,331 — — 1,034,331 
Long-term debt131,527 128,287 — — 128,287 
Accrued interest payable8,604 8,604 111 — 8,493 

(dollars in thousands)Fair Value Measurement Using
September 30, 2025Notional
Amount		Carrying
Amount		Estimated
Fair Value		Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Off-balance sheet financial instruments: 
Commitments to extend credit$1,351,802 $— $1,144 $— $1,144 $— 
Standby letters of credit and financial guarantees written2,437 — 37 — 37 — 
Derivatives:
Forward sale commitments1,576 (16)(16)— (16)— 
Risk participation agreements51,424 (3)(3)— (3)— 
Back-to-back swap agreements:
Assets61,095 3,123 3,123 — 3,123 — 
Liabilities(61,095)(3,123)(3,123)— (3,123)— 
Interest rate swap agreements114,580 4,344 4,344 — 4,344 — 
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(dollars in thousands)  Fair Value Measurement Using
December 31, 2024Carrying
Amount		Estimated
Fair Value		Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Financial assets:
Cash and due from financial institutions$77,774 $77,774 $77,774 $— $— 
Interest-bearing deposits in other financial institutions303,167 303,167 303,167 — — 
Investment securities1,334,588 1,244,339 59,498 1,177,994 6,847 
Loans held for sale5,662 5,662 — 5,662 — 
Loans5,332,852 4,916,765 — — 4,916,765 
Mortgage servicing rights8,473 12,387 — — 12,387 
Accrued interest receivable 23,378 23,378 462 4,607 18,309 
Financial liabilities:     
Deposits:     
Noninterest-bearing demand1,888,937 1,888,937 1,888,937 — — 
Interest-bearing demand and savings and money market3,667,889 3,667,889 3,667,889 — — 
Time1,087,185 1,079,275 — — 1,079,275 
Long-term debt156,345 153,760 — — 153,760 
Accrued interest payable10,051 10,051 113 — 9,938 

(dollars in thousands)  Fair Value Measurement Using
December 31, 2024Notional
Amount		Carrying
Amount		Estimated
Fair Value		Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Off-balance sheet financial instruments:
Commitments to extend credit$1,219,537 $— $1,167 $— $1,167 $— 
Standby letters of credit and financial guarantees written2,702 — 41 — 41 — 
Derivatives:
Interest rate lock commitments469 (4)(4)— (4)— 
Forward sale commitments4,909 46 46 — 46 — 
Risk participation agreements35,183 — — — — — 
Back-to-back swap agreements:
Assets50,202 3,840 3,840 — — 3,840 
Liabilities(50,202)(3,840)(3,840)— — (3,840)
Interest rate swap agreements115,545 8,382 8,382 — 8,382 — 

Fair Value Measurements

The Company classifies its financial assets and liabilities measured at fair value into a three-level hierarchy, based on the markets in which the financial assets and liabilities are traded and the reliability of the assumptions used to determine fair value as follows:

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

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

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•Level 3 — Fair value is determined by using model-based techniques that rely on significant assumptions not observable in the market. These unobservable assumptions reflect the Company's own estimates of assumptions that market participants would use in pricing the asset or liability. Techniques may include the use of discounted cash flow models and other similar methods that require the use of significant judgment or estimation.

Fair value is measured based on the price that we would expect to receive if an asset were sold, or the price that we would expect to pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Company also prioritizes the use of observable inputs and minimizes reliance on unobservable inputs when developing fair value estimates.

Fair Value Hierarchy Transfers

During the nine months ended September 30, 2025, the Company transferred its back-to-back swaps from Level 3 to Level 2 of the fair value hierarchy due to a change in valuation methodology.

During the year ended December 31, 2024, the Company transferred its interest rate swap from Level 3 to Level 2 of the fair value hierarchy due to a change in valuation methodology.

Recurring and Nonrecurring Fair Value Measurements

The Company uses fair value measurements to record adjustments to certain financial assets and liabilities and to determine fair value disclosures. Available-for-sale securities and derivatives are recorded at fair value on a recurring basis.

Periodically, the Company may be required to record other financial assets, such as loans held for sale, individually evaluated loans, mortgage servicing rights, and other real estate owned, at fair value on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of lower of cost or fair value accounting, or write-downs of individual assets.

The following tables present the fair value of financial assets and liabilities measured on a recurring basis as of the dates presented:
(dollars in thousands)Fair Value at Reporting Date Using
September 30, 2025Fair ValueQuoted Prices
in Active
Markets for
Identical Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Available-for-sale securities:    
Debt securities:    
States and political subdivisions$116,247 $— $110,111 $6,136 
U.S. Treasury and other government-sponsored entities and agencies100,761 61,250 39,511 — 
Collateralized loan obligations40,903 — 40,903 — 
Mortgage-backed securities:    
Residential - U.S. government-sponsored entities and agencies416,555 — 416,555 — 
Residential - Non-government agencies15,963 — 15,286 677 
Commercial - U.S. government-sponsored entities and agencies68,254 — 68,254 — 
Total available-for-sale investment securities758,683 61,250 690,620 6,813 
Derivatives:
Forward sale commitments(16)— (16)— 
Risk participation agreements(3)— (3)— 
Interest rate swap agreements4,344 — 4,344 — 
Total derivatives4,325 — 4,325 — 
Total$763,008 $61,250 $694,945 $6,813 

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(dollars in thousands)Fair Value at Reporting Date Using
December 31, 2024Fair ValueQuoted Prices
in Active
Markets for
Identical Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Available-for-sale securities:    
Debt securities:    
States and political subdivisions$116,833 $— $110,668 $6,165 
U.S. Treasury and other government-sponsored entities and agencies81,200 59,498 21,702 — 
Collateralized loan obligations31,140 — 31,140 — 
Mortgage-backed securities:    
Residential - U.S. government-sponsored entities and agencies414,471 — 414,471 — 
Residential - Non-government agencies16,926 — 16,244 682 
Commercial - U.S. government-sponsored entities and agencies67,161 — 67,161 — 
Commercial - Non-government agencies9,927 — 9,927 — 
Total available-for-sale investment securities737,658 59,498 671,313 6,847 
Derivatives:
Interest rate lock commitments(4)— (4)— 
Forward sale commitments46 — 46 — 
Interest rate swap agreements8,382 — 8,382 — 
Total derivatives8,424 — 8,424 — 
Total$746,082 $59,498 $679,737 $6,847 

The following table presents changes in Level 3 financial assets and liabilities measured at fair value on a recurring basis for the periods presented:
Available-For-Sale Debt Securities:
(dollars in thousands)States and Political SubdivisionsResidential - Non-Government AgenciesInterest Rate Swap AgreementsTotal
Balance at December 31, 2024$6,165 $682 $— $6,847 
Principal payments received(178)(18)— (196)
Unrealized net gain (loss) included in other comprehensive income149 13 — 162 
Balance at September 30, 2025$6,136 $677 $— $6,813 
  
Balance at December 31, 2023$6,436 $714 $6,440 $13,590 
Principal payments received(163)(18)— (181)
Unrealized net gain (loss) included in other comprehensive income65 22 (1,238)(1,151)
Balance at September 30, 2024$6,338 $718 $5,202 $12,258 

The Company estimates the fair value of Level 3 financial assets and liabilities using a discounted cash flow model that calculates the present value of estimated future principal and interest payments. Based on this methodology, the estimated aggregate fair value of Level 3 financial assets and liabilities measured at fair value on a recurring basis was $6.8 million as of September 30, 2025, compared to and $6.8 million as of December 31, 2024.

