CPF 10-K & 10-Q changes, risk factors and insider trading

•Our commercial and industrial loanindustrial, and commercial real estate loan portfolios expose us to risks that may be greater than the risks related to our other loans.

Risks Related to Interest RateRates and Liquidity Risks

•Failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely affect our ability to report our financial condition and results of operations completely, accurately and on a timely basis.timely.

•Significant increases in residential home insurance premiums and overall challenges in obtaining home ownershomeowners insurance generally may negatively impact the residential real estate market.

•Costs of compliance with environmental laws and regulations are significant, and the cost of compliance with potential new environmental laws, including limitations on emissions relating to climate change, could adversely affect our financial condition and results of operations.

The FRB regulates the supply of money and credit in the U.S. Its policies determinedetermine, in large partpart, the cost of funds for lending and investinginvesting, and the return earned on those loans and investments, both of whichwhich, affect the net interest margin. It also can materially decrease the value of financial assets we hold, such as debt securities.

High-profile bank failures in the first half of 2023, and the resulting media coverage, caused general uncertainty and concern regarding the liquidity adequacy of the banking industry and in particular, regional and community banks like the Company. Uncertainty and concern may be compounded by the reach and depth of media attention, including social media, and its ability to disseminate concerns or rumors about these kinds of events or other similar risks, and may have in the past and may in the future lead to market-wide liquidity problems and concerns from the Company's own customer base. These bank failures underscore the importance of maintaining diversified sources of funding as key measures to ensure the safety and soundness of a financial institution. As a result, market conditions and other external factors may impact the competitive landscape for deposits in the banking industry and could materiallyhave adverselya material, adverse impact on the Company's liquidity and results of operations. While the Department of the Treasury, the Federal Reserve, and the FDIC took steps to ensure that depositors of these recently failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will continue to be successful in restoring customer confidence in the banking industry.

For the year ended December 31, 2024,2025, we recorded $9.8$15.7 million in provision for credit losses. As a result of a variety of factors, including a decline in local, national or international economic conditions, it is possible that we may experience deterioration in credit quality and material credit losses and in turn, decreasesincreases to our allowanceprovision for credit losses. Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral for our loans. If that were to occur, we may have to record additional provisions for credit losses which would have an adverse impact on our net income, financial condition and capital ratios.

Our commercial and industrial loanindustrial, and commercial real estate loan portfolios expose us to risks that may be greater than the risks related to our other loans.

Our loan portfolio includes commercial and industrial loans and commercial real estate loans, which are secured by commercial real estate, including but not limited to, structures and facilities to support activities designated as multi-family residential properties, industrial, warehouse, general office, retail, health care and religious dwellings. Commercial and industrial and commercial real estate loans carry more risk as compared to other types of lending, because they typically involve larger loan balances often concentrated with a single borrower or groups of related borrowers. Accordingly, charge-offs on commercial and industrial and commercial real estate loans may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios. In addition, these loans expose a lender to greater credit risk than loans secured by residential real estate. The payment experience on commercial real estate loans that are secured by income producing properties are typically dependent on the successful operation of the related real estate property and thus, may subject us to adverse conditions in the real estate market or to the general economy. The collateral securing these loans typically cannot be liquidated as easily as residential real estate. If we foreclose on these loans, our holding period for the collateral typically is longer than residential properties because there are fewer potential purchasers of the collateral.

Unexpected deterioration in the credit quality of our commercial or commercial real estate loan portfolios would require us to increase our provision for credit losses, which would reduce our profitability and could materially adversely affect our business, financial condition, results of operationsoperations, and prospects. Furthermore, such deterioration could require us to raise additional capital.

We generally use the judicial foreclosure process which can be very lengthy. Additionally,Consumer theprotection jointinitiatives federal-stateor settlementregulations with several mortgage servicers over abuse of foreclosure practices resulted in the implementation of enhancedon mortgage loan modification programs and loss mitigation practices. The loss mitigation practices could impact our foreclosure procedures, which in turn could adversely affect our business, financial conditioncondition, or results of operations.

Future BaaS collaboration agreements, as they have in the past,agreements may include loan or line of credit arrangements with our potential partners and may also include various loss sharing agreements.agreements, as they have in the past. We typically will require guarantees and/or collateral to protect the Bank against credit risk. However, there is a risk that our partners will be unable to meet their obligations under the agreements.

