Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

Payment of Filing Fee (Check the appropriate box):

 

CENTRAL PACIFIC FINANCIAL CORP.

220 South King Street

Honolulu, Hawaii 96813

(808) 544-0500

February 28, 2022

Dear Fellow Shareholder:

On behalf of your Board of Directors, we cordially invite you to attend the 2022 Annual Meeting of Shareholders of Central Pacific Financial Corp. The Annual Meeting will be held on Thursday, April 21, 2022, at 11:00 a.m., Hawaii time. Due to the public health impact of the coronavirus outbreak (COVID-19), and to support the health and well-being of our employees and shareholders, this year’s Annual Meeting will be held virtually. You can attend online at www.virtualshareholdermeeting.com/CPF2022, where you will be able to vote and submit questions electronically during the Annual Meeting. You may vote before the Annual Meeting at www.proxyvote.com. Specific Instructions for accessing the Annual Meeting are provided on the notice, proxy card or voting instruction form you received (and please have this notice, proxy card or voting instruction form available when you visit the website) and in the “Attending the Meeting” section of the Proxy Statement.

This year, we will again be using the “Notice and Access” method of providing proxy materials to shareholders via the Internet. We believe that this process provides shareholders with a convenient and quick way to access the proxy materials and vote, while allowing us to conserve natural resources and reduce the costs of printing and distributing the proxy materials. We will mail to most of our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy statement and the Form 10-K and vote electronically via the Internet. This notice will also contain instructions on how to receive a paper copy of the proxy materials. All shareholders who do not receive a notice will receive a paper copy of the proxy materials by mail or an electronic copy of the proxy materials by email.

The accompanying Notice of Annual Meeting of Shareholders and Proxy Statement describe proposals to be acted upon at the Annual Meeting. Please give these materials your prompt attention. Then, we ask that you vote by internet, telephone or by mail, as set forth in the voting instructions or proxy card that are included with these materials, to ensure that your shares are represented and voted at the meeting. Shareholders who attend the meeting may withdraw their proxy and vote at the meeting if they wish to do so. Your vote is important, so please act at your earliest convenience.

We appreciate your continued interest in Central Pacific Financial Corp.

CENTRAL PACIFIC FINANCIAL CORP.

220 South King Street

Honolulu, Hawaii 96813

(808) 544-0500

NOTICE IS HEREBY GIVEN that, pursuant to its Bylaws and the call of its Board of Directors, the Annual Meeting of Shareholders (the “Meeting”) of Central Pacific Financial Corp. (the “Company”) will be held virtually on Thursday, April 21, 2022, at 11:00 a.m., Hawaii time. The Meeting will be a completely virtual meeting of shareholders, to be conducted via live audio webcast. You will be able to attend the Meeting and submit your questions during the Meeting by attending virtually at www.virtualshareholdermeeting.com/CPF2022. The Meeting is being held for the purpose of considering and voting upon the following proposals:

1.Election of Directors.

2.Executive Compensation.

3.Ratification of Appointment of Independent Registered Public Accounting Firm.

4.Other Business.

Only those shareholders of record at the close of business on February 11, 2022 shall be entitled to notice of and to vote at the Meeting.

Dated: February 28, 2022

By Order of the Board of Directors,

 

GLENN K.C. CHING

Important notice regarding the availability of proxy materials for the annual shareholders’ meeting to be held on April 21, 2022.

 

Our Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 2021 are accessible, free of charge, at https://www.cpb.bank/2022proxy and https://www.proxyvote.com.

YOUR VOTE IS IMPORTANT. SHAREHOLDERS ARE URGED TO VOTE AND CAN DO SO BY INTERNET, TELEPHONE OR BY MAIL, AS SET FORTH IN THE VOTING INSTRUCTIONS OR PROXY CARD THAT ARE INCLUDED WITH THESE MATERIALS. SHAREHOLDERS WHO ATTEND THE MEETING MAY WITHDRAW THEIR PROXY AND VOTE AT THE MEETING IF THEY WISH TO DO SO.

CENTRAL PACIFIC FINANCIAL CORP.

220 South King Street

Honolulu, Hawaii 96813

(808) 544-0500

INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Central Pacific Financial Corp. (the “Company”) for use at the 2022 Annual Meeting of Shareholders (the “Meeting”) of the Company to be held online at www.virtualshareholdermeeting.com/CPF2022 on Thursday, April 21, 2022, at 11:00 a.m., Hawaii time, and at any and all adjournments or postponements thereof. The Notice of Internet Availability of Proxy Materials, this Proxy Statement and accompanying form of proxy or voting instruction card, are first being made available to shareholders on or about February 28, 2022.

The proposals to be considered and voted upon at the Meeting will be:

The Board fixed the close of business on February 11, 2022 as the record date (the “Record Date”) for the determination of the shareholders of the Company entitled to notice of and to vote at the Meeting. Only holders of record of shares of the Company’s Common Stock (“Common Stock”) at the close of business on the Record Date will be entitled to vote at the Meeting and at any adjournment or postponement of the Meeting. There were 27,635,614 shares of the Company’s Common Stock, no par value, issued and outstanding on the Record Date, held by approximately 3,081 holders of record. There are no other classes of shares of the Company’s capital stock outstanding.

Each holder of Common Stock will be entitled to one (1) vote, virtually in person or by proxy, for each share of Common Stock standing in the holder’s name on the books of the Company as of the Record Date on any matter submitted to the vote of the shareholders.

The required quorum for the transaction of business at the Meeting is a majority of the total outstanding shares of Common Stock entitled to vote at the Meeting, either present virtually in person or represented by proxy. Abstentions will be included in determining the number of shares present at the Meeting for the purpose of determining the presence of a quorum.

Under the rules of the National Association of Securities Dealers, Inc., member brokers generally may not vote shares held by them in street name for customers unless they are permitted to do so under the rules of any national securities exchange of which they are a member. Under the rules of the New York Stock Exchange, Inc. (“NYSE”), a member broker who holds shares in street name for

customers has the authority to vote on certain “routine” proposals if the NYSE member broker has transmitted proxy soliciting materials to the beneficial owner but has not received instructions from that owner. NYSE member brokers will not be permitted to vote on proposal numbers 1 or 2 unless they receive instructions from their customers. NYSE rules permit member brokers that do not receive instructions from their customers, to vote on proposal number 3 as discussed above in their discretion.

The following chart sets forth the required vote to approve each proposal to be considered and voted upon at the Meeting, and the effect of “Withhold” votes, abstentions, and broker non-votes.

Additional information regarding each of these proposals is provided in the section titled “DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD OF DIRECTORS” (for Proposals 1 through 3 above).

The following is the Board’s recommendation with respect to each of the proposals to be considered and voted upon at the Meeting:

It is not anticipated that any matters will be presented at the Meeting other than as set forth in the accompanying Notice of the Meeting and this Proxy Statement. If any other matters are presented properly at the Meeting, however, the proxy will be voted by the proxy holders in accordance with the recommendations of the Board or, if no recommendation is given, in their own discretion.

You may vote by internet, telephone or by mail, as set forth in the voting instructions or proxy card that is provided to you.

Voting by Internet or Telephone. Voting by internet or telephone is fast and convenient and your vote is immediately confirmed and tabulated. The internet and telephone voting procedures are designed to authenticate votes cast by use of a personal identification number which is provided with your voting instructions. These procedures allow shareholders to appoint a proxy to vote their shares and to confirm that their instructions have been properly recorded. If you vote by internet or telephone, you do not have to mail in a proxy card, but your vote must be received by the voting deadline set forth in your voting instructions.

Voting by Mail. If you wish to vote by mail, you may request a paper copy of these materials which will include a proxy card. If you vote by proxy card, be sure to complete, sign, date and mail your proxy card in the accompanying postage-prepaid envelope by the voting deadline set forth on the proxy card.

If your shares are held by a bank, broker or other nominee, please follow the instructions provided with your proxy materials to determine if internet or telephone voting is available. If your bank or broker does make internet or telephone voting available, please follow the voting instructions provided by your bank or broker.

If you vote by internet or by telephone, you should not return a proxy card.

Any shareholder who executes and delivers a proxy has the right to revoke it at any time before it is exercised by filing with the Corporate Secretary of the Company an instrument revoking it or a duly executed proxy bearing a later date. A proxy may also be revoked by attending the Meeting and voting virtually in person at the Meeting, or by following the instructions at www.virtualshareholdermeeting.com/CPF2022. Subject to such revocation, all shares represented by a properly executed proxy received in time for the Meeting will be voted by the proxy holders in accordance with the instructions on the proxy. If your shares are held in street name, you should follow the instructions of your broker, bank or nominee regarding the revocation of proxies.

This solicitation of proxies is made on behalf of the Board and the Company will bear the costs of the preparation of proxy materials and the solicitation of proxies for the Meeting. It is contemplated that proxies will be solicited principally through the mail, but directors, officers and regular employees of the Company or its subsidiary, Central Pacific Bank (the “Bank”), may solicit proxies personally, by telephone, electronically or by other means of communication. Although there is no formal agreement to do so, the Company may reimburse banks, brokerage houses and other custodians, nominees and fiduciaries for their reasonable expenses in forwarding these proxy materials to beneficial owners. The Company has retained D.F. King & Co., Inc. to assist it in connection with the solicitation of proxies for a fee of approximately $8,500, plus reimbursement of expenses.