The weighted-average discount rate is the primary unobservable input used in the fair value measurement of the available-for-sale debt securities. The weighted average discount rate utilized was 5.78% as of September 30, 2025, 6.22% as of December 31, 2024, and 5.72% as of September 30, 2024. These discount rates were derived by incorporating a credit spread
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over the FHLB Fixed-Rate Advance curve. A significant increase in the weighted-average discount rate could result in a lower fair value, while a decrease could result in a higher fair value.

There were no financial assets or liabilities measured on a nonrecurring basis as of September 30, 2025 and December 31, 2024.
16. SEGMENT INFORMATION

The Company evaluated its operating segments in accordance with ASC 280, "Segment Reporting" and determined that it operates as one reportable segment: banking operations.

The Company provides a comprehensive range of financial services, including construction and real estate development lending, commercial lending, residential mortgage lending, consumer lending, trust services, retail brokerage services, and our retail branch offices. These services are aggregated into a single segment because there is no material difference in the products or services offered based on customer type or geographic location. All activities are closely aligned with the Company's core business of providing financial services and are subject to similar risks and returns. Additionally, no single customer accounts for more than 10% of total revenue, and all operations are domestic, located in the State of Hawaii.

The Company's Executive Committee, designated chief operating decision maker ("CODM"), evaluates performance and makes strategic decisions based on consolidated financial information. The CODM does not assess performance or allocate resources based on individual product lines or geographic regions. Instead, performance is evaluated holistically using consolidated metrics such as total revenue, net income, and risk management of the Company. Resources are allocated to support the Company's overall business strategy.

Revenue is primarily generated from loans, investments, and deposits, as presented in the Company's consolidated balance sheets. Significant expenses include interest expense, provisions for credit losses, and salaries and employee benefits, as reflected in the Company's consolidated statements of income. Segment performance is assessed using consolidated net income, with a primary focus on net interest income, rather than gross interest income and expense.

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

17. CONTINGENT LIABILITIES AND OTHER COMMITMENTS

The Company and its subsidiaries are involved in legal proceedings arising in the ordinary course of business. The outcome and timing of resolution for these matters are inherently uncertain. However, based on information currently available and after consultation with legal counsel, management believes that the ultimate disposition of these matters will not have a material adverse effect on the Company's financial condition or results of operations.

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

18. SUBSEQUENT EVENTS

On October 1, 2025, the Company notified holders of its 4.75% fixed-to-floating rate subordinated notes due in 2030, that it would be redeeming the notes in full on the November 1, 2025 call date. These notes, which totaled $55.0 million in principal outstanding as of September 30, 2025, will be redeemed at par.

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

Forward-Looking Statements and Factors that Could Affect Future Results

Certain statements contained in this quarterly report on Form 10-Q that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"), notwithstanding that such statements are not specifically identified. In addition, certain statements may be contained in our future filings with the U.S. Securities and Exchange Commission ("SEC"), in press releases and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act.

Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, capital expenditures, payment or nonpayment of dividends, net interest income, capital position, credit losses, net interest margin or other financial items; (ii) statements of plans, objectives, and expectations of Central Pacific Financial Corp. (the "Company") or its management or Board of Directors, including those relating to business plans, use of capital resources, products or services, and regulatory developments or actions; (iii) statements of future economic performance including anticipated performance results from our business initiatives; and (iv) any statements of the assumptions underlying or relating to any of the foregoing.

Words such as "believe," "plan," "anticipate," "aim," "seek," "expect," "intend," "forecast," "hope," "target," "continue," "remain," "estimate," "will," "should," "may," and other similar expressions are intended to identify forward-looking statements, although such terminology is not the exclusive means of doing so.

While we believe that our forward-looking statements and their underlying assumptions are reasonably based, such statements are inherently subject to risks and uncertainties that may cause actual results to differ materially from expectations. Factors that may lead to such differences include, 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, and other cost-cutting 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 economic conditions and natural disasters (such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, 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, including the Dodd-Frank Act, changing capital and consumer protection rules, and new regulations affecting our operations and competitiveness;
•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;
•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;
•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");
•increased competition among financial institutions, and other financial service providers;
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•market volatility and monetary fluctuations, including the transition away from the London Interbank Offered Rate Index;
•declines in our market capitalization or changes in the price of the Company's common stock;
•the effects and cost of acquisitions, dispositions, or strategic transactions we may make or evaluate;
•political instability, acts of war, terrorism, or other geopolitical conflicts;
•shifts in consumer spending, borrowings, and savings behaviors;
•technological changes and developments;
•cybersecurity incidents, data privacy breaches, or fraud involving us or third-party vendors;
•deficiencies in our internal controls over financial reporting or disclosure controls, and our ability to remediate them;
•our ability to achieve efficiency ratio improvement goals;
•our ability to attract and retain key personnel;
•changes in our personnel, organization, compensation and benefit plans;
•risks related to the United States fiscal debt, deficit and budget uncertainties; and
•our success at managing the risks involved in the foregoing items.

For further information with respect to factors that could cause actual results to materially differ from the expectations or projections stated in the forward-looking statements, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's Forms 10-Q and 10-K for the current fiscal quarter and the last fiscal year, respectively, and in particular, the discussion of "Risk Factors" set forth 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.

Overview

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, 2025, Central Pacific Bank operated 27 branches and 55 ATMs across the State of Hawaii, offering full-service community banking.

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:

•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 and homeowners. 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
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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 contribute meaningfully to non-interest 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, a professional and reliable resource to meet Hawaii’s housing needs, and also serve as a bridge between Hawaii and Japan. Through a legacy of strong connections with Japan, including individuals, businesses and several regional banks, we continue to service the needs and promote ongoing activities primarily through deposit product offerings and two-way referrals of other products and services.

Basis of Presentation

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, 2024 filed with the U.S. Securities and Exchange Commission (the "SEC") on February 26, 2025, 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 noted below with the Audit Committee of the Board of Directors, and the Audit Committee has also reviewed the accompanying disclosures.

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.

Financial Summary

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.

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.

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
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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.

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.

Three Months Ended September 30,Nine Months Ended September 30,
 2025202420252024
Return on average assets1.01 %0.72 %0.99 %0.76 %
Return on average shareholders’ equity12.89 10.02 12.99 10.91 
Basic earnings per share$0.69 $0.49 $2.02 $1.55 
Diluted earnings per share0.69 0.49 2.01 1.55 

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 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.