Losses associated with the loans or lines of credit accounts related to BaaS relationships that we may enter into, could have a material adverse effect on our net income, results of operationsoperations, and financial condition.

Risks Related to Interest RateRates and Liquidity Risks

The majority of our assets and liabilities are monetary in nature and subject to risk from changes in interest rates. Like most financial institutions, our earnings and profitability depend significantly on our net interest income, which is the difference between interest income on interest-earning assets, such as loans and investment securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings. We expect that we will periodically experience "gaps" in the interest rate sensitivitiessensitivity of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa. If market interest rates should move contrary to our position, this "gap" will work against us and our earnings may be negatively affected. We are unable to predict or control fluctuations of market interest rates, which are affected by many factors, including the following:

Our primary sources of interest income include interest on loans, as well as interest earned on investment securities. Interest earned on investment securities represented 13.3% of our interest income in the year ended December 31, 2025, as compared to 11.7% of our interest income in the year ended December 31, 2024, as compared to 11.2% of our interest income in the year ended December 31, 2023.2024. Accordingly, effectively managing our investment securities portfolio to generate interest income while managing the composition and risks (including credit, interest rate and liquidity) associated with that portfolio, including the mix of government agency and non-agency securities, remains important. If we are unable to effectively manage our investment securities portfolio or if the interest income generated by our investment securities portfolio declines, our net interest income and net interest margin could be adversely affected.

The management of liquidity risk is critical to the management of our business and our ability to service our customer base. In managing our balance sheet, our primary source of funding is customer deposits. Our ability to continue to attract these deposits and other funding sources is subject to variability based upon a number of factors including volume and volatility in the securities' markets, our financial condition, our credit rating and the relative interest rates that we are prepared to pay for these liabilities. The availability and level of deposits and other funding sources is highly dependent upon the perception of the liquidity and creditworthiness of the financial institution,institution. and perceptionPerception can change quickly in response to market conditions or circumstances unique to a particular company. Concerns about our past and future financial condition or concerns about our credit exposure to other parties could adversely impact our sources of liquidity, financial position, including regulatory capital ratios, results of operations and our business prospects.

If our level of deposits were to materially decrease, we would need to raise additional funds by increasing the interest that we pay on certificates of deposits or other depository accounts, seek other debt or equity financing or draw upon our available lines of credit. We rely on commercial and retail deposits, and to a lesser extent, advances from the Federal Home Loan Bank of Des Moines ("FHLB") and the Federal Reserve discount window, to fund our operations. Although we have historically been able to replace maturing deposits and advances as necessary, we might not be able to replace such funds in the future if, among other things, our results of operations or financial conditioncondition, or the results of operations or financial condition of the FHLBFHLB, were to change.

We constantly monitor our activities with respect to liquidityliquidity, and evaluate closely our utilization of our cash assets closely; however, there can be no assurance that our liquidity or the cost of funds to us may not be materially and adversely impacted as a result of economic, market, or operational considerations that we may not be able to control.

We originate and sell residential mortgage loans. We rely on Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac"), and other purchasers to purchase first mortgage loans in order to reduce our credit risk and interest rate riskrisks, and provide funding for additional loans we desire to originate. We cannot provide assurance that these purchasers will not materially limit their purchases from us due to capital constraints or other factors, including, with respect to Fannie Mae and Freddie Mac, a change in the criteria for conforming loans. In addition, various proposals have been made to reform the U.S. residential mortgage finance market, including the role of Fannie Mae and Freddie Mac. The exact effects of any such reforms are not yet known, but may limit our ability to sell conforming loans to Fannie Mae or Freddie Mac. In addition, mortgage lending is highly regulated, and our inability to comply with all federal and state regulationsregulations, and investor guidelines regarding the origination, underwriting, documentationdocumentation, and servicing of mortgage loans may also impact our ability to continue selling mortgage loans. If we are unable to continue to sell loans in the secondary market, our ability to fund, and thus originate, additional mortgage loans may be adversely affected, which could have a material adverse effect on our business, financial conditioncondition, or results of operations.

Hawaii law only permits the Bank to pay dividends out of retained earnings as defined under Hawaii banking law ("Statutory Retained Earnings"), which differs from GAAP retained earnings. As of December 31, 2024,2025, the Bank had Statutory Retained Earnings of $196.8$234.7 million. In addition, regulatory authorities could limit the ability of the Bank to pay dividends to CPF. The inability to receive dividends from the Bank could have a material adverse effect on our financial condition, results of operationsoperations, and prospects.