This year’s Meeting will be held virtually, and the Board of Directors and certain members of Company management may log in to the Meeting from remote locations.

The Company’s Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 2021 are available free of charge at https://www.cpb.bank/2022proxy and at https://www.proxyvote.com.

In addition, the Company will provide without charge, upon the written request of any shareholder, a copy of the Company’s Annual Report on Form 10-K including the financial statements and the financial statement schedules, required to be filed with the United States Securities and Exchange Commission (the “SEC”) for the fiscal year ended December 31, 2021. Requests should be directed to Central Pacific Financial Corp., Attn: Investor Relations, P.O. Box 3590, Honolulu, Hawaii 96811 or to https://www.proxyvote.com.

The Company will also deliver promptly upon written or oral request a separate copy of the Company’s Annual Report on Form 10-K and the Company’s Proxy Statement, to any shareholder who shares an address with other shareholders and where only one (1) set of materials were sent to that address to be shared by all shareholders at that address.

We are furnishing materials to our shareholders primarily via the internet instead of mailing printed copies of those materials to our shareholders. By doing so, we save costs and reduce the environmental impact of the Meeting. On February 28, 2022, the Company mailed a Notice of Internet Availability of Proxy Materials (“Notice”) to shareholders. The Notice contains instructions about how to access our proxy materials and vote online or by telephone. If you would like to receive a paper copy of our proxy materials, please follow the instructions included in the Notice.

Based on filings made under Section 13(d) and Section 13(g) of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of February 11, 2022, the following were the only persons known to management of the Company to beneficially own more than five percent (5%) of the Company’s outstanding Common Stock:

The following table sets forth certain information regarding beneficial ownership of Common Stock by each of the current directors, nominees, and the Named Executive Officers (as defined under “COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS—COMPENSATION DISCUSSION AND ANALYSIS”), as well as all directors and executive officers as a group, as of the close of business on February 11, 2022. Unless otherwise noted, the address of each person is c/o Central Pacific Financial Corp., 220 South King Street, Honolulu, Hawaii 96813.

The Company’s directors, executive officers and the beneficial holders of more than ten percent (10%) of the Common Stock are required to file certain reports with the SEC regarding the amount of and changes in their beneficial ownership of the Company’s Common Stock. Based on its review of copies of those reports, the Company is required to disclose known failures to file required forms, or failures to timely file required reports during the previous year. To the best knowledge of the Company, there were no failures to file or timely file such required reports during year 2021 by any person who was at any time during year 2021 a director, officer, beneficial owner of more than ten percent (10%) of the Common Stock, or any other persons subject to Section 16 of the Exchange Act with respect to the Company.

The Company currently has twelve (12) directors: Christine H. H. Camp, Earl E. Fry, Wayne K. Kamitaki, Jonathan B. Kindred, Paul J. Kosasa, Duane K. Kurisu, Christopher T. Lutes, Colbert M. Matsumoto, A. Catherine Ngo, Saedene K. Ota, Crystal K. Rose, and Paul K. Yonamine, all of whom, other than Wayne K. Kamitaki who reached our mandatory retirement age and was not nominated for re-election, are also nominees for directors. The term of all directors expires at the Meeting. Accordingly, there are eleven (11) directors to be elected at the Meeting to serve one-year terms expiring at the 2023 Annual Meeting of Shareholders and until their respective successors are elected and qualified, subject to the earlier of their death, resignation, retirement, disqualification or removal from office.

All nominees have indicated their willingness to serve and unless otherwise instructed, proxies will be voted for all of the nominees. However, in the event that any of them should be unable to serve, the proxy holders named on the proxy cards will vote in their discretion for such persons as the Board may recommend.

There are no family relationships among directors or executive officers of the Company. As of the date hereof and for the past five years, no directorships are held by any director or director nominee with a company with a class of securities registered pursuant to Section 12 of the Exchange Act, or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940, except for Director Christine H. H. Camp who is a former director of the Federal Home Loan Bank of Des Moines from 2018 to 2021; Director Earl E. Fry, who is a director of Hawaiian Holdings, Inc. (NASDAQ ticker “HA”), a director of Backblaze Inc. (NASDAQ ticker “BLZE”), and a former director of Xactly Corporation from September 2005 to July 2017; and Director Crystal K. Rose, who is also a director of Hawaiian Holdings, Inc. (NASDAQ ticker “HA”).

The election of directors requires a plurality of the votes cast “FOR” the election of the directors by the shares entitled to vote in the election at a meeting at which a quorum is present. Accordingly, the eleven (11) directorships to be filled at the meeting will be filled by the eleven (11) nominees receiving the highest number of “FOR” votes.

The following table sets forth certain information with respect to each of the directors (all of whom are nominees), and executive officers. Information for Ms. Ngo and Mr. Yonamine, who are also executive officers, appears under the “Nominees” heading. The term of each director expires at the Meeting.

The below provides information regarding the nominees to our Board, including certain types of knowledge, experience or attributes possessed by one or more of our director nominees.

 

Set forth below is information concerning the current executive officers of the Company who are not also directors of the Company:

During the fiscal year ended December 31, 2021, the Board held a total of eight (8) meetings. Each incumbent director attended at least seventy-five percent (75%) of the total number of the aggregate of the Board meetings and meetings held by all committees of the Board on which he/she served during 2021. The Company expects directors to attend the annual meeting of shareholders. All directors attended last year’s annual meeting of shareholders.

The Board has three (3) standing committees: an Audit Committee, a Compensation Committee, and a Governance Committee.

The following table sets forth the non-employee members of the Board as of the date of this Proxy Statement and the committees of the Board on which they currently serve, and the committees on which they will serve effective as of the Meeting.

Interested parties may communicate directly with the Chairman by writing to: Paul K. Yonamine, 220 South King Street, 22^nd Floor, Honolulu, Hawaii 96813. Interested parties may communicate directly with the Lead Independent Director or with the non-management or independent directors as a group, by writing to: Crystal K. Rose, Bays Lung Rose & Voss, Topa Financial Center, Suite 900, 700 Bishop Street, Honolulu, Hawaii 96813. Alternatively, concerns may be made known and communicated directly to the Chairman or to the Lead Independent Director or to the non-management or independent directors as a group, through procedures set forth in the Company’s Complaint Policy which is available on the Company’s website (www.cpb.bank).

The Audit Committee held seven (7) meetings during 2021, including three (3) private sessions with the independent auditors, five (5) private sessions with internal Audit and Credit Review, five (5) private sessions with executive management, and two (2) executive sessions. The responsibilities of the Audit Committee are described in the paragraph below and under the subheading “REPORT OF THE AUDIT COMMITTEE.” The Audit Committee operates under a Charter adopted by the Board. The Charter of the Audit Committee is available on the Company’s website (www.cpb.bank). The current members of the Company’s Audit Committee are Earl E. Fry (Chair), Jonathan B. Kindred, and Wayne K. Kamitaki, each of whom is “independent” within the meaning of the listing standards of the NYSE and the rules of the SEC. Effective as of the Meeting, the members of the Company’s Audit Committee will be Earl E. Fry (Chair), Jonathan B. Kindred, and Christine H. H. Camp, each of whom is “independent” within the meaning of the listing standards of the NYSE and the rules of the SEC. The Board has also determined that each member is financially literate, as such qualification is defined under the rules of the NYSE, that each member has accounting or related financial management expertise, as such qualification is defined under the rules of the NYSE, and that Earl E. Fry, Christine H. H. Camp, and Wayne K. Kamitaki are each an “audit committee financial expert” within the meaning of the rules of the SEC. None of Ms. Camp, Mr. Kamitaki and Mr. Kindred serves on the audit committee of any other publicly registered company. Mr. Fry serves on the audit committees of two other publicly registered companies: Hawaiian Holdings Inc. and Backblaze Inc.

Pursuant to the Company’s Audit Committee Charter, the Audit Committee reviews and evaluates all related party transactions that are material to the financial statements pursuant to the Company’s Policy Regarding Transactions with Related Persons, and determines conflicts of interest pursuant to the Company’s Code of Conduct & Ethics and pursuant to its Code of Conduct & Ethics for Senior Financial Officers. In addition, certain loans to directors and executive officers and their related interests are subject to the lending restrictions set forth in Federal Reserve Board Regulation O and the lending policies and procedures of the Bank. Each director and executive officer is required to report to the Company transactions with the Company in which they have an interest.