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.

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%.

Three Months Ended September 30,Nine Months Ended September 30,
2025202420252024
Financial Measures:
Net income$18,574 $13,305 $54,605 $42,067 
Diluted earnings per share$0.69 $0.49 $2.01 $1.55 
Pre-provision net revenue (non-GAAP)$27,799 $19,898 $83,385 $63,644 
Return on average assets1.01 %0.72 %0.99 %0.76 %
Return on average shareholders' equity12.89 %10.02 %12.99 %10.91 %
Efficiency ratio (non-GAAP)62.84 %70.12 %61.47 %66.86 %
As of September 30, 2025 and 2024:
Tangible common equity ratio (non-GAAP)7.92 %7.31 %

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Three Months Ended September 30,Nine Months Ended September 30,
2025202420252024
Adjusted Financial Measures (Non-GAAP):
Adjusted net income$19,741 $15,667 $55,772 $44,429 
Adjusted diluted earnings per share$0.73 $0.58 $2.06 $1.64 
Adjusted pre-provision net revenue$29,315 $22,966 $84,901 $66,712 
Adjusted return on average assets1.08 %0.85 %1.01 %0.80 %
Adjusted return on average shareholders' equity13.67 %11.75 %13.25 %11.51 %
Adjusted efficiency ratio60.81 %65.51 %60.77 %65.26 %
As of September 30, 2025 and 2024:
Adjusted tangible common equity ratio7.94 %7.34 %

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)2025202420252024
GAAP net income$18,574 $13,305 $54,605 $42,067 
Add: Expenses related to the consolidation of the Operations Center1,516 — 1,516 — 
Add: Expenses related to a strategic opportunity— 3,068 — 3,068 
Non-GAAP pre-tax adjustments1,516 3,068 1,516 3,068 
Less: Income tax effects (assumes 23% ETR)(349)(706)(349)(706)
Non-GAAP adjustments, net of tax
1,167 2,362 1,167 2,362 
Adjusted net income (non-GAAP)$19,741 $15,667 $55,772 $44,429 
Diluted weighted average shares outstanding27,083,280 27,194,625 27,118,824 27,137,985 
GAAP diluted EPS$0.69 $0.49 $2.01 $1.55 
Add: Non-GAAP adjustments, net of tax0.04 0.09 0.05 0.09 
Adjusted diluted EPS (non-GAAP)$0.73 $0.58 $2.06 $1.64 
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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)2025202420252024
Average assets$7,341,281 $7,347,403 $7,347,895 $7,378,479 
Add: Non-GAAP adjustments, net of tax1,167 2,362 389 787 
Adjusted average assets (non-GAAP)$7,342,448 $7,349,765 $7,348,284 $7,379,266 
ROA (GAAP net income divided by average assets)1.01 %0.72 %0.99 %0.76 %
Add: Non-GAAP adjustments, net of tax0.07 0.13 0.02 0.04 
Adjusted ROA (non-GAAP)1.08 %0.85 %1.01 %0.80 %
Average shareholders' equity$576,531 $530,928 $560,671 $513,914 
Add: Non-GAAP adjustments, net of tax1,167 2,362 389 787 
Adjusted average shareholders' equity (non-GAAP)$577,698 $533,290 $561,060 $514,701 
ROE (GAAP net income divided by average shareholders' equity)12.89 %10.02 %12.99 %10.91 %
Add: Non-GAAP adjustments, net of tax0.78 1.73 0.26 0.60 
Adjusted ROE (non-GAAP)13.67 %11.75 %13.25 %11.51 %

Pre-Provision Net Revenue

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:

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2025202420252024
GAAP net income$18,574 $13,305 $54,605 $42,067 
Add: Income tax expense5,068 3,760 15,464 12,569 
Pre-tax income23,642 17,065 70,069 54,636 
Add: Provision for credit losses4,157 2,833 13,316 9,008 
PPNR (non-GAAP)
27,799 19,898 83,385 63,644 
Add: Expenses related to the consolidation of the Operations Center1,516 — 1,516 — 
Add: Expenses related to a strategic opportunity— 3,068 — 3,068 
Non-GAAP pre-tax adjustments1,516 3,068 1,516 3,068 
Adjusted PPNR (non-GAAP)
$29,315 $22,966 $84,901 $66,712 

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.

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
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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. However, this ratio should not be viewed as a substitute for GAAP results and may not be comparable to similarly titled measures reported by other companies. The following table presents the Company's efficiency ratio and adjusted efficiency ratio for the periods presented:

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2025202420252024
Total other operating expense$47,009 $46,687 $133,027 $128,414 
Less: Expenses related to the consolidation of the Operations Center(1,516)— (1,516)— 
Less: Expenses related to a strategic opportunity— (3,068)— (3,068)
Non-GAAP pre-tax adjustments(1,516)(3,068)(1,516)(3,068)
Adjusted total other operating expense (non-GAAP)$45,493 $43,619 $131,511 $125,346 
Net interest income$61,301 $53,851 $178,796 $155,959 
Total other operating income13,507 12,734 37,616 36,099 
Total revenue$74,808 $66,585 $216,412 $192,058 
Efficiency ratio (non-GAAP)62.84 %70.12 %61.47 %66.86 %
Less: Non-GAAP pre-tax adjustments(2.03)(4.61)(0.70)(1.60)
Adjusted efficiency ratio (non-GAAP)60.81 %65.51 %60.77 %65.26 %

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.

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, 2025December 31, 2024September 30, 2024
Total equity$588,066 $538,385 $543,725 
Less: Intangible assets— — (1,390)
TCE588,066 538,385 542,335 
Add: Non-GAAP adjustments, net of tax1,167 10,011 2,362 
Adjusted TCE (non-GAAP)$589,233 $548,396 $544,697 
Total assets$7,421,478 $7,472,096 $7,415,430 
Less: Intangible assets— — (1,390)
Tangible assets7,421,478 7,472,096 7,414,040 
Add: Non-GAAP adjustments, net of tax1,167 10,011 2,362 
Adjusted tangible assets (non-GAAP)$7,422,645 $7,482,107 $7,416,402 
TCE ratio (non-GAAP)7.92 %7.21 %7.31 %
Add: Non-GAAP adjustments, net of tax0.02 0.12 0.03 
Adjusted TCE ratio (non-GAAP)7.94 %7.33 %7.34 %

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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.

Tourism Trends

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.

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.

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.

Labor Market and Economic Indicators

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.

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.

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, 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.

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Interest Rate Environment

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.

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.

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.

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, 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.