Our ability to pay cash dividends to our shareholders is subject to restrictions under federal and Hawaii law, including restrictions imposed by the FRB and covenants set forth in various agreements we are a party to, including covenants set forth in our subordinated debentures and subordinated notes.debentures. We cannot provide any assurance that we will continue to pay dividends to our shareholders.

Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, negative sentiment about our business, unethical practices, employee mistakes, misconduct or fraud, failure to deliver minimum standards of service or quality, failure of any product or service offered by us to meet our customers’ expectations, compliance deficiencies, government investigations, security breaches, litigation, and questionable, unlawful or fraudulent activities of our partners (including BaaS partners),partners, contract counterparties, employees or customers. We have policies and procedures in place to protect our reputation and promote ethical conduct, but these policies and procedures may not be fully effective to address reputational threats in all circumstances. Negative publicity regarding our business, employees, partners, contracting counterparties, employees or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental scrutinyscrutiny, and regulation.

Checking and savings account balances and other forms of deposits can decrease when our deposit customers perceive alternative investments, such as the stock market or other non-depository investments, as providing superior expected returns or seek to spread their deposits over several banks to maximize FDIC insurance coverage. Furthermore, technology and other changes have made it more convenient for the Bank's customers to transfer funds into alternative investments including products offered by other financial institutions or non-bank service providers. Increases in short-term interest rates could increase transfers of deposits to higher yielding deposits. Efforts and initiatives that we undertake to retain and increase deposits, including deposit pricing, can increase our costs. When the Bank's customers move money out of bank deposits in favor of alternative investmentsinvestments, or into higher yielding deposits, or spread their accounts over several banks, we can lose a relatively inexpensive source of funds, thus increasing our funding costs.

Our financial performance and profitability depend on our ability to manage past and possible future growth. Continued organic growth and any future acquisitions or dispositions we may make or evaluate may result in additional expenses, and involve issues with operations, integration, regulatory, management and other issues that could have a material adverse effect on our business, financial condition, results of operationsoperations, and cash flows.

Failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely affect our ability to report our financial condition and results of operations accuratelycompletely, accurately, and on a timely basis.timely.

A failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely affect our ability to report our financial results accuratelycompletely, accurately, and on a timely basis,timely, which could result in a loss of investor confidence in our financial reporting or adversely affect our access to sources of liquidity. Furthermore, because of the inherent limitations of any system of internal control over financial reporting, including the possibility of human error, the circumvention or overriding of controls and fraud may not prevent or detect all misstatementsmisstatements, even with effective internal controls. Frequent or rapid changes in procedures, methodologies, systems, personnel and technology exacerbate the challenges of developing and maintaining a system of internal controls and can increase the cost and level of effort to develop and maintain such systems.

Periodically the Financial Accounting Standards Board ("FASB") and the SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. As a result of changes to financial accounting or reporting standards, whether promulgated or required by the FASB or other regulators, we could be required to change certain assumptions or estimates that we have previously used in preparing our financial statements, which could adversely affect our business, financial conditioncondition, and results of operations. See Note 1 - Summary of Significant Accounting Policies to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data."

In deciding whether to extend credit or enter into other transactions, we rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports and other financial information. We may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other financial information could have a material adverse impact on our business and, in turn, our financial conditioncondition, and results of operations.

We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national, regionalregional, and community banks within the various markets in which we operate. Additionally, various out of stateout-of-state banks conduct business in theour market areas in which we currently operate.areas. We also face competition from many other types of financial institutions, including without limitation, savings banks, credit unions, finance companies, and financial service providers, includingsuch as mortgage providers and brokers, operating via the internet and other technology platforms, brokerage firms, insurance companies, factoring companiescompanies, and other financial intermediaries.

The financial services industry could become even more competitive as a result of legislative, regulatoryregulatory, and technological changeschanges, andas well as continued consolidation. Banks, securities firmsfirms, and insurance companies canmay merge under the umbrella of a financial holding company, whichenabling canthem virtuallyto offer anya typebroad array of financial service,services, including banking, securities underwriting, insurance (both agency and underwriting), and merchant banking. Technology has also lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and servicesservices, as well as bettermore pricingfavorable for those products and servicespricing, than we can.