The Compensation Committee held nine (9) meetings during 2021. The Compensation Committee’s primary purpose is to assist the Board in discharging the Board’s responsibilities relating to compensation of the Company’s executive officers by evaluating and recommending to the Board the approval of executive officers’ benefits, bonuses, incentive compensation, severance, equity-based or other compensation plans, policies and programs of the Company and providing all required disclosures on executive compensation for inclusion in the Company’s Proxy Statement. The Compensation Committee also provides risk management of the Company’s compliance with any laws, rules and regulations applicable to compensation practices, plans and programs, and to ensure that compensation is not structured in a way which will encourage unnecessary or excessive risk taking. The functions of the Compensation Committee are further described in “COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS” below, under the subheading “COMPENSATION DISCUSSION AND ANALYSIS.” The Charter of the Compensation Committee is available on the Company’s website (www.cpb.bank). The current members of the Company’s Compensation Committee are Wayne K. Kamitaki (Chair), Christine H.H. Camp, Saedene K. Ota, Duane K. Kurisu and Crystal K. Rose, each of whom is “independent” within the meaning of the listing standards of the NYSE, is a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act. Effective as of the Meeting, the members of the Company’s Compensation Committee will be Saedene K. Ota (Chair), Christine H.H. Camp, Duane K. Kurisu, and Crystal K. Rose, each of whom is “independent” within the meaning of the listing standards of the NYSE, is a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act.

From time-to-time, the Compensation Committee seeks advice from outside experts in the compensation field. The Compensation Committee has historically engaged a compensation consultant to provide input on both Board and executive compensation issues. In 2021 the Committee retained Korn Ferry (US) (“Korn Ferry”). Korn Ferry is an organizational consulting firm that assists clients in designing optimal organization structures, roles, and responsibilities.

In 2021, the Compensation Committee engaged Korn Ferry to serve as an independent compensation consultant. Korn Ferry was engaged directly by the Compensation Committee and Korn Ferry consultants reported directly to the Compensation Committee for its services in these capacities. The Compensation Committee discusses, reviews, and approves all consulting projects performed by Korn Ferry and periodically reviews the relationship with Korn Ferry, and considers competitive proposals from other firms.

The Compensation Committee considered the independence of Korn Ferry in light of SEC rules and NYSE listing standards. The Compensation Committee requested and received reports from Korn Ferry addressing the independence of Korn Ferry and its consultants, including the following factors: (1) other services provided to the Company by Korn Ferry; (2) fees paid by the Company as a percentage of Korn Ferry’s total revenue; (3) policies or procedures maintained by Korn Ferry that are designed to prevent a conflict of interest; (4) any business or personal relationships between the consultants and a member of the Compensation Committee; (5) any Company Common Stock owned by the consultants; and (6) any business or personal relationships between our executive officers and the consultants. The Compensation Committee discussed these considerations as well as other considerations and concluded that the work performed by Korn Ferry and its consultants, involved in the engagement did not raise any conflict of interest.

The Governance Committee held five (5) meetings during 2021. The Governance Committee is responsible for promoting the best interests of the Company and its shareholders through the implementation of sound corporate governance principles and practices, including identifying individuals qualified to become Board members, recommending nominees for directors of the Company, reviewing the qualifications and independence of the members of the Board and its committees, reviewing and monitoring the Company’s Corporate Governance Guidelines, monitoring the Board’s and the Company’s compliance regarding changes in corporate governance practices and laws and leading the Board in its annual review of the performance of the Board. The Charter of the Governance Committee and the Company’s Corporate Governance Guidelines are available on the Company’s website (www.cpb.bank). The current members of the Company’s Governance Committee are Paul J. Kosasa (Chair), Crystal K. Rose, and Duane K. Kurisu, each of whom is “independent” within the meaning of the listing standards of the NYSE.

The Board’s “Director Resignation Policy” provides that at any shareholder meeting at which directors are subject to an uncontested election, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall tender a letter of resignation to the Board for consideration by the Governance Committee. The Governance Committee shall recommend to the Board the action to be taken with respect to such offer of resignation. The Board shall act promptly with respect to each such letter of resignation and shall notify the director concerned of its decision. Any director who tenders his or her resignation pursuant to this provision shall not participate in the Governance Committee or Board action regarding whether to accept his or her resignation offer.

The Board’s “Corporate Governance Guidelines” provide that a non-employee Director must retire form the Board upon attaining the age of seventy (70). A non-employee director who turns seventy (70) during a term for which he or she was elected will be allowed to serve until, but only until, December 31st of the calendar year in which he or she turns 70 provided his or her elected term does not end earlier.

The Board has determined, in accordance with our Standards Regarding Director Independence, that all directors who are currently directors or who served during 2021 and all nominees (other than Christopher T. Lutes (see discussion below), A. Catherine Ngo who is Executive Vice Chair of the Company, and Paul K. Yonamine who is Chairman and Chief Executive Officer of the Company) are “independent” within the meaning of the rules of the NYSE. All of the directors and nominees (other than Ms. Ngo and Mr. Yonamine) are non-employees. All committees of the Board are comprised solely of independent directors.

The Board determined in 2022 that Christopher T. Lutes is no longer independent due to business that the Company and the Bank are conducting with Elevate Credit, Inc. (“Elevate”) in which Mr. Lutes serves as Chief Strategy Officer, and with Swell Financial, Inc. (“Swell”), a fintech company, in which Mr. Lutes serves as a board member and in which Elevate is an investor. The Company is an investor in Swell, has contributed certain intellectual property to Swell and has one designee on the Swell board of directors, currently Mr. Yonamine. The Bank will provide various consumer products through Swell’s digital online application technology. In connection with the foregoing, Elevate will provide various services to Swell and to the Bank. The Company, the Bank, Elevate, and Swell have entered into various agreements regarding the foregoing business relationships, all of which business relationships when collectively considered by the Company’s Board, resulted in the Board concluding that Director Lutes should no longer be classified as independent.

With respect to those directors who were determined independent by the Board, the following transactions, relationships and arrangements were considered by the Board in its determination of a director’s independence, including with respect to service on the Board’s committees, and none were found to adversely impact an independence determination.

During 2021, the following directors and nominees either directly and/or indirectly through companies in which they have a business interest or affiliation, or through members of their immediate families, received and/or had outstanding loans with the Bank: Christine H. H. Camp, Earl E. Fry, Wayne K. Kamitaki, Paul J. Kosasa, Duane K. Kurisu, Colbert M. Matsumoto, Saedene K. Ota, and Crystal K. Rose.

During 2021, the following directors and nominees either directly and/or indirectly through companies in which they have a business interest or affiliation, or through members of their immediate families, opened and/or maintained deposit, trust, investment and/or other banking accounts with the Bank: Christine H. H. Camp, Earl E. Fry, Wayne K. Kamitaki, Jonathan B. Kindred, Paul J. Kosasa, Duane K. Kurisu, Colbert M. Matsumoto, A. Catherine Ngo, Saedene K. Ota, Crystal K. Rose, and Paul K. Yonamine.

During 2021, the following directors and nominees served on boards of, or were involved in fundraising on behalf of, non-profit, community, charitable and/or cultural organizations, which received monetary donations from the Bank: Earl E. Fry, and Duane K. Kurisu. For 2021, the Company did not pay to any charitable or non-profit organization in which one of the Company’s Board members serves on that organization’s board, any amount in excess of the greater of $1,000,000 or 2% of the recipient organization’s gross annual revenues. Donations from the Bank in 2021 totaled $2,500.

During 2021, the following directors and nominees served on boards of, or were involved in fundraising on behalf of, non-profit, community, charitable and/or cultural organizations, which received monetary donations from the Central Pacific Bank Foundation: Christine H. H. Camp, Earl E. Fry, Wayne K. Kamitaki, Jonathan B. Kindred, Paul J. Kosasa, Duane K. Kurisu, Colbert M. Matsumoto, A. Catherine Ngo, Saedene K. Ota, and Paul K. Yonamine. For 2021, the Company did not pay to any charitable or non-profit organization in which one of the Company’s Board members serves on that organization’s board, any amount in excess of the greater of $1,000,000 or 2% of the recipient organization’s gross annual revenues. Donations from the Foundation in 2021 totaled $389,767.

During 2021, the following independent directors and nominees served on boards and as officers of companies that either directly or indirectly had business relationships with the Bank in the ordinary course of the Bank’s business, in which the directors had no involvement and which were on no more favorable terms than for other similarly situated matters: Paul J. Kosasa, Duane K. Kurisu and Colbert M. Matsumoto.

Company director Paul J. Kosasa is President and Chief Executive Officer, and a director of ABC Stores. ABC Stores has a fleet of retail convenience stores in Waikiki and other tourist locations in Hawaii and these locations are prime spots for the Bank to place its ATMs for use by tourists. In 2021, the Bank paid a total of $25,967 to place eight ATMs in ABC Stores. The Bank does not pay any premium or provide any preferential terms to ABC Stores, the arrangement is made on no more favorable terms than for other similarly situated transactions, and Mr. Kosasa had no direct involvement in the Bank’s ATM contract with ABC Stores. This arrangement is not a large dollar arrangement for ABC Stores; the value to ABC Stores being the ATM convenience afforded its customers. This arrangement is beneficial to the Bank as it generates fee revenue for the Bank due to the heavy tourist traffic in Waikiki and the other tourist areas where these ATMs are located.