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(dollars in thousands)Three Months Ended September 30,
20252024Variance
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$167,247 4.41 %$1,857 $203,657 5.42 %$2,775 $(36,410)(1.01)%$(918)
Investment securities:
Taxable (1)1,348,314 2.90 9,776 1,340,347 2.68 8,975 7,967 0.22 801 
Tax-exempt (1) (2)138,470 2.59 898 141,168 1.98 697 (2,698)0.61 201 
Total investment securities1,486,784 2.87 10,674 1,481,515 2.61 9,672 5,269 0.26 1,002 
Loans, including loans held for sale5,332,656 5.01 67,222 5,330,810 4.89 65,469 1,846 0.12 1,753 
FHLB and FRB stock25,066 6.30 395 6,928 7.31 127 18,138 (1.01)268 
Total interest earning assets7,011,753 4.55 80,148 7,022,910 4.43 78,043 (11,157)0.12 2,105 
Noninterest-earning assets329,528   324,493   5,035  
Total assets$7,341,281   $7,347,403   $(6,122) 
Liabilities and Equity
Interest-bearing liabilities:         
Interest-bearing demand deposits$1,358,837 0.14 %$490 $1,267,135 0.15 %$484 $91,702 (0.01)%$6 
Savings and money market deposits2,293,452 1.54 8,898 2,298,853 1.77 10,235 (5,401)(0.23)(1,337)
Time deposits up to $250,000437,192 2.28 2,509 534,497 3.15 4,238 (97,305)(0.87)(1,729)
Time deposits over $250,000586,251 3.32 4,901 647,728 4.18 6,802 (61,477)(0.86)(1,901)
Total interest-bearing deposits4,675,732 1.43 16,798 4,748,213 1.82 21,759 (72,481)(0.39)(4,961)
FHLB advances and other short-term borrowings— — — — — — — — — 
Long-term debt131,493 5.61 1,860 156,247 5.82 2,287 (24,754)(0.21)(427)
Total interest-bearing liabilities4,807,225 1.54 18,658 4,904,460 1.95 24,046 (97,235)(0.41)(5,388)
Noninterest-bearing deposits1,833,960  1,787,209  46,751 
Other liabilities123,565   124,806   (1,241) 
Total liabilities6,764,750   6,816,475   (51,725) 
Total equity576,531   530,928   45,603  
Total liabilities and equity$7,341,281   $7,347,403   $(6,122) 
Net interest income (taxable-equivalent)  61,490   53,997   7,493 
Taxable-equivalent adjustment(189)(146)(43)
Net interest income (GAAP)$61,301 $53,851 $7,450 
Interest rate spread3.01 %2.48 %0.53 %
Net interest margin (taxable-equivalent) 3.49 %  3.07 %  0.42 % 
(1)  At amortized cost.
(2) Includes taxable-equivalent adjustment using a federal statutory tax rate of 21%.

Net interest income (expressed on a taxable-equivalent basis) was $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.

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Interest Income

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.

Interest Expense

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.

Net Interest Margin

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.
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(dollars in thousands)Nine Months Ended September 30,
20252024Variance
Average
Balance		Average
Yield/
Rate		Interest
Income/
Expense		Average
Balance		Average
Yield/
Rate		Interest
Income/
Expense		Average
Balance		Average
Yield/
Rate		Interest
Income/
Expense
Assets
Interest earning assets:
Interest-bearing deposits in other financial institutions$169,066 4.42 %$5,595 $210,464 5.45 %$8,589 $(41,398)(1.03)%$(2,994)
Investment securities:
Taxable (1)1,367,968 2.87 29,448 1,333,394 2.47 24,652 34,574 0.40 4,796 
Tax-exempt (1) (2)139,050 2.58 2,691 142,085 2.14 2,284 (3,035)0.44 407 
Total investment securities1,507,018 2.84 32,139 1,475,479 2.43 26,936 31,539 0.41 5,203 
Loans, including loans held for sale5,317,481 4.95 197,009 5,372,247 4.79 192,710 (54,766)0.16 4,299 
FHLB and FRB stock23,392 6.31 1,107 6,885 7.43 384 16,507 (1.12)723 
Total interest earning assets7,016,957 4.49 235,850 7,065,075 4.32 228,619 (48,118)0.17 7,231 
Noninterest-earning assets330,938 313,404 17,534 
Total assets$7,347,895 $7,378,479 $(30,584)
Liabilities and Equity
Interest-bearing liabilities:
Interest-bearing demand deposits$1,357,095 0.14 %$1,385 $1,279,256 0.15 %$1,473 $77,839 (0.01)%$(88)
Savings and money market deposits2,304,708 1.52 26,174 2,246,478 1.64 27,655 58,230 (0.12)(1,481)
Time deposits up to $250,000444,726 2.37 7,887 544,823 3.22 13,125 (100,097)(0.85)(5,238)
Time deposits over $250,000597,876 3.41 15,246 714,763 4.31 23,078 (116,887)(0.90)(7,832)
Total interest-bearing deposits4,704,405 1.44 50,692 4,785,320 1.82 65,331 (80,915)(0.38)(14,639)
FHLB advances and other short-term borrowings— — — 22 5.60 1 (22)(5.60)(1)
Long-term debt138,298 5.60 5,797 156,188 5.86 6,848 (17,890)(0.26)(1,051)
Total interest-bearing liabilities4,842,703 1.56 56,489 4,941,530 1.95 72,180 (98,827)(0.39)(15,691)
Noninterest-bearing deposits1,820,158 1,793,854 26,304 
Other liabilities124,363 129,181 (4,818)
Total liabilities6,787,224 6,864,565 (77,341)
Total equity560,671 513,914 46,757 
Total liabilities and equity$7,347,895 $7,378,479 $(30,584)
Net interest income (taxable-equivalent)179,361 156,439 22,922 
Taxable-equivalent adjustment(565)(480)(85)
Net interest income (GAAP)$178,796 $155,959 $22,837 
Interest rate spread2.93 %2.37 %0.56 %
Net interest margin (taxable-equivalent)3.41 %2.95 %0.46 %
(1)  At amortized cost.
(2) Includes taxable-equivalent adjustment using a federal statutory tax rate of 21%.

Net interest income (expressed on a taxable-equivalent basis) was $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.

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Interest Income

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.

Interest Expense

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.

Net Interest Margin

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.

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.

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Three Months Ended September 30, 2025
Compared To September 30, 2024		Nine Months Ended September 30, 2025
Compared To September 30, 2024
Increase (Decrease) Due to:Increase (Decrease) Due to:
(dollars in thousands)VolumeRateNet ChangeVolumeRateNet Change
Interest earning assets:
Interest-bearing deposits in other financial institutions$(495)$(423)$(918)$(1,690)$(1,304)$(2,994)
Investment securities:
Taxable (1)53 748 801 647 4,149 4,796 
Tax-exempt (1) (2)(13)214 201 (49)456 407 
Total investment securities40 962 1,002 598 4,605 5,203 
Loans, including loans held for sale25 1,728 1,753 (1,994)6,293 4,299 
FHLB and FRB stock331 (63)268 919 (196)723 
Total interest earning assets(99)2,204 2,105 (2,167)9,398 7,231 
Interest-bearing liabilities:
Interest-bearing demand deposits37 (31)6 54 (142)(88)
Savings and money market deposits(24)(1,313)(1,337)684 (2,165)(1,481)
Time deposits up to $250,000(771)(958)(1,729)(2,411)(2,827)(5,238)
Time deposits over $250,000(642)(1,259)(1,901)(3,787)(4,045)(7,832)
Total interest-bearing deposits(1,400)(3,561)(4,961)(5,460)(9,179)(14,639)
FHLB advances and other short-term borrowings— — — (1)— (1)
Long-term debt(358)(69)(427)(782)(269)(1,051)
Total interest-bearing liabilities(1,758)(3,630)(5,388)(6,243)(9,448)(15,691)
Net interest income (taxable-equivalent)$1,659 $5,834 $7,493 $4,076 $18,846 $22,922 
(1)  At amortized cost.
(2) Includes taxable-equivalent adjustment using a federal statutory tax rate of 21%.