Our ability to compete successfully depends on a number of factors, including, among other thingsothers:

•the ability to develop, maintainmaintain, and build upon long-term customer relationships based on top qualitytop-quality service, high ethical standardsstandards, and safe, sound assets;

•the scope, relevancerelevance, and pricing of products and services offered to meet customer needs and demands;

Failure to perform in any of these areas could significantly weaken our competitive position and adversely affect our growth and profitability, whichwhich, in turn, could have a material adverse effect on our financial condition and results of operations.

In addition, the soundness of our financial condition may also affect our competitiveness. Customers may decide not to do business with the Bank dueif they perceive our financial condition to itsbe financialless condition.favorable that that of our competitors.

During the ordinary course of business, we may foreclose on and take title to properties securing certain loans that we have originated or acquired. We also own several of our branch locations and are building new branch locations in the State of Hawaii. For any real property that we may possess, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage and costs of complying with applicable environmental regulatory requirements. Failure to comply with such requirements can result in penalties. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property's value or limit our ability to use, sellsell, or lease the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, financial condition or results of operations.

Credit ratings assigned by ratings agencies to us, our affiliatesaffiliates, or our securitiessecurities, may impact the decision of certain customers, or institutions in particular, to do business with us. A rating downgrade or a negative rating could adversely affect our deposits, our ability to access the capital markets on favorable terms and our business relationships.

We rely upon certain third-party vendors to provide products and services necessary to maintain our day-to-day operations, including, providing the core processing system that services the Bank, as well as data processing and storage, online and mobile banking interfaces and services, internet connections, telecommunications, and network access. Accordingly, our operations are exposed to the risk that these vendors might not perform in accordance with applicable contractual arrangements or service level agreements, as the vendors may experience service outages, cybersecurity attacks, data breaches, or other events that may impair their ability to provide fully functioning systems or other services. The failure of an external vendor to perform in accordance with applicable contractual arrangements or service level agreements could be disruptive to our operations and could have a material adverse effect on our business, financial conditioncondition, or results of operations, and/or damage our reputation. Further, third-party vendor risk management continues to be an area of high regulatory focus. Failure to follow applicable regulatory guidance in this area could expose us to regulatory actions.

The ongoing operation of many financial institutions may be closely interrelated as a result of credit, trading, execution of transactionstransactions, or other relationships between the institutions. As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions. This risk may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges with which we interact on a daily basis, and, therefore, could adversely affect us. Any of these operational or other risks could materially adversely affect our business, financial condition and results of operations.

Significant increases in residential home insurance premiums and overall challenges in obtaining home ownershomeowners insurance generally may negatively impact the residential real estate market.

We are a bank holding company that, through our banking subsidiary, Central Pacific Bank, offers full service commercial banking primarily in the State of Hawaii.

•Loans: OurThe loansCompany's consistloan ofportfolio includes commercial and industrial,industrial loans, commercial mortgage,mortgages, and construction loans to small and medium-sized companies, businessbusinesses, professionals, and real estate investorsinvestors, and developers,developers. asThe wellCompany asalso offers residential mortgage,mortgages, home equity,equity loans, and consumer loans to homeownersindividuals and individuals.homeowners. Our lendingLending activities contributerepresent toa core source of interest income, which is a key componentdriver of our revenuesoverall reportedrevenue. The Company aims to maintain a strong and diversified loan portfolio, primarily in interestHawaii, income.with selective diversification into U.S. Mainland markets.

•Deposits: WeThe offerCompany offers a fullcomprehensive rangesuite of deposit products and services including: checking, savings and time deposits,deposit accounts, as well as cash management,management solutions, and digital banking services.capabilities. WeThe alsoCompany's maintain a broadextensive branch and ATM network inacross the State of Hawaii.Hawaii supports convenient access for its customers. The interest paid on such deposits hasis a significantkey impactcomponent on ourof interest expense, anwhich importantsignificantly factorinfluences in determining ouroverall earnings. In addition, fees and service charges on deposit accountsaccounts, along with card interchange income contribute meaningfully to ournon-interest revenues.revenue.

Additionally,•Wealth weManagement: offerThe wealthCompany management products and services, such asoffers non-deposit investment products, annuities, investment management, assettrust custodycustody, estate planning, and generalfinancial consultation and planningadvisory services.

•Results in 2025 were impacted by $1.5 million in pre-tax expenses related to the consolidation of the Company's former operations center into its main headquarters ("Operations Center Consolidation") in the third quarter of 2025. Results in 2024 were impacted by a pre-tax loss on sales of investment securities of $9.9 million related to an investment securities portfolio repositioning ("Repositioning Loss") and pre-tax expenses related to our evaluation and assessment of a strategic opportunity of $3.1 million ("Strategic Expense").