Company director Duane K. Kurisu is sole owner and co-manager of PacificBasin Communications LLC which publishes Hawaii Business magazine, Honolulu magazine, and Honolulu Family magazine. In 2021, the Bank paid a total amount of $80,200, which amount includes agency commissions paid by the Bank to Anthology Marketing Group, Inc., the Bank’s traditional media agency of record, for advertising of the Bank’s brand, products and services in PacificBasin Communications, LLC media, detailed as follows: $40,850 for Hawaii Business magazine; $38,695 for Honolulu magazine; and $654 for Honolulu Family magazine. Mr. Kurisu is the sole owner and manager of aio Digital, LLC (dba Library Creative) (“aio Digital”). In 2021, the Bank paid aio Digital $8,377, for design services. In addition, the Bank supported the 2021 44th Prince Lot Hula Festival (“Hula Festival”) by being one among other sponsors in presenting the Hula Festival virtually through watchhula.com. In addition to the Bank, the other sponsors were Kamehameha Schools and aio Digital. The Bank’s contribution to the Hula Festival consisted of $12,827 which was applied towards aio Digital’s work in providing the Hula Festival with the website watchhula.com. All services provided by aio Digital were not professional services; the services were not advisory in nature. aio Digital performed design services in accordance with the Bank’s specific instructions and subject to the Bank’s design approval. The Bank’s engagement of aio Digital was not due to Mr. Kurisu’s relationship with aio Digital. Mr. Kurisu had no involvement with any of the aforementioned transactions and they were made on no more favorable terms than for other similarly situated transactions.

Company director Colbert M. Matsumoto is Chairman of the Board and a minority owner (<10%) of Island Holdings, Inc. (“Island Holdings”), a Director of Island Insurance Company, Limited (“Island Insurance”), and a Director of Atlas Insurance Agency, Inc. (“Atlas Insurance”). Island Holdings is the parent company of Island Insurance and Atlas Insurance. Mr. Matsumoto is an employee of Island Holdings and is not an employee of any of the other aforementioned entities. Atlas Insurance is the largest insurance agency in Hawaii, with roots going back to 1929 and an A+ rating from the Better Business Bureau of Hawaii, Inc. Atlas Insurance is headquartered in Honolulu, Oahu and has offices on the islands of Hawaii, Maui, and Kauai. The Company has been a customer of Atlas Insurance since at least 2000, well before Mr. Matsumoto joined the Company’s Board. The Company’s engagement of Atlas Insurance was not and is not due to Mr. Matsumoto’s relationship with Atlas Insurance, and Mr. Matsumoto is not involved in any way in any insurance matters between the Company and Atlas Insurance. In 2021, out of the insurance premiums which the Company and its subsidiaries paid for insurance policies that Atlas placed on behalf of the Company and its subsidiaries, Atlas Insurance received a total of $129,574 in fees and commissions (based on fees and premiums on the Company’s corporate insurance policies totaling $1,521,436, of which the Company paid $128,729 in premiums to Island Insurance and Tradewind Insurance Company, Limited (“Tradewind Insurance”), a wholly owned subsidiary of Island Insurance, for policies they issued). The services provided by Atlas Insurance, Island Insurance and Tradewind Insurance were not professional services; the services were not advisory in nature. Atlas Insurance acted as an insurance agency and the Company independently made all decisions and determinations regarding the Company’s insurance coverage. Payments to Island Insurance and Tradewind Insurance were premiums for insurance policies. Mr. Matsumoto did not receive any direct commissions paid for premiums paid by the Company to Island Insurance, Atlas Insurance or Tradewind Insurance. Atlas Insurance paid the Bank $44,823 (for base rent, common area maintenance fees, real property taxes, and general excise taxes) for space in the Bank’s Hilo office building. Hoike Networks, Inc. doing business as Pacxa and Framework 21 (“Pacxa”), is wholly indirectly owned by Island Holdings and provides the Bank with information technology support, equipment leasing, software licensing, and website hosting services pursuant to a five-year service contract. The services provided by Pacxa were not professional services or advisory in nature; the services were technical support and software licensing services directed by the Bank’s information technology and marketing teams. The Bank paid Pacxa $1,559,312 for its services in 2021 and such amount is below 1% of the annual revenue of Island Holdings. $596,209 of the amount paid to Pacxa in 2021 was pass-through costs for software licensing, cloud storage services, and hardware purchases. The Company’s engagement of Pacxa was not and is not due to Mr. Matsumoto’s relationship with Pacxa, and Mr. Matsumoto is not

involved in any way in any matters between the Company and Pacxa. Mr. Matsumoto had no involvement with any of the aforementioned transactions and they were made on no more favorable terms than for other similarly situated transactions. The Company’s relationships with the aforementioned entities, other than Pacxa, predate Mr. Matsumoto joining the Company’s Board.

Company executive officer, Mr. Arnold Martines, is President and Chief Operating Officer of the Company and the Bank. His wife, Thuy Nguyen-Martines, has been employed by the Bank since 2003 and currently holds the position of Senior Vice President and Senior Private Banking Manager, a non-executive officer position. In 2021, Ms. Nguyen-Martines’s total compensation, including salary, bonus, equity awards and other benefits, totaled approximately $185,000. Ms. Nguyen-Martines participates in the Company’s general benefit plans available to all similarly situated employees. Her compensation is commensurate with that of her peers and Mr. Martines does not have input into Ms. Nguyen-Martines’s compensation. “See also “Director Independence and Relationships.”

The Bank, which is a wholly-owned subsidiary of the Company, has made (in addition to any loans specified in the “Director Independence and Relationships” section immediately preceding this section) loans to directors and executive officers, their immediate family members, and companies in which they or their immediate family members have an interest, in the ordinary course of its business as a bank. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the Bank and do not involve more than the normal risk of collectability or present other unfavorable features. As of the date of this Proxy Statement, all of these loans are pass-rated loans.

The Company has a Board approved written policy (“Policy Regarding Transactions with Related Persons”) which sets forth the process and procedures for the review, approval, ratification and disclosure of any transactions with a related person (“transaction” and “related person” being as defined by Item 404 of SEC Regulation S-K). Loans subject to the lending restrictions set forth in Federal Reserve Board Regulation O are reviewed by the Bank’s Board Directors’ Loan Committee and approved by the Bank’s Board. All other loans to related persons are reviewed by the Bank’s Board Directors’ Loan Committee and reported to the Audit Committee quarterly. All other transactions with related persons are reviewed by the Company’s Audit Committee.

The Company’s Board has no policy with respect to the separation of the offices of Chairman, President and Chief Executive Officer. It is the Board’s view that rather than having a rigid policy, the Board, with the advice and assistance of its Governance Committee, and upon consideration of all relevant factors and circumstances, will determine, as and when appropriate, whether the offices of Chairman, President and Chief Executive Officer should be separate. Since June 1, 2014, Crystal K. Rose has served as Lead Independent Director and as a member of the Governance Committee of the Company’s and the Bank’s Board of Directors. Ms. Rose previously served as Chair of the Board of Directors of the Company and the Bank from April 20, 2011 through May 31, 2014 and Chair of the Governance Committee of the Company’s and the Bank’s Board of Directors from June 1, 2014 through April 1, 2019. Paul K. Yonamine, currently serves as Chairman of the Company’s Board of Directors and Executive Chairman of the Bank’s Board of Directors, and Chief Executive Officer of the Company. A. Catherine Ngo currently serves as Executive Vice-Chair of the Company and the Bank and also serves on the Company’s and Bank’s Board of Directors. Colbert M. Matsumoto currently serves as Vice Chair of the Board of Directors of the Company and the Bank. Arnold D. Martines currently serves as President and Chief Operating Officer of the Company and the Bank. Nine (9) of the twelve (12) Company’s and Bank’s Board of Directors are independent outside (non-employee) directors. As the Board’s former Chair and now as its Lead Independent Director, Ms. Rose previously presided over and once again presides over all meetings of the non-management directors in executive sessions, acts as liaison and facilitates communications between the Board and the principal executive officers, and ensures independent Board governance and oversight of management. In addition, all members of the Board’s Audit Committee, Compensation Committee, and Governance Committee are comprised of independent, non-management directors. The Company believes that the current structure ensures sufficient Board independence from management while also optimizing the efficiency and effectiveness of the Board and management in the oversight of the Company and the Bank, and also supports and provides for orderly transition and succession.

The Company is a one-bank holding company, with the Bank being the Company’s only bank subsidiary. The Company was set up as the Bank’s holding company to capitalize on the benefits of a bank holding company structure, including potential tax advantages, ability to engage in stock repurchases, potential flexibility with respect to activities, and flexibility with capital raising. All of the directors on the Company’s Board also serve on the Bank’s Board of Directors. In addition, all of the Company’s directors who serve on the Company’s Audit Committee, Compensation Committee and Governance Committee also serve on those same board level committees at the Bank. Deloitte & Touche LLP, the Company’s and Bank’s internal auditor, reports directly to the Company’s and Bank’s respective Audit Committees.