Other Operating Income

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

 Three Months Ended September 30,
(dollars in thousands)20252024$ Change% Change
Other operating income:
Mortgage banking income$958 $822 $136 16.5 %
Service charges on deposit accounts2,330 2,167 163 7.5 
Other service charges and fees6,472 5,947 525 8.8 
Income from fiduciary activities1,547 1,447 100 6.9 
Income from bank-owned life insurance1,879 1,897 (18)-0.9 
Net loss on sales of investment securities(30)— (30)N.M.
Other: 
Equity in earnings of unconsolidated entities32 7 25 357.1 
Income recovered on previously charged-off loans37 52 (15)-28.8 
Other recoveries27 19 8 42.1 
Unrealized gains on loans held for sale— 17 (17)-100.0 
Commissions on sale of checks75 74 1 1.4 
Other180 285 (105)-36.8 
Total other operating income$13,507 $12,734 $773 6.1 

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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.

 Nine Months Ended September 30,
(dollars in thousands)20252024$ Change% Change
Other operating income:
Mortgage banking income$2,299 $2,475 $(176)-7.1 %
Service charges on deposit accounts6,601 6,405 196 3.1 
Other service charges and fees18,195 17,077 1,118 6.5 
Income from fiduciary activities4,672 4,331 341 7.9 
Income from bank-owned life insurance4,636 4,653 (17)-0.4 
Net loss on sales of investment securities(30)— (30)N.M.
Other:
Equity in earnings of unconsolidated entities65 (24)89 -370.8 
Income recovered on previously charged-off loans130 147 (17)-11.6 
Other recoveries80 63 17 27.0 
Unrealized gains on loans held for sale78 — 78 N.M.
Commissions on sale of checks231 221 10 4.5 
Other659 751 (92)-12.3 
Total other operating income$37,616 $36,099 $1,517 4.2 

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.

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Other Operating Expense

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

Three Months Ended September 30,
(dollars in thousands)20252024$ Change% Change
Other operating expense:
Salaries and employee benefits$24,749 $22,299 $2,450 11.0 %
Net occupancy4,598 4,612 (14)-0.3 
Computer software5,151 4,590 561 12.2 
Legal and professional services2,669 2,460 209 8.5 
Equipment867 972 (105)-10.8 
Advertising730 889 (159)-17.9 
Communication791 740 51 6.9 
Other:
SERP expense113 107 6 5.6 
Charitable contributions155 182 (27)-14.8 
FDIC insurance assessment790 871 (81)-9.3 
Miscellaneous loan expenses160 283 (123)-43.5 
ATM and debit card expenses1,048 910 138 15.2 
Armored car expenses468 432 36 8.3 
Entertainment and promotions461 534 (73)-13.7 
Stationery and supplies153 170 (17)-10.0 
Directors’ fees and expenses409 281 128 45.6 
Directors' deferred compensation plan expense397 1,196 (799)-66.8 
Strategic expenses— 3,068 (3,068)-100.0 
Amortization and impairment of intangible assets— 24 (24)-100.0 
Facility consolidation costs1,516 — 1,516 N.M.
Loss (gain) on disposal of fixed assets3 38 (35)-92.1 
Other1,781 2,029 (248)-12.2 
Total other operating expense$47,009 $46,687 $322 0.7 
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 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.

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Nine Months Ended September 30,
(dollars in thousands)20252024$ Change% Change
Other operating expense:
Salaries and employee benefits$69,264 $64,280 $4,984 7.8 %
Net occupancy13,243 13,809 (566)-4.1 
Computer software15,185 13,258 1,927 14.5 
Legal and professional services8,340 7,286 1,054 14.5 
Equipment2,899 2,977 (78)-2.6 
Advertising2,449 2,704 (255)-9.4 
Communication2,725 2,234 491 22.0 
Other:
SERP expense341 323 18 5.6 
Charitable contributions478 510 (32)-6.3 
FDIC insurance assessment2,485 2,752 (267)-9.7 
Miscellaneous loan expenses809 992 (183)-18.4 
ATM and debit card expenses2,742 2,681 61 2.3 
Armored car expenses1,357 1,373 (16)-1.2 
Entertainment and promotions1,295 1,368 (73)-5.3 
Stationery and supplies531 552 (21)-3.8 
Directors’ fees and expenses1,277 882 395 44.8 
Directors' deferred compensation plan expense390 1,538 (1,148)-74.6 
Strategic expenses— 3,068 (3,068)-100.0 
Amortization and impairment of intangible assets— 71 (71)-100.0 
Facility consolidation costs1,516 — 1,516 N.M.
Loss (gain) on disposal of fixed assets3 54 (51)-94.4 
Other5,698 5,702 (4)-0.1 
Total other operating expense$133,027 $128,414 $4,613 3.6 
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, 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.

Income Taxes

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.

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.

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
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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.

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.

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.

Financial Condition

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.

Investment Securities

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.

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Loans

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 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,
2025		December 31,
2024		$ Change% Change
Hawaii:    
Commercial and industrial$464,797 $430,167 $34,630 8.1 %
Construction176,067 145,182 30,885 21.3 
Residential mortgage1,839,535 1,892,520 (52,985)(2.8)
Home equity610,889 676,982 (66,093)(9.8)
Commercial mortgage1,169,568 1,165,060 4,508 0.4 
Consumer223,065 274,712 (51,647)(18.8)
Total loans4,483,921 4,584,623 (100,702)(2.2)
Less: ACL(44,762)(45,967)1,205 (2.6)
Loans, net of ACL$4,439,159 $4,538,656 $(99,497)(2.2)
U.S. Mainland:    
Commercial and industrial$144,017 $176,769 $(32,752)(18.5)
Construction41,543 29 41,514 143,151.7 *
Commercial mortgage443,619 335,620 107,999 32.2 
Consumer254,102 235,811 18,291 7.8 
Total loans883,281 748,229 135,052 18.0 
Less: ACL(15,631)(13,215)(2,416)18.3 
Loans, net of ACL$867,650 $735,014 $132,636 18.0 
Total:    
Commercial and industrial$608,814 $606,936 $1,878 0.3 
Construction217,610 145,211 72,399 49.9 
Residential mortgage1,839,535 1,892,520 (52,985)(2.8)
Home equity610,889 676,982 (66,093)(9.8)
Commercial mortgage1,613,187 1,500,680 112,507 7.5 
Consumer477,167 510,523 (33,356)(6.5)
Total loans5,367,202 5,332,852 34,350 0.6 
Less: ACL(60,393)(59,182)(1,211)2.0 
Loans, net of ACL$5,306,809 $5,273,670 $33,139 0.6 
* Not meaningful.