•Excluding the impact of the Operations Center Consolidation, non-GAAP adjusted net income was $78.6 million, or $2.91 per diluted common share in 2025. (See Tables 1-6 for reconciliations of the adjusted non-GAAP financial measures.) Excluding the impact of the Repositioning Loss and Strategic Expense, non-GAAP adjusted net income was $63.4 million, or $2.34 per diluted common share in 2024. (See Tables 3-81-6 for reconciliations of the adjusted non-GAAP financial measures.)

•We recorded return on average assets ("ROA") and return on average shareholders' equity ("ROE") ratios of 0.72%1.06% and 10.25%,13.62%, respectively, in 2024,2025, compared to ROA and ROE ratios of 0.78%0.72% and 12.38%,10.25%, respectively, in 2023.2024. Excluding the impact of the Operations Center Consolidation in 2025 and Repositioning Loss and Strategic Expense,Expense in 2024, adjusted ROA and ROE ratios (non-GAAP) was 0.86%1.07% and 12.10%,13.81%, respectively, in 2024,2025, compared to adjusted ROA and ROE ratios (non-GAAP) of 0.78%0.86% and 12.24%,12.10%, respectively, in 2023.2024. (See Table 73 - Adjusted Return on Average Assets and Adjusted Return on Average Shareholders' Equity for a reconciliation of the non-GAAP adjusted ROA and ROE.)

•Total deposits declined by $203.6$34.2 million, or 3.0%0.5% in 2024,2025, primarily due to the run-off of high-cost government time deposits greater than $250,000 of $271.5$53.5 million. Our core deposit portfolio grew by $54.0$19.3 million, or 0.9%.0.3%.

The majority of ourOur operations are primarily concentrated in the State of Hawaii.Hawaii, As a result,making our performance ishighly significantlysensitive influencedto bylocal theeconomic, strengthenvironmental, ofand theindustry-specific conditions, particularly those affecting broader macroeconomic trends, real estate markets, the tourism industry,estate, and the economic environment and environmental conditions in Hawaii. Macroeconomic conditions also influence our performance.tourism. A favorable business environmentclimate in Hawaii is generally characterized by expanding gross state product, low unemploymentunemployment, and rising personal income; while an unfavorable business environmentclimate is characterized byreflects the reverse.opposite.

The Department of Labor and Industrial Relations reported that Hawaii's seasonally adjusted annual unemployment rate was 3.0%2.2% in the month of December 2024,2025, whicha felldecline from 3.0% in December 2024 and well below the national seasonally adjusted unemployment rate of 4.1%.4.4%. The State of Hawaii's Department of Business, Economic Development and Tourism ("DBEDT") projects Hawaii's seasonally adjusted annual unemployment rate to beaverage around 2.7%3.0% in 2025.2026.

Hawaii's economy is measured by the growth of real personal income and real gross state product. DBEDT isestimates expected to reportthat real personal income grew by approximately 2.8%1.7% butin 2025, while real gross state product grew by approximately 1.6% for 2024.2025. DBEDT projects real personal income to grow by 1.6% and real gross state product to grow by 2.0%1.5% for 2025.2026.

Real estate lendinglending, is one of the primary focuses for us, includingparticularly residential mortgage and commercial mortgage loans.loans, Asis a result,core wefocus are dependent onof the strengthCompany. Consequently, our performance is closely tied to the health of Hawaii's real estate market. TheDespite Hawaiimixed results, Hawaii's housing market continuesremained toresilient experiencein solid prices, increased sales activity, strong demand and low inventory.2025. According to the Honolulu Board of Realtors, the median price for a single-family home on Oahu was $1,139,000 for the year ended December 31, 2025, representing an increase of 3.5% from the median resale price of $1,100,000 for the year ended December 31, 2024, representing an increase of 4.8% from the median resale price of $1,050,000 for the year ended December 31, 2023.2024. The median resale price for condominiums on Oahu was $507,250 for the year ended December 31, 2025, representing a decrease of 1.5% from the median resale price of $515,000 for the year ended December 31, 2024, representing an increase of 1.3% from the median resale price of $508,500 for the year ended December 31, 2023.2024. Oahu unit sales volume increased by 9.1%3.5% for single-family homes, and decreased by 2.5%1.1% for condominiums in 20242025 from 2023.2024.