The Board oversees various risks of the Company and the Bank at both the Board level and through Board Committees. The Company’s and the Bank’s Audit Committees perform the customary risk oversight functions of an audit committee, which includes overseeing accounting, auditing, internal controls, legal and regulatory matters, financial reporting and financial risk. The Company’s and the Bank’s Compensation Committees perform the customary risk oversight functions of a compensation committee, which includes, overseeing the Company’s and Bank’s compliance with any laws, rules and regulations applicable to the Company’s and Bank’s compensation practices, plans and programs, and to help ensure that compensation is not structured in a way which will encourage unnecessary or excessive risk taking. The Company’s and the Bank’s Governance Committees perform the required and customary risk oversight functions of a governance committee, including overseeing risks associated with the Company’s and Bank’s governance practices and the leadership structure of the Board, and Company and Bank management. The Bank Directors’ Loan Committee oversees the Bank’s credits/loans, asset quality, and credit risk. The Bank’s Board Trust Committee oversees the Bank’s trust business/activities and fiduciary risk. The Bank’s Board Compliance Committee oversees the Bank’s information and cyber security posture and risk, the Bank’s compliance with the Bank Secrecy Act requirements, and the Bank’s compliance with consumer laws and regulations, and compliance risk. The Board reviews and approves the Company’s and Bank’s strategic plan, business plan, and annual budget and reviews and/or approves all major initiatives and undertakings to ensure they are strategically supportable and offer a sufficient return without an unacceptable level of risk. The Board also considers environmental, health and safety, and social matters as part of its risk oversight function. In addition, during year 2021, the Board and various of its Board Committees, continued to focus with management on addressing the financial, credit, safety, and other impacts and associated risks on the Company and the Bank due to the COVID-19 pandemic and its effect on the Bank’s customers, employees, shareholders, vendors, community, and other stakeholders. The Board receives regular updates from executives and management on the impact of the COVID-19 pandemic on the Bank’s business and financial performance, employees and community, and on the steps the Bank took to protect its employees and customers, ensure the provision of banking services to customers, and help the Bank’s customers and the Hawaii community during the COVID-19 pandemic.

Cyber security incidents compromising non-public personal financial information may produce material adverse effects to the Bank’s business, including but not limited to, reputational harm, loss of intellectual property, disruption of key business operations, governmental fines/penalties, and litigation/remediation costs. Under the direction of its Chief Information Security Officer (“CISO”), the Bank maintains a formal information security management program to address cyber security risks. The Board and the Bank’s Compliance Committee regularly receive reports and briefings from the CISO and Chief Legal Officer relating to a full range of cyber security issues, the Bank’s risk posture to protect against cyber security threats, and policies that are intended to adequately implement the program. This periodic reporting includes the annual review of the FDIC requirements relating to cyber security and the Gramm-Leach-Bliley Act.

The Company is committed to promoting and fostering ethical conduct and sound corporate governance principles. The Company has a Code of Conduct & Ethics (the “Code”) applicable to all employees, officers and directors of the Company. In addition, the Company also has a supplemental Code of Conduct & Ethics for Senior Financial Officers, which is applicable to the Chief Executive Officer, President, Chief Financial Officer, Controller, any other principal financial officer or principal accounting officer and any other person fulfilling and/or performing any similar role, function or capacity. Both of the aforementioned Codes of Conduct & Ethics are available on the Company’s website (www.cpb.bank) and Company employees annually certify that they have read and understand the Code or codes applicable to them. The Code provides standards of conduct and ethics in order to preserve, promote and foster the highest ethical conduct among all employees, officers and directors of the Company, and addresses conflicts of interest, corporate opportunities, honesty and integrity, securities trading, fair dealing, diversity and inclusion, confidentiality, protection and proper use of Company assets, and encourages the reporting of any suspected violation of the Code through robust reporting protocols and whistleblower protections. The Company also maintains a strong whistleblower and anti-retaliation policy and encourages reporting in accordance with the Company’s Complaint Policy available on the Company’s website (www.cpb.bank), which provides several designated channels, including to the Company’s Human Resources Manager, Internal Audit Coordinator, Chief Legal Officer, Chief Executive Officer, President or Board of Directors, or through a third-party hosted anonymous alert line. A waiver or amendment of any provision of the Code or supplemental Code of Conduct & Ethics for Senior Financial Officers may be made only by the Board. Any amendment or waiver of the supplemental Code of Conduct & Ethics for Senior Financial Officers will be posted on the Company’s website (www.cpb.bank) within four (4) business days of such amendment or waiver, as the case may be. In addition, the Bank has a Sexual Harassment & Other Forms of Harassment Policy which specifically addresses sexual harassment, other forms of harassment, investigation procedures, discipline, confidentiality, and prohibition of retaliation.

The Company’s Company Stock Trading Policy prohibits directors and employees (including executive officers) from hedging the risk associated with the ownership of the Company’s stock. This prohibition would include any purchase of financial instruments (including put or call options or any other derivative instruments) which function as a hedge on the Company’s stock. The Company’s Company Stock Trading Policy also prohibits directors and executive officers from pledging transactions involving the Company’s stock as collateral, including the use of a traditional margin account with a broker-dealer, without the prior consent of the Company’s Chairman or President.

Director Qualifications. The Governance Committee is responsible for reviewing the qualifications and independence of director nominees in accordance with the criteria set forth in the Company’s Corporate Governance Guidelines. The general criteria considered include independence, diversity, age, skills, experience and other relevant considerations in the context of the needs of the Board. Diversity is considered and desired and is viewed in a broad context; we seek Board members from different professions, industries, backgrounds, experiences, cultures, ethnicities, races, and gender, who can represent Hawaii’s multi-cultural, multi-ethnic, and multi-racial population and community.

Identifying and Evaluating Nominees. The Board seeks to identify candidates for director positions that are best qualified and suited to meet the needs of the Company and to present these candidates for shareholder approval, as and when director positions become open and available. The Governance Committee will first identify, review, evaluate and recommend to the Board, nominees for director positions. The Board will then vote whether or not to recommend such nominees to the Company’s shareholders for election. In identifying potential director nominees, the Governance Committee will search within the State of Hawaii and may search outside the State of Hawaii for any potential director candidates, and in this regard, may utilize the services of a professional search firm. While the same general criteria set forth above shall be applied in evaluating a candidate’s qualifications, it is difficult to enumerate all of the attributes, skills and qualities that the Governance Committee and/or Board may, at any given point in time, determine, consider and value in evaluating, selecting and recommending director nominees. Accordingly, the Governance Committee and the Board exercise their discretion and consider any circumstances, experiences, attributes, skills, qualities, and factors applicable to any director nominee with the intent and purpose of having the best qualified and suited directors serving on the Board at all times, as well as ensuring that the Board as a whole is diverse and well rounded. The Board may enlist the services of a third party to conduct a background check or other investigation in order to determine whether a candidate meets any criteria.

Shareholder Nominees. In accordance with the policies set forth in the Company’s Corporate Governance Guidelines and the Company’s Bylaws (as amended), the Governance Committee will consider properly submitted director nominees for election at the 2023 Annual Meeting of Shareholders recommended by shareholders if such recommendations are received in writing not less than ninety (90) calendar days nor more than one hundred twenty (120) calendar days prior to the first anniversary date of the annual meeting for the preceding year (such anniversary date, April 21, 2023), and comply with all other applicable requirements set forth in said Corporate Governance Guidelines and Bylaws (as amended). Shareholder recommendations should be addressed to the Company’s Corporate Secretary, P.O. Box 3590, Honolulu, Hawaii 96811. In addition, shareholders may bring nominations directly before an annual meeting by giving timely notice in writing to the Company’s Corporate Secretary within the same ninety (90) to one hundred twenty (120) calendar day period prior to the first anniversary date of the annual meeting for the preceding year (such anniversary date, April 21, 2023) and complying with all other applicable requirements set forth in the Company’s Bylaws. In addition to satisfying the foregoing requirements under the Company’s bylaws, to comply with the universal proxy rules (once effective), shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than February 20, 2023.

Our Board and management team greatly value the opinions and feedback of our shareholders. In 2021 we reached out to 9 of our 10 largest shareholders, representing approximately 50% of our Common Stock and the two leading proxy advisory firms. This effort was led by our President and our Chief Financial Officer, with senior executives from our Legal and Human Resources teams joining the calls.

Feedback from the 2021 Annual Meeting of Shareholders was positive overall. Topics covered in our shareholder engagement discussions included:

A summary of the feedback we received was discussed and considered by the Board, and, where needed, enhancements have been made to our disclosures to improve transparency. We believe these engagement efforts with our shareholders will allow us to better understand our shareholders’ priorities and perspectives and provide us with useful input.

Shareholders and other interested parties who wish to communicate with us on these or other matters may contact us electronically at legal@cpb.bank or by mail at Legal Department, Central Pacific Financial Corp., 220 South King Street, Honolulu, Hawaii 96813.