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.

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
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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.

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.

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.

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, 2025. Maturities are based on contractual maturity dates and do not factor in principal amortization.

Maturing
(dollars in thousands)One Year
or Less		Over One
Through
Five Years		Over Five
Through
Fifteen Years		Over 
Fifteen
Years		TotalPercentage
Commercial and industrial:
With fixed interest rates$5,278 $164,910 $85,236 $— $255,424 42.0 %
With variable interest rates46,999 231,239 18,012 57,140 353,390 58.0 %
Total commercial and industrial52,277 396,149 103,248 57,140 608,814 100.0 %
Construction:
With fixed interest rates— 25,814 17,537 — $43,351 19.9 %
With variable interest rates94,251 57,221 20,720 2,067 174,259 80.1 %
Total construction94,251 83,035 38,257 2,067 217,610 100.0 %
Residential mortgage:
With fixed interest rates1,449 13,212 237,848 1,291,401 $1,543,910 83.9 %
With variable interest rates16 2,199 19,383 274,027 295,625 16.1 %
Total residential mortgage1,465 15,411 257,231 1,565,428 1,839,535 100.0 %
Home equity:
With fixed interest rates2,749 17,292 32,823 29,855 $82,719 13.5 %
With variable interest rates4,198 3,521 21,209 499,242 528,170 86.5 %
Total home equity6,947 20,813 54,032 529,097 610,889 100.0 %
Commercial mortgage:
With fixed interest rates22,783 461,653 287,168 — $771,604 47.8 %
With variable interest rates122,095 509,760 209,728 — 841,583 52.2 %
Total commercial mortgage144,878 971,413 496,896 — 1,613,187 100.0 %
Consumer:
With fixed interest rates9,749 306,915 56,704 69,675 $443,043 92.8 %
With variable interest rates4,236 2,148 — 27,740 34,124 7.2 %
Total consumer13,985 309,063 56,704 97,415 477,167 100.0 %
Loans:
With fixed interest rates$42,008 $989,796 $717,316 $1,390,931 $3,140,051 58.5 %
With variable interest rates271,795 806,088 289,052 860,216 2,227,151 41.5 %
Total loans$313,803 $1,795,884 $1,006,368 $2,251,147 $5,367,202 100.0 %

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Nonperforming Assets and Accruing Loans 90+ Days Past Due

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

(dollars in thousands)September 30,
2025		December 31,
2024		$ Change% Change
Nonperforming Assets ("NPAs")  
Nonaccrual loans:  
Commercial and industrial$357 $414 $(57)(13.8)%
Residential mortgage11,413 9,044 2,369 26.2 
Home equity2,119 952 1,167 122.6 
Consumer430 608 (178)(29.3)
Total nonaccrual loans14,319 11,018 3,301 30.0 
Other real estate owned ("OREO")— — — N.M.
Total NPAs14,319 11,018 3,301 30.0 
Accruing Loans 90+ Days Past Due
Residential mortgage1,159 323 836 258.8 
Home equity— 78 (78)(100.0)
Consumer349 373 (24)(6.4)
Total accruing loans 90+ days past due1,508 774 734 94.8 
Total NPAs and accruing loans 90+ days past due$15,827 $11,792 $4,035 34.2 
Ratio of nonaccrual loans to total loans0.27 %0.21 %0.06 %
Ratio of NPAs to total assets0.19 %0.15 %0.04 %
Ratio of NPAs and accruing loans 90+ days past due to total loans and OREO0.29 %0.22 %0.07 %
Not meaningful ("N.M.")

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

(dollars in thousands)
Balance at December 31, 2024$11,018 
Additions9,114 
Reductions: 
Payments(1,485)
Return to accrual status(2,240)
Charge-offs, valuation adjustments and other reductions(2,088)
Total reductions(5,813)
Net increase3,301 
Balance at September 30, 2025$14,319 

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.

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
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and an owner-occupied commercial real estate loan to classified during the second quarter of 2025. Both loans remain performing and are adequately collateralized.

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.

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)2025202420252024
Allowance for Credit Losses ("ACL") on Loans:
Balance at beginning of period$59,611 $62,225 $59,182 $63,934 
Provision for credit losses on loans3,440 3,040 11,155 9,609 
Charge-offs:
Commercial and industrial(1,071)(663)(4,509)(1,864)
Residential mortgage— (99)— (383)
Consumer(2,824)(3,956)(8,665)(13,139)
Total charge-offs(3,895)(4,718)(13,174)(15,386)
Recoveries:
Commercial and industrial204 158 570 378 
Construction— — 3 — 
Residential mortgage8 8 25 25 
Home equity9 — 21 6 
Consumer1,016 934 2,611 3,081 
Total recoveries1,237 1,100 3,230 3,490 
Net charge-offs(2,658)(3,618)(9,944)(11,896)
Balance at end of period$60,393 $61,647 $60,393 $61,647 
Average loans, net of deferred fees and costs$5,332,656 $5,330,810 $5,317,481 $5,372,247 
Ratio of annualized net charge-offs to average loans0.20 %0.27 %0.25 %0.30 %
Ratio of ACL to total loans1.13 %1.15 %1.13 %1.15 %
Ratio of ACL to nonaccrual loans422 %532 %422 %532 %

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.

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.

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.

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.

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In accordance with U.S. GAAP, loans held for sale and other real estate owned are excluded from the Company's ACL assessment.