•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

•the costs and effects of legal and regulatory proceedings, including actual or threatened litigation and the effortsresults of governmental and regulatory exams and orders, as well as the costs of ongoing or potential compliance efforts;

As of MarchJune 31,30, 2026, Central Pacific Bank operated 27 branches and 5556 ATMs across the State of Hawaii, offering full-service community banking.

Central Pacific Bank was founded by World War II veterans who, despite returning home as war heroes, faced limited banking opportunities in Hawaii. In response, they established the Bank to serve individuals and small businesses that lacked access to financial services at the time. This legacy continues to guide our commitment to creating opportunityopportunities and servingservicing our community continues in the present day as we strive to deliver exceptional customer service and tailored financial products to meet the unique needs of our customers and the communities we serve. This legacy continues to shape our mission to deliverthrough exceptional customer service and tailored financial products that meet the evolving needs of our customers' needs,customers, including:

•Loans: The Company's loan portfolio includes commercial and industrial loans, commercial mortgages, and construction loans to small and medium-sized businesses, professionals, and real estate investors and developers. The Company also offers residential mortgages, home equity loans, and consumer loans to individuals and homeowners.individuals. Lending activities represent a core source of interest income, which is a key driver of our overall revenue. The Company aims to maintain a strong and diversified loan portfolio, primarily in Hawaii, with selective expansion into mainland markets.

•Deposits: The Company offers a comprehensive suite of deposit products and services including checking, savings, and time deposit accounts, as well as cash management solutions and digital banking capabilities. The Company's extensive branch and ATM network across the State of Hawaii supports convenient access for its customers. The interest paid on deposits is a key component of interest expense, which significantly influences overall earnings. In addition, fees and service charges on deposit accounts, along with card interchange contribute meaningfully to non-interestother operating revenue.

Our foundational principles are based on continuing to be a leading bank for small businesses, and a professional and reliable resource to meet Hawaii’s housing needs. To drive growth, diversify our balance sheet, and strengthen resilience, we also focus on markets and niche segments that differentiate our BankBank, which includes strategic partnerships with financial institutions in Japan and Korea.

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

Management determined the allowance for credit losses ("ACL") on loans is a critical accounting policy as of MarchJune 31,30, 2026 and December 31, 2025. This policy requires significant judgment and involves inherent complexity. Additional information regarding this policy is provided in Note 1 - Summary of Significant Accounting Policies included in the accompanying notes to the consolidated financial statements, as well as in Note 1 and the section titled "Critical Accounting Policies and Use of Estimates" within Management's Discussion and Analysis of Financial Condition and Operating Results in the Company's 2025 Annual Report on Form 10-K.

During the three months ended MarchJune 31,30, 2026, the Company recorded a provision for credit losses of $2.4$4.4 million, compared to a provision of $4.2$5.0 million during the same period in 2025. During the six months ended June 30, 2026, the Company recorded a provision for credit losses of $6.7 million, compared to a provision of $9.2 million during the same period in 2025. The decreasedecreases in the provision waswere primarily driven by alower decreasenet in loan balances and changescharge-offs in the economicthree forecastand usedsix months ended June 30, 2026, compared to the same periods in our current expected credit losses model.2025.

Non-GAAP financial measures may not be comparable to similarly entitled measures reported by other companies. The results for the three months ended MarchJune 31,30, 2026 were not materially impacted by items outside of the normal course of business.

A key measure of operating efficiency monitored by the Company is the efficiency ratio, which is derived from GAAP-based amounts. It is calculated by dividing total other operating expenses by total pre-provision revenue (defined as net interest income plus total other operating income). The Company believes that the efficiency ratio, a non-GAAP financial measure, provides a useful supplemental metric that enhances understanding of its business performance and operating efficiency. 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:

The improvements in the efficiency ratio in the three and six months ended MarchJune 31,30, 2026, compared to the same periods in 2025, waswere primarily driven by higher net interest income and other operating income, which more than offset the increaseincreases in other operating expense.

The Hawaii State Department of Business, Economic Development and Tourism ("DBEDT") reported that Hawaii's seasonally adjusted unemployment rate was 2.3%2.6% in FebruaryJune 2026, slightly lowerhigher than 2.6%2.4% in JanuaryMarch 20252026 and well below the national seasonally adjusted unemployment rate of 4.3%.4.2%. University of Hawaii Economic Research Organization ("UHERO") forecasts Hawaii's seasonally adjusted unemployment rate to remain relatively steady at 2.2%.2.4% for the full year 2026.