Shareholders of the Company and others may send written communications directly to the Board, addressed to: Board of Directors of Central Pacific Financial Corp., 220 South King Street, 22^nd Floor, Honolulu, Hawaii 96813. Any such communication may be directed to the attention of the Chairman of the Board or the Chair of any Board Committee (such as, for example, the Chair of the Audit Committee or the Chair of the Governance Committee) or to the Lead Independent Director or to the non-management or independent directors. Shareholders and others sending such communications should include the following in their written communication: (a) such shareholder(s) and others should identify himself/herself/itself/themselves, and if a shareholder, provide reasonably satisfactory proof of their ownership of the Company’s Common Stock; (b) such shareholder(s) and others should state in reasonable detail and communicate with reasonable clarity and specificity their issue or concern; and (c) such shareholder(s) and others should include their contact information (at a minimum, phone number and address). Shareholders and others who wish to communicate anonymously with the Board or any group of the Board should refer to the Company’s Complaint Policy available on the Company’s website (www.cpb.bank). However, nothing that is stated in this paragraph shall override any requirements imposed on any shareholder communications under the Company’s Articles of Incorporation (as amended) or Bylaws (as amended) or other governing documents or by any law, rule or regulation.

Since the Bank’s founding, the Bank has been committed to serving the communities in which it operates. The Bank believes that a commitment to social, environmental, and economic responsibility is important to the Bank’s success. This commitment starts at the top with our Board, which regularly considers environmental, health and safety, and social matters as part of its oversight functions, and has incorporated ESG related initiatives into the Company’s 2022 Strategic Plan and Business Plan.

In 2021 we released our inaugural annual ESG Report and disclosures in accordance with the Sustainability Accounting Standards Board (SASB) Commercial Banks, Mortgage Finance, and Consumer Finance Sustainability Accounting Standards. These reports, as well as other ESG related disclosures are available on our “Investor Relations” page at cpb.bank. The Bank intends to publish its ESG Report for calendar year 2021 later this year. Our website, ESG Report, and ESG related disclosures are not part of or incorporated into this proxy statement.

The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filings under the United States Securities Act of 1933, as amended, or under the United States Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate this Report by reference.

The Audit Committee’s primary purposes are to: (a) assist the Board in its oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the Company’s independent auditors’ qualifications and independence, and (iv) the performance of the Company’s internal audit function and independent auditors; (b) decide whether to appoint, retain or terminate the Company’s independent auditors and to pre-approve all audit, audit-related and other services, if any, to be provided by the independent auditors; (c) review certain related party transactions; and (d) prepare this Report. The Board has determined, upon the recommendation of the Governance Committee, that each member of the Audit Committee is “independent” within the meaning of the rules of the NYSE and the SEC. The Board has also determined that each member is financially literate and has accounting or related financial management expertise, as such qualifications are defined under the rules of the NYSE, and that Earl E. Fry and Wayne K. Kamitaki are each an “audit committee financial expert” within the meaning of the rules of the SEC. The Audit Committee is established in accordance with Section 3(a)(58)(A) of the United States Securities Exchange Act of 1934, as amended. All non-audit services performed by the independent auditor must be specifically pre-approved by the Audit Committee or a member thereof.

Management is responsible for the preparation, presentation and integrity of the Company’s financial statements, accounting and financial reporting principles and the establishment and effectiveness of internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditors are responsible for performing an independent audit of the financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), expressing an opinion as to the conformity of such financial statements with generally accepted accounting principles and auditing the effectiveness of internal control over financial reporting. The independent auditors have free access to the Audit Committee to discuss any matters they deem appropriate.

In performing its oversight role, the Audit Committee has reviewed and discussed the audited financial statements with management and the independent auditors. The Audit Committee has also discussed with the independent auditors the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. In addition, the Audit Committee has received the written disclosures and the letter from the independent auditor required by applicable requirements of the PCAOB regarding the auditors’ communications with the Audit Committee concerning independence, and has discussed with the independent auditor the independent auditors’ independence.

During 2021, the Audit Committee performed all its duties and responsibilities under the Audit Committee Charter. In addition, based on the reports and discussions described in this Report, the Audit Committee recommended to the Board that the audited financial statements of the Company for the fiscal year ended December 31, 2021 be included in the Company’s Annual Report on Form 10-K for such fiscal year.

Respectfully submitted by the members of the Audit Committee of the Board as of February 22, 2022:

The following table shows for the year ended December 31, 2021, information on compensation earned by our directors who served on the Board during 2021, other than Paul K. Yonamine’s and A. Catherine Ngo’s compensation as employees, which are disclosed in the Summary Compensation Table.

The table below sets forth the Board positions held by directors and the composition of the Audit, Compensation, and Governance Committees of the Central Pacific Financial Corp. and Central Pacific Bank Board for 2021 as well as the Directors Loan, Trust and Compliance Committees of the Central Pacific Bank Board for 2021.

Non-employee and employee directors of the Company and the Bank are eligible to participate in the Company’s 2013 Stock Compensation Plan, and as noted above portions of their compensation as directors is paid in Common Stock under such plan.

The Company maintains a Directors Deferred Compensation Plan under which each non-employee director of the Company and the Bank may elect to defer all or a portion of his or her annual retainer. Under the Directors Deferred Compensation Plan, a participating director may elect from various alternative payment schedules, but full payout must occur no later than the tenth (10th) anniversary of separation from service on the Board. Under the Directors Deferred Compensation Plan, deferred amounts are valued based on the performance of certain investment funds offered by the Bank’s Trust Division and/or the performance of the Company’s common stock, which hypothetical investments are selected by the director. All deferred compensation payments are made in cash, not in shares of Company common stock or any other property. In October 2021, administration of the Director’s Deferred Compensation Plan transitioned to a third-party administrator, The Pangburn Group. The transition did not impact the Director’s Deferred Compensation Plan design or the directors’ investment allocations. No plan earnings are considered to be “above-market” or “preferential” and as a result no amounts are reported in the Directors Compensation table. The Directors Deferred Compensation Plan is a nonqualified deferred compensation plan under which distributions are made in cash from the general assets of the Company under the direction and oversight of the Compensation Committee.

The following Compensation Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filings under the United States Securities Act of 1993, as amended, or under the United States Securities and Exchange Act of 1934, as amended, except to the extent we specifically incorporate this Report by reference.

The Compensation Committee has reviewed and discussed with executive management the Compensation Discussion and Analysis that immediately follows this report as required by Item 402(b) of SEC Regulation S-K. Based on such review and discussion, the Compensation Committee recommended to the Board that such Compensation Discussion and Analysis be included in the Proxy Statement and incorporated as referenced in our Annual Report on Form 10-K for the year ended December 31, 2021. Respectfully submitted by the members of the Compensation Committee of the Board who participated in the review, discussion, and recommendation.

Wayne K. Kamitaki, Chair

Christine H. H. Camp

Duane K. Kurisu

Saedene K. Ota

Crystal K. Rose

The Committee intends this Compensation Discussion and Analysis to provide full, transparent disclosure of what we believe to be a thoughtfully designed compensation structure which focuses on the achievement of short-term objectives and affirms the philosophy for driving long-term shareholder value. This Compensation Discussion and Analysis (“CD&A”) discusses our 2021 executive compensation program, and more specifically as it relates to the following executive officers:

We refer to these executives as our Named Executive Officers (“NEOs”).

Central Pacific Financial Corp. (the “Company”) is a Hawaii-based bank holding company with approximately $7.4 billion in assets as of December 31, 2021. Central Pacific Bank (the “Bank”), our primary subsidiary, is a full-service commercial bank offering a broad range of banking products and services, including accepting demand, savings and time deposits, and originating loans through the operation of 30 branches in the State of Hawaii.

Under the oversight of our Compensation Committee of the Board of Directors (the “Committee”), our executive compensation program is designed to align total compensation with financial and business performance over the short- and long- term.

The 2021 year was a record for us in financial performance, with our reporting the highest annual net income since the Great Recession. It also was a year where we solidified our position as a Hawaii leader in small business lending, as well as for residential mortgages. We reported strong financial results, and we also saw solid credit, along with strong capital and liquidity. A few key highlights include:

Strategic Initiatives

During the year, the Company also made significant progress on its longer-term strategic initiatives.

The Company executed on all of its 2021 Business Plan initiatives as demonstrated by significant loan and deposit growth, digital innovation, and improved market presence, all of which drove strong financial results. Some noteworthy accomplishments include the following:

The Company’s 2021 net income was $79.9 million, which was an increase of 114% compared to 2020. Additionally, Return on Assets (ROA) for 2021 was 1.13% as compared to 0.58% in 2020. The significant increase in net income and ROA was a result of the economic recovery from the pandemic-influenced 2020 and strong management actions through the crisis. In particular, management’s strong sales management focus, talent acquisition and rebranding campaign contributed to a 2021 year of solid growth with a core loan portfolio (excluding PPP) increase of $463 million, or 10.2%, and core deposit portfolio increase of $1.0 billion, or 19.9%. Additionally, management led a highly successful Paycheck Protection Program (PPP) initiative in 2020 and 2021 which included funding over 11,800 PPP loans totaling over $875 million. This was approximately 28% of all PPP loans originated in the State of Hawaii, which was the highest state percentage share in the nation. The achievement was possible due to quick and decisive management actions to put in place our PPP customer portal very early, as well as to mobilize our workforce from all departments to assist in the effort. The Company has also successfully assisted PPP borrowers with obtaining forgiveness from the Small Business Administration (SBA), with approximately 90% of PPP loans forgiven or paid down as of December 31, 2021. Such actions, along with other operational efficiency initiatives, have directly contributed to the significant increase in net income and ROA in 2021.