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, 2025December 31, 2024
(dollars in thousands)ACL for Loans% of ACL by Loan ClassLoan Class as a % of Total LoansACL for Loans% of ACL by Loan ClassLoan Class as a % of Total Loans
Commercial and industrial$6,889 11.4 %11.3 %$7,113 12.0 %11.4 %
Construction3,966 6.6 %4.1 2,316 3.9 %2.7 
Residential mortgage14,189 23.5 %34.2 15,267 25.8 %35.5 
Home equity1,163 1.9 %11.4 2,335 3.9 %12.7 
Commercial mortgage20,564 34.1 %30.1 18,882 31.9 %28.1 
Consumer13,622 22.5 %8.9 13,269 22.5 %9.6 
Total$60,393 100.0 %100.0 %$59,182 100.0 %100.0 %

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

Three Months Ended September 30,Nine Months Ended September 30,
2025202420252024
Commercial and industrial0.07 %0.04 %0.10 %0.04 %
Residential mortgage— 0.01 — 0.01 
Consumer0.13 0.22 0.15 0.25 
Total0.20 %0.27 %0.25 %0.30 %

Deposits

The Company's deposit portfolio is well-diversified and reflects a long-standing commitment to relationship-based banking. As of September 30, 2025, approximately 53% 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 established relationships with Japanese regional banks, corporations, and non-resident alien individuals, 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,
2025		December 31,
2024		$ Change% Change
Noninterest-bearing demand deposits$1,903,614 $1,888,937 $14,677 0.8 %
Interest-bearing demand deposits1,340,725 1,338,719 2,006 0.1 
Savings and money market deposits2,292,881 2,329,170 (36,289)(1.6)
Time deposits up to $250,000444,005 483,378 (39,373)(8.1)
Core deposits5,981,225 6,040,204 (58,979)(1.0)
Other time deposits greater than $250,000458,339 500,693 (42,354)(8.5)
Government time deposits138,120 103,114 35,006 33.9 
Total time deposits greater than $250,000596,459 603,807 (7,348)(1.2)
Total deposits$6,577,684 $6,644,011 $(66,327)(1.0)

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Total deposits were $6.58 billion as of September 30, 2025, a decrease of $66.3 million, or 1.0%, from $6.64 billion as of December 31, 2024. The decrease was primarily driven by decreases in savings and money market deposits of $36.3 million, time deposits up to $250,000 of $39.4 million, and other time deposits greater than $250,000 of $42.4 million. These decreases were partially offset by increases in noninterest-bearing demand deposits of $14.7 million, and government time deposits of $35.0 million. The Company did not hold any wholesale, brokered, or listing service deposits as of September 30, 2025.

Core deposits, which we define as demand deposits, savings and money market deposits, and time deposits up to $250,000, totaled $5.98 billion as of September 30, 2025, a decrease of $59.0 million, from $6.04 billion as of December 31, 2024. Core deposits represented 90.9% of total deposits as of September 30, 2025, compared to 90.9% as of December 31, 2024.

The average cost of total deposits was 102 bps in the third quarter of 2025, compared to 132 bps in the same quarter in 2024. For the nine months ended September 30, 2025, the average cost of total deposits was 104 bps, compared to 133 bps during the same period in 2024.

All deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. Estimated uninsured deposits totaled $2.80 billion, or 43% of total deposits, as reported in the Company's FDIC Call Report as of September 30, 2025, compared to $2.82 billion, or 42% of total deposits as of December 31, 2024.

Fully collateralized deposits totaled approximately $305.6 million as of September 30, 2025, compared to $282.3 million as of December 31, 2024. Excluding fully collateralized deposits, estimated uninsured deposits totaled $2.49 billion, or 38% of total deposits as of September 30, 2025, compared to $2.54 billion, or 38% of total deposits as of December 31, 2024.

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

(dollars in thousands)September 30, 2025
Remaining maturity:
Three months or less$301,280 
Over three through twelve months290,045 
Over one year through three years4,617 
Over three years517 
Total$596,459 

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 or share repurchases.

Common Equity

Total shareholders' equity was $588.1 million as of September 30, 2025, compared to $538.4 million as of December 31, 2024. The change in total shareholders' equity was primarily attributable to net income of $54.6 million and other comprehensive income of $22.4 million for the nine months ended September 30, 2025, partially offset by cash dividends paid of $21.9 million, and the repurchase of $7.0 million in common stock under the Company's stock repurchase programs.

The ratio of total shareholders' equity to total assets was 7.92% as of September 30, 2025, compared to 7.21% as of December 31, 2024. Book value per share was $21.86 as of September 30, 2025, compared to $19.89 as of December 31, 2024.

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 meetings its own obligations, including payments on its junior subordinated debentures that fund trust preferred securities and subordinated notes.

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CPF relies on dividends from the Bank to meet its obligations. On a stand-alone basis, CPF had an available cash balance of $19.2 million as of September 30, 2025, compared to $23.0 million as of December 31, 2024.

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 $229.9 million as of September 30, 2025, compared to $196.8 million as of December 31, 2024.

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 and subordinated notes. There is no assurance that dividends will continue at the current rate or at all.

Share Repurchases

In January 2025, the Company’s Board of Directors authorized a new share repurchase program (the "2025 Repurchase Plan") allowing the Company to repurchase up to $30.0 million of its common stock in open market or privately negotiated transactions. The 2025 Repurchase Plan replaced the prior repurchase authorization in its entirety.

During the nine months ended September 30, 2025, the Company repurchased 258,648 shares of common stock at an aggregate cost of $7.0 million under the 2025 Repurchase Plan. As of September 30, 2025, $23.0 million remained available for repurchase under the plan.

Trust Preferred Securities

As of September 30, 2025, 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.

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%.

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.

Subordinated Notes

On October 20, 2020, the Company completed a $55.0 million private placement of ten-year fixed-to-floating rate subordinated notes, which was used to support regulatory capital ratios and for general corporate purposes. These notes were subsequently exchanged for registered notes with identical terms at the end of the fourth quarter of 2020.

The 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.

As of September 30, 2025, the subordinated notes had a carrying value of $55.0 million, net of unamortized debt issuance costs of $20 thousand that is being amortized through November 1, 2025.

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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 principle, 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.

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

General capital adequacy regulations adopted by the FRB and FDIC require an institution to maintain minimum leverage capital, tier 1 risk-based capital, total risk-based capital, and common equity tier 1 ("CET1") capital ratios. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.

For a further discussion of 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 2024 Form 10-K.

The following table presents the regulatory capital ratios for the Company and the Bank, as well as the minimum capital adequacy requirements applicable to all financial institutions, as of the dates presented. As of September 30, 2025 and December 31, 2024, 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.

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 ActualMinimum Required
for Capital Adequacy
Purposes		Minimum Required
to be
Well Capitalized
(dollars in thousands)AmountRatioAmount
Ratio [1]
AmountRatio
Central Pacific Financial Corp.      
September 30, 2025      
Leverage capital$729,792 9.7 %$299,849 4.0 %N/AN/A
CET1 risk-based capital679,792 12.6 243,649 4.5 N/AN/A
Tier 1 risk-based capital729,792 13.5 324,865 6.0 N/AN/A
Total risk-based capital849,915 15.7 433,154 8.0 N/AN/A
December 31, 2024      
Leverage capital$704,045 9.3 %$301,967 4.0 %N/AN/A
CET1 risk-based capital654,045 12.3 239,366 4.5 N/AN/A
Tier 1 risk-based capital704,045 13.2 319,155 6.0 N/AN/A
Total risk-based capital820,796 15.4 425,540 8.0 N/AN/A
Central Pacific Bank      
September 30, 2025      
Leverage capital$762,655 10.2 %$299,617 4.0 %$374,521 5.0 %
CET1 risk-based capital762,655 14.1 243,380 4.5 351,548 6.5 
Tier 1 risk-based capital762,655 14.1 324,506 6.0 432,675 8.0 
Total risk-based capital827,778 15.3 432,675 8.0 540,844 10.0 
December 31, 2024      
Leverage capital$731,155 9.7 %$301,410 4.0 %$376,763 5.0 %
CET1 risk-based capital731,155 13.8 238,814 4.5 344,953 6.5 
Tier 1 risk-based capital731,155 13.8 318,419 6.0 424,558 8.0 
Total risk-based capital792,906 14.9 424,558 8.0 530,698 10.0 