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 threesix months ended MarchJune 31,30, 2026. According to the Honolulu Board of Realtors, sales of Oahu single-family homes rose 10.9%,8.5%, while Oahu condominium sales fell 3.6%9.4% for the threesix months ended MarchJune 31,30, 2026, compared to the same period in 2025. The median sale price of Oahu single-family homes increasedstayed 3.4%relatively toflat at $1.2 million in the threesix months ended MarchJune 31,30, 2026, compared to $1.15 million in the same period in 2025. The median sale price of Oahu condominiums increased by 2.0%4.0% to $510,000$520,000 in the threesix months ended MarchJune 31,30, 2026, compared to $500,000 in the same period in 2025.

According to preliminary data from the HawaiiDBEDT, Tourism Authority ("HTA"), 1.664.18 million visitors arrived in the Hawaiian Islands during the twofive months ended FebruaryMay 28,31, 2026, an increase of 7.2%2.9% from 1.554.06 million visitors during the same period in 2025. Visitor arrivals from Japan are improving with a 6.6%8.6% increase year-over-year. Visitor spending totaled $9.67 billion in the five months ended May 31, 2026, up 6.2% from $9.11 billion in the same period in 2025.

In September 2025, the Federal Open Market Committee ("FOMC") implemented its first rate cut of 2025, reducing the target range by 25 basis points ("bps") to 4.00% to 4.25%. This decision was driven by signs of a weakening labor market and moderated economic growth, despite inflation remaining above the Fed’s 2% target. During the fourth quarter of 2025, the FOMC cut rates twice by 25 bps to a target rate of 3.50% to 3.75% at the end of 2025. The FOMC also signaled the possibility of one more cut in 2026 as they aim to balance employment and inflation goals.

In MarchJuly 2026, the FOMC decided to maintainmaintained the target range for the federal funds rate at 3.50% to- 3.75%3.75%, dueunchanged from the meetings earlier in the year. While economic activity continued to expand at a solid pace, inflation remained above the Federal Reserve's target and uncertainty aboutsurrounding the economic outlookoutlook, andincluding implicationsthe potential effects of the developments acrossin the Middle East.East conflict and global energy markets, supported the Committee's decision to keep rates unchanged.

A comparison of net interest income and net interest margin on a taxable-equivalent basis for the three and six months ended MarchJune 31,30, 2026 and 2025 is presented below. Net interest margin is calculated as annualized net interest income, adjusted to a taxable-equivalent basis using a federal statutory tax rate of 21%, expressed as a percentage of average interest-earning assets.

Net interest margin was 3.53%3.57% for the firstsecond quarter of 2026, an increase of 2213 bps from 3.31%3.44% for the same quarter in 2025. Net interest margin was 3.55% for the six months ended June 30, 2026, an increase of 18 bps from 3.37% in the same period in 2025. The increase in net interest margin for the three and six months ended June 30, 2026 was primarily dueattributable to increases in average yields earned on loans combined with the decreasedecreases in the average raterates paid on interest-bearing deposits.deposits Theseand positivelong-term variances weredebt, partially offset by a decline in the average yieldsyield earned on investments.interest-bearing deposits in other financial institutions and investment securities.

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.two factors.

Total other operating income for the firstsix quartermonths ofended June 30, 2026 was $11.6$26.2 million, which increased by $0.5$2.1 million, or 4.3%,8.6%, from $11.1$24.1 million infor the same quarterperiod in 2025. The increase was primarily driven by income relateddue to aincreases of $0.7 million in debit card program contract extension consideration of $0.7 million, (included in other income.operating income-other), $0.6 million in income from BOLI due to favorable equity market performance, and $0.4 million in fee income generated from investment services.

Total other operating expense for the firstsecond quarter of 2026 was $43.7$46.2 million, which increased by $1.6$2.2 million, or 3.8%,5.1%, from $42.1$43.9 million for the same quarter in 2025, primarily driven by higher salaries and employee benefits of $1.3$2.7 million.million due to higher deferred compensation expense and incentive accruals, and higher directors' deferred compensation plan expense.