Our earnings in 2021 included an increase of $13.4 million in net interest income, related to strong loan growth, as well as PPP interest and fee income. Net interest income from PPP which totaled $26.4 million in 2021, had a positive impact on earnings and is reflective of management actions that drove the Company to outperform on the PPP program. 2021 net income also included a $14.6 million credit to the provision for credit losses driven by the economic recovery.

The Company continued to realize solid growth on its balance sheet and ended the year with $7.4 billion in assets, driven by strong growth in the loan and deposit portfolio. The year-over-year increase in total loans of $138 million, or $463 million excluding PPP

loans, was led by increases in our residential mortgage and consumer loan portfolios of $186 million and $144 million respectively. The Company worked with its PPP borrowers in filing forgiveness applications. and with that, PPP loans saw a decrease in balances of $325 million during the year. Core deposits increased by $1.0 billion or 19.9% from the prior year, as the Company continued to build customer relationships and improved our market presence with our brand revitalization and digital enhancements.

Asset quality remained strong as non-performing assets were 0.08% of total assets on December 31, 2021. Further, we saw a significant decline from $192.3 million in criticized assets as of the end of 2020, to $76.3 million as of the end of 2021. Due to our strong capital position, we increased quarterly cash dividends to an annual amount of $0.96 per share in 2021 from $0.92 per share in 2020. Further, in the 1^st quarter of 2022, we increased dividends to an annualized $1.04 per share. In 2021, we also resumed repurchases under our share repurchase program and repurchased 696,894 shares of Common Stock in 2021, for $18.7 million.

Key factors contributing to the Company’s financial performance in 2021 included the Company’s strong residential lending team that was able to capitalize on the solid residential real estate market in the State of Hawaii. Also, the Company benefited from its focused strategy on digital initiatives and building and strengthening customer relationships. Significant highlights for the year ended December 31, 2021, were as follows:

 

Our annual and long-term compensation programs are intended to recognize bank-wide performance and strong individual contributions and performance for 2021, and over the longer-term. Decisions were carefully considered by the Committee to allow us to remain competitive and continue to be able to attract, retain and motivate highly qualified and specialized talent to execute our go-forward strategy. Hawaii’s high cost of living/housing, competition for talent, and the need for competitive pay relative to local competition are also critical factors in our executive compensation decisions and compensation decisions for all Company employees. Total compensation for our executive team historically has been well below that of local Hawaii banks, presenting a risk to our business. We took steps to address this in 2021 in regard to base salary and equity awards. Below is a summary of the key components of our NEOs’ compensation.

Base Salary. In 2021, base salary increases for our NEOs ranged from 5% to 26% based on market benchmarking (including relative to pay for our local Hawaii competition). Mr. Yonamine’s salary adjustment brought his salary in-line with peer and local Hawaii, compensation. See section below headed “Executive Compensation - Local Labor Market Considerations in Hawaii”, for details on local competitive benchmarking. Mr. Martines’ salary adjustment reflects his assumption of new responsibilities as Chief Banking Officer and early steps in execution of the Company's leadership succession plan, and the salary adjustment for Mr. Morimoto reflected his increased responsibilities (particularly in the areas of strategic planning and risk management).

Annual Incentive Plan (“AIP”). Funding of our AIP for 2021 is based on net income performance and is designed to motivate and reward achievement of company performance, including both strategic and operational objectives. At threshold performance (80%), the incentive pool funds at 50% and at maximum performance (120% or more), the incentive pool funds at 200%. Payouts to the respective NEOs under the AIP take into consideration additional company-wide metrics, business plan goals and personal objectives.

Long-Term Equity Incentives. Our annual 2021 equity grants were made pursuant to the executive long-term equity incentive plan, with grant value tied to respective percentages of base salary. The long-term equity incentive plan provides for one-half of the awards to be performance-based stock units (PSUs) and one-half to be time-based restricted stock units (RSUs). The PSUs are based on two performance metrics balanced between one-half of the PSUs to be earned based on Return on Assets (ROA), and the other one-half on relative Total Shareholder Return (rTSR) compared to a group of industry peers. The Company likely will return to an equity program where performance-based awards are greater than 50% of annual awards. However, for 2021 grants, given continued uncertainty regarding full return of tourists to Hawaii (and the impact that will have on future Company performance), the Committee chose for annual 2021 equity awards to be 50% performance-based.

Supplemental Award. The Committee made supplemental retention awards of time-based RSUs to the NEOs (except for the CEO), and to key senior officers in 2021. Our NEOs and senior officers historically have had relatively small unvested equity holdings, making the cost for a local competitor to recruit them relatively low. The supplemental awards were designed to address retention issues at the bank in the context of our small, local, and hyper-competitive market for qualified talent. Our bank has a strong team of officers whose expertise complement each other well. The loss of any one NEO or senior officer would be very disruptive to the Company, particularly with succession planning and the number of major strategic initiatives underway. The Committee views these awards as one-time only, with annual grants going forward to be made only pursuant to the Company’s long-term equity incentive program.

CEO Equity Award. As noted above, local talent competition has created retention difficulties that extend to our most senior executive officers. When we benchmarked CEO pay to our peer group and to local publicly traded companies, with whom we compete for executive talent, our CEO target total compensation was positioned below the 50^th percentile of the Company’s peer group, below the 25^th percentile of local publicly traded companies and at the bottom of local publicly traded banks. Given these clear disparities, the Committee provided the CEO with a larger than typical equity award (comprised of one-half PSUs and one-half RSUs). This larger grant was not only meant to improve alignment of Mr. Yonamine’s compensation with our peer banks and with local competitors, it was also intended to retain Mr. Yonamine, who is critical to driving our business strategy. The potential loss of our CEO during a vital time when many ground-breaking initiatives are underway, would be hurtful to the company and our shareholders. The Committee viewed the larger than typical grant to be for 2021 only, with grants returning to the more typical amount in 2022. Finally, rather than providing Mr. Yonamine with a supplemental retention award comprised of RSUs only (as was provided to the other NEOs), the Committee decided instead to provide the CEO with a larger than typical equity award, as the Committee wanted to maintain an even ratio between time-based and performance-based awards for him.

2021 Target Pay Mix. The charts below for Paul K. Yonamine and our other NEOs illustrate the target compensation established for 2021, consisting of base salary, target annual incentive awards and target 2021 Long Term Incentive Plan awards (consisting of performance stock unit and restricted stock unit awards, but not including the one-time supplemental RSU awards granted to the NEOs other than the CEO). For 2021, our compensation targets and pay mix were as follows:

 

In 2021, approximately 87% of the votes cast (for and against) were voted in favor of our named executive officer compensation. While the Committee believes that the result of this vote is evidence that the Company's compensation policies and decisions are in the best interests of its shareholders, this vote result represented a modest decrease from the vote result in 2020, and the Committee sought to better understand the potential reasons for this modest decline in voting support.

Our engagement efforts focused on outreach to 9 of our 10 largest shareholders, representing approximately 50% of our Common Stock. Additionally, we sought discussions with the two leading proxy advisory firms. This effort was conducted in the summer of 2021 and was led by our President and our Chief Financial Officer, with senior executives from our Legal and Human Resources teams joining the calls. Executive leadership, the Compensation Committee, and the Board were kept informed of outreach efforts. The key discussion topics related to executive compensation were:

In our outreach, shareholders and executive advisory firms expressed support of our executive compensation programs, but asked for greater clarity and detail on the programs going-forward, including in regard to 1) any changes made to compensation programs (to include specific reasons for the changes), and 2) more discussion on alignment of compensation with performance/shareholder returns. We believe this year’s CD&A provides the increased level of clarity and detail. Also, we provide greater discussion this year on compensation/performance alignment, including adding a chart to this year’s “2021 Key Financial Highlights”, that shows “Total Shareholder Return” (which was 54% for the Company for 2021, compared with 36% for the Compensation Peer Group, and 14% for Hawaii public banks). Also, in the shareholder outreach, we discussed our local talent market competition, and how that informs our recent and ongoing compensation decisions. Shareholders supported our taking action to respond to local market competition, but asked that we provide more detail on the local market in this year’s CD&A (as we have done, in the section headed “Executive Compensation - Local Labor Market Considerations in Hawaii”, as well as in other sections of this CD&A). There also was feedback regarding using a balanced scorecard for funding of the AIP (rather than net income being the only determinant for funding of the AIP pool), thereby strengthening the alignment of the company’s strategic goals with our performance objectives. We have made such a change for the 2022 AIP to address this point.

The central principle of our compensation philosophy is that executive compensation should align with shareholders’ interests. Our executive compensation program is designed to:

No discussion regarding executive compensation would be complete without providing some information that contributes to an understanding of the State of Hawaii’s unique market for talent, which results in a “hyper-competitive” environment for acquisition and retention of key talent, and especially of experienced senior executives.

This brings us to the micro level, or the “hyper-competitive” talent market among companies operating in Hawaii. Beyond the resource and financial expense of sourcing and retaining key talent, organizations face significant operational risks associated with talent gaps and especially with respect to senior executive leadership and succession planning considerations.

The Company places significant priority on strategically managing its leadership talent pipeline and therefore on competitive benchmarking for talent at the NEO and senior executive levels. Given the factors outlined above, every company operating in Hawaii, large or small, regardless of sector, is a competitor for the executive talent we seek to acquire and/or retain – which places a premium on ensuring competitive compensation levels and programs across the Bank.

At the macro level, key factors that add to the difficulty and complexity of recruiting and retaining key and executive talent include:

With the above in mind, the Compensation Committee reviews compensation of executives in our local Hawaii public companies and view this as important additional information, beyond reviewing compensation of peers in the Company’s compensation peer group.

With respect to competitive benchmarking, our CEO’s target total direct compensation is below market compared to the Company’s peer group (16 peers), lags even more when compared to Hawaii publicly traded companies (eight companies), and is at the bottom compared to Hawaii competitor banks (four banks), with whom we compete for executive level talent. For these reasons, the actions taken in 2021 with respect to Mr. Yonamine’s compensation were necessary; particularly considering the benchmarking data associated with the four competitor banks represented in the local benchmarking sample.

Below is a summary of where our CEO compensation was positioned to the Company’s peer group and to the local market, based on 2020 peer and market data.

The Company’s executive compensation program is supported by strong corporate governance and Board oversight.

The Company has strong compensation governance practices that reinforce our principles, support sound risk management and are stockholder-aligned:

Each year, with assistance from the executive compensation consultant, the Compensation Committee reviews the compensation practices of our peers to assess the competitiveness of the compensation program for our NEOs. Although benchmarking is used to compare compensation structures and levels to our peers, it is only one of the tools used by the Compensation Committee to determine total compensation. Benchmarking is used by the Compensation Committee primarily to ascertain competitive total compensation levels (including base salary, annual cash incentives, equity awards, and employee benefits) with comparable institutions. Peer performance, market factors, the Bank’s performance and individual performance are all factors that the Compensation Committee considers when establishing total compensation, including incentives.

In addition to the peer group used below, the Committee also looks at compensation using a separate group of local Hawaii public companies as a supplemental frame of reference. This is done to properly address our employment circumstances, including hiring challenges and retention risk, as a bank in a small, local and hyper-competitive market for qualified talent. Our leadership team is small and our NEOs are among the recruiting pool for local competitors. Executive turnover would not only be disruptive for our Company, especially given our strategic initiatives, but turnover also creates operational risk and increased opportunity cost and replacement cost from a timing, compensation, resource and business perspective.

The Compensation Committee reviews the composition of the Compensation Peer Group on an annual basis and modifies the group as necessary as a result of mergers, changes to banks within the group, or changes within the Company. The 2021 Compensation Peer Group was selected based primarily on certain current market criteria, including the following:

(Although they do not fall exactly within the above criteria, we have included Bank of Hawaii Corporation and First Hawaiian, Inc. in our Compensation Peer Group for 2022 because we compete with them for qualified talent. These banks view our Bank as a potential source of executives and other key employees for their banking operations, and similarly, we view these banks as a potential talent source for us.)

The selection criteria in 2021 resulted in a group of sixteen (16) peers. The Company was positioned near the 38th percentile in terms of asset size at the time of the of the Compensation Committee review and selection of 2021 Compensation Peer Group members. Two additional peers had been included in the peer group, however, both were acquired and are no longer publicly traded, Franklin Financial Network, Inc. and Century Bancorp, and therefore both were removed from our 2021 Compensation Peer Group.

Our compensation program is comprised of multiple components, including annual base salary, annual cash incentive, annual long-term equity grants, and employee benefit programs. We believe that over the long term, a combination of pay components is essential to attract and retain executives and to incentivize them to achieve strategic operating and financial goals. There is no set formula to determine the mix of the various pay components and our use of the components may change from year to year based on the Company’s circumstances, market conditions, and competitive market for executive talent.

The Committee and the Board believe that it is important to provide market-based compensation that will attract and retain highly talented executives with the appropriate competencies and skills necessary for the Company’s continued success. Such compensation would include the full range of compensation components, including incentive awards that vary with financial

performance, based on achieving our strategic plan and goals without encouraging excessive and unnecessary risk taking that could threaten the overall value of the Company. Equally important is the need to maintain shareholder confidence and to comply with regulatory executive compensation restrictions and guidance by developing appropriate compensation structures.

Therefore, the Committee evaluates our compensation program and its related components on an ongoing basis. Adjustments are made to the compensation structure as appropriate to maintain the Company’s competitive position for executive talent, consistent with our compensation philosophy and objectives, and within the parameters of regulatory restrictions and guidance. Our annual compensation program is structured as follows:

We pay our executives base salaries intended to be competitive with our Compensation Peer Group and the local market, and consider the executive’s experience, performance, responsibilities, and past and potential contribution to the Company. The objective of paying a base salary is to provide a base level of compensation that fairly reflects the executive’s job responsibilities and scope of the role performed within the Company. There is no specific weighting applied to the factors considered in setting the level of base salaries, and the Committee uses its own judgment and expertise in determining appropriate salaries within the parameters of our compensation philosophy and objectives. While there continues to be a strong focus on collaboration and teamwork, modest adjustments have been made to base salaries over time to recognize the differences in the scope of the positions and individual contributions.

In making base salary decisions, the Committee also considers the positioning of projected total compensation with target-level performance incentives. Because we set incentive opportunities as a percentage of base salary, changes in base salary have a compound effect on total compensation. Before recommending base salary changes to the Board, the Committee reviews the projected total compensation based on the proposed base salaries, considering both internal and external equity, and confirms that total compensation for the Chairman & CEO and other NEOs are appropriately aligned with the market.

The table below shows the NEOs’ annual base salaries for 2021 and how these changed compared to 2020.

The 2021 salary adjustments for the NEOs resulted from a formal market study, in which NEO compensation was compared to the Compensation Peer Group and the local market for similar roles. In all cases, the salary adjustments were made based on market alignment and business requirements. Mr. Yonamine’s salary adjustment brought his salary in-line with peer compensation. Mr. Martines’ salary adjustment reflects his assumption of new responsibilities as Chief Banking Officer and early steps in execution of the Company's leadership succession plan. (As further execution on the succession plan, Mr. Martines was promoted to President and Chief Operating Officer, effective January 1, 2022.) The salary adjustment for Mr. Morimoto reflected his increased responsibilities, particularly in the areas of strategic planning and risk management.

We use our AIP to provide variable compensation based on achievement of Company, Business Plan and Personal objectives. As with other key elements of our executive compensation program, the Compensation Committee annually reviews the design, performance metrics and target opportunities for our NEOs. For the 2021 AIP the Compensation Committee used net income to determine funding for the AIP. The AIP components for 2021 include:

All NEOs have target opportunities as shown below.

The table below reflects the Board approved Net Income AIP funding for 2021. Funding increases are based on the level of net income results, and for 2021 the Committee capped the incentive pool at two hundred percent (200%) for achievement of one hundred and twenty percent (120%) or more of net income target. Actual net income performance was 145% of target which resulted in incentive pool funding at the 200% cap.

In addition, the Committee maintained a governor whereby allowance for credit loss reserve releases in 2021 were capped at $8.5M for purposes of the incentive pool funding calculation. This represented 10% of $85.2M of budgeted pre-tax pre-provision net income. In the context, of our 2021 final financial results, we had $14.6 million in reserve release credits, but of that amount, for purposes of calculation of the AIP incentive pool, only $8.5 million in reserve release credits were applied. Even with that governor provision, our bank’s “adjusted” net income in 2021 (with the governor), was at 136% of the net income target, with a calculated payout of 280% of the pool (but with the payout being capped at 200% per the terms of the AIP). Further, had the governor not allowed the benefit of any reserve release credits at all, the net income in 2021 would have still been at 125% of the net income target, with a calculated payout of 225% of the pool (capped at 200%).

Subsequent to determining the pool funding, upon which an individual’s payout is largely determined, the Committee assessed corporate, business, and personal goals to finalize the payout. Plan participants were eligible to receive cash awards at the pool funding percentage if certain corporate, business plan, and personal goals were achieved. These additional goals were set at the outset of 2021, with focus on a set of financial, corporate, business plan and personal goals aligned with the board-approved annual budget and annual business plan. Personal performance goals focused on leadership and development, as well as other individual-specific goals (such as succession planning and/or financial performance for the respective NEO’s Division(s), as applicable). Weighting among these goals varies by executive and is impacted by their roles, level of responsibility and participation in strategic initiatives. Weightings for each NEO are as follows:

There are two Corporate Goals that apply to all our NEOs: Net Income and ROA. While the