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

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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, 2025December 31, 2024
Estimated Net Interest Income SensitivityEstimated Net Interest Income Sensitivity
Rate ChangeGradualInstantaneousGradualInstantaneous
+300 bps1.71 %3.20 %3.03 %4.00 %
+200 bps1.18 %2.20 %1.91 %2.68 %
+100 bps0.63 %1.16 %0.84 %1.36 %
-100 bps(0.11)%(1.01)%(1.36)%(2.21)%
-200 bps(0.76)%(2.66)%(2.93)%(4.74)%
-300 bps(1.47)%(4.65)%(4.55)%(7.41)%

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
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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, 2025, the Company had $309.9 million in cash on its balance sheet and approximately $2.33 billion in total other liquidity sources, including available borrowing capacity and unpledged investment securities. Refer to Note 8 - Short-Term Borrowings and Long-Term Debt in the accompanying notes to the consolidated financial statements in this report for information on the Company's borrowing arrangements.

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

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

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

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

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

The financial services industry and broader economy may be subject to new or changing government policy, legislation and regulation, or the prolonged effects of a government shutdown.

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

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

Issuer Purchases of Equity Securities

On January 27, 2025, the Company's Board of Directors authorized a new share repurchase plan (the "2025 Repurchase Plan"), permitting the repurchase of up to $30.0 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 2025 Repurchase Plan replaced and superseded in its entirety the share repurchase program previously approved by the Company’s Board of Directors.

During the three months ended September 30, 2025, the Company repurchased 78,255 shares of common stock, at a cost of $2.3 million or $29.95 per share, under the Company's 2025 Repurchase Plan.

As of September 30, 2025, $23.0 million in share repurchase authorization remained available for repurchase under the Company's 2025 Repurchase Plan. The Company makes no assurance regarding the timing or extent of future repurchases under this program.

 Issuer Purchases of Equity Securities
Period
Total
Number
of Shares
Purchased [1]
Average
Price Paid
per Share		Total Shares
Purchased as
Part of Publicly
Announced
Programs		Maximum Dollar
Value of
Shares That
May Yet Be
Purchased Under
the Program
July 1-31, 2025— $— — $25,328,845 
August 1-31, 202513,414 26.67 13,255 24,975,582 
September 1-30, 202565,000 30.63 65,000 22,984,906 
Total78,414 $29.95 78,255 22,984,906 

[1] During the three months ended September 30, 2025, 159 shares were acquired from employees in connection with income tax withholding obligations related to the vesting of restricted stock or performance stock units. These purchases were not included within the Company's publicly announced share repurchase program.

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Item 5. Other Information

Rule 10b5-1 Trading Arrangements

During the three months ended September 30, 2025, none of the Company’s directors or officers (as defined under Rule 16a-1(f)) adopted, modified or terminated any trading arrangements under Rule 10b5-1 or non-Rule 10b5-1 trading arrangements (as defined in Item 408 of Regulation S-K) involving the purchase or sale of the Company's common stock.

Item 6. Exhibits

Exhibit No. Document
3.1
Restated Articles of Incorporation, as amended, of the Registrant (incorporated by reference to the Registrant’s Form 10-Q filed with the SEC on August 5, 2025).
3.2
Amended and Restated Bylaws of the Registrant (incorporated by reference to the Registrant’s Form 8-K filed with the SEC on July 25, 2025).
31.1
Rule 13a-14(a) Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2
Rule 13a-14(a) Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1
Section 1350 Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 **
32.2
Section 1350 Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 **
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document *
101.SCHInline XBRL Taxonomy Extension Schema Document *
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document *
101.LABInline XBRL Taxonomy Extension Label Linkbase Document *
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document *
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document *
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101)
*Filed herewith.
**Furnished herewith.

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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 CENTRAL PACIFIC FINANCIAL CORP.
 
  
  
Date:October 29, 2025/s/ Arnold D. Martines
 Arnold D. Martines
 
Chairman, President and Chief Executive Officer
 (Principal Executive Officer)
/s/ Dayna N. Matsumoto
 Dayna N. Matsumoto
 Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

78

Source: View Original Filing on SEC EDGAR

FAQ

What were CPF's Q3 2025 earnings and EPS?

Net income was $18,574 thousand and diluted EPS was $0.69.

How did CPF's net interest income and expense trend in Q3 2025?

Net interest income was $61,301 thousand; total interest expense declined to $18,658 thousand.

What were CPF's loans and deposits at September 30, 2025?

Loans (net) were $5,306,809 thousand and deposits were $6,577,684 thousand.

What was CPF's provision for credit losses in Q3 2025?

The provision for credit losses was $4,157 thousand.

How much noninterest income did CPF generate in Q3 2025?

Total other operating income was $13,507 thousand, including service charges and fees.

What capital returns did CPF make in Q3 2025?

CPF paid a $0.27 per share dividend and repurchased 78,255 shares.

How many CPF shares were outstanding recently?

Shares outstanding were 26,903,512 as of September 30, 2025, and 26,827,512 as of October 16, 2025.
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Central Pacific

NYSE:CPF

CPF Rankings

#2979 Ranked by Market Cap
#889 Ranked by Dividends

CPF Latest News

Oct 29, 2025
Central Pacific Financial Reports Third Quarter 2025 Earnings of $18.6 Million
Oct 15, 2025
Central Pacific Financial Corp. Announces Conference Call to Discuss Third Quarter 2025 Financial Results
Jul 25, 2025
Central Pacific Financial Reports Second Quarter 2025 Earnings of $18.3 Million
Jul 11, 2025
Central Pacific Financial Corp. Announces Conference Call to Discuss Second Quarter 2025 Financial Results
Apr 23, 2025
Central Pacific Financial Reports First Quarter 2025 Earnings of $17.8 Million

CPF Latest SEC Filings

Oct 29, 2025
[8-K] CENTRAL PACIFIC FINANCIAL CORP Reports Material Event
Oct 6, 2025
[Form 4] CENTRAL PACIFIC FINANCIAL CORP Insider Trading Activity
Oct 1, 2025
[8-K] CENTRAL PACIFIC FINANCIAL CORP Reports Material Event
Sep 12, 2025
[Form 4] CENTRAL PACIFIC FINANCIAL CORP Insider Trading Activity
Sep 12, 2025
[144] CENTRAL PACIFIC FINANCIAL CORP SEC Filing

CPF Stock Data

762.45M
25.97M
2.51%
97.81%
1.84%
Banks - Regional
State Commercial Banks
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United States
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