The Company recorded income tax expense of $6.2$6.1 million for the firstsecond quarter of 2026, compared to $4.8$5.6 million for the same quarter in 2025. For the six months ended June 30, 2026, the Company recorded income tax expense of $12.3 million, compared to $10.4 million for the same period in 2025. The increaseincreases in income tax expense for the three months ended March 31, 2026 compared to the same period in 2025 iswere primarily attributable to higher pre-tax income.

The effective tax rate ("ETR") for the firstsecond quarter of 2026 was 22.99%,22.57%, compared to 21.25%23.48% for the same quarter in 2025. The increasedecrease in the ETRCompany's iseffective tax rate was primarily attributable to loweran increase in tax-exempt BOLI income compared to the same period in 2025.income.

The Company's net deferred tax assetsasset ("DTAsDTA"), net of valuation allowance, totaled $26.8$24.8 million as of MarchJune 31,30, 2026, compared to $23.6 million as of December 31, 2025. These amounts were included in other assets on the Company's consolidated balance sheets.

The valuation allowance on the Company's net DTA totaled $3.4 million and $3.4 million as of MarchJune 31,30, 2026 and DecemberMarch 31, 2025,2026, respectively. The valuation allowance on our net DTA relates to net apportioned net operating loss ("NOL") carryforwards for California state income tax purposes as the state has suspended the use of NOL carryforwards for the tax years 2024 through 2026.

Total assets were $7.50 billion as of MarchJune 31,30, 2026, an increase of $86.1$91.8 million, or 1.2%, from $7.41 billion as of December 31, 2025. The increase was primarily driven by increases in loans,investment interest-bearing deposits in other financial institutions,securities and investment securities.loans.

Investment securities totaled $1.33$1.38 billion as of MarchJune 31,30, 2026, an increase of $23.1$70.0 million, or 1.8%,5.3%, from $1.31 billion as of December 31, 2025. The increase in the investment securities portfolio reflected net purchases of $48.9$125.1 million, and amortization of unrecognized losses on investment securities transferred to HTM of $1.5$3.2 million, partially offset by principal runoff and net accretion of discount totaling $24.7$52.4 million, and a $2.6$5.9 million decrease in the market valuation of the AFS portfolio.

The Company strategically supplements its Hawaii loan portfolio by selectively pursuing commercial, construction, commercial real estate, and consumer loan opportunities on the U.S. Mainland. This approach supports growth, enhances geographic, asset class and rate type diversification, generally provides higher yields, while maintaining the Company's disciplined credit standards and underwriting practices.

Loans, net of deferred costs, totaled $5.32$5.31 billion as of MarchJune 31,30, 2026, an increase of $31.3$19.2 million, or 0.6%,0.4%, from $5.29 billion as of December 31, 2025. The increase was primarily driven by an increase in commercial mortgage loans of $109.3$91.9 million, partially offset by decreases in residential mortgage loans of $32.2$23.8 million, home equity loans of $17.7$22.8 million, consumer loans of $15.5$19.7 million, commercial and industrial loans of $4.2 million, and construction loans of $8.8$2.2 million.

The Hawaii loan portfolio decreased by $58.7$78.2 million, or 1.3%,1.8%, from December 31, 2025. The decrease was primarily due to decreases in construction loans of $37.9 million, residential mortgage loans of $32.2$23.8 million, construction loans of $25.4, and home equity loans of $17.7$22.8 million, consumer of $10.9 million. These decreases were partially offset by an increaseincreases in commercial and industrial loans of $8.8 million, and commercial mortgage loans of $26.0$8.5 million.

The U.S. Mainland loan portfolio increased by $89.9$97.5 million, or 11.0%,11.9%, from December 31, 2025. The increase was primarily driven by increases in commercial mortgage loans of $83.3$83.4 million and construction loans of $16.6$35.7 million, partially offset by a decreasedecreases in commercial and industrial loans of $13.0 million and consumer loans of $8.3$8.7 million. During the threesix months ended MarchJune 31,30, 2026, the Company purchased $15.8$39.3 million in U.S. Mainland consumer automobile loans, which were largely offset by portfolio runoff.

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 MarchJune 31,30, 2026. Maturities are based on contractual maturity dates and do not factor in principal amortization.

Nonperforming Assets and Accruing Loans 90 Days or More Past Due The following table presents nonperforming assets ("NPAs") and accruing loans 90+ days or more past due as of the dates presented:

Nonperforming assets totaled $14.5$16.5 million, or 0.19%0.22% of total assets as of MarchJune 31,30, 2026, compared to $14.4 million, or 0.19% of total assets as of December 31, 2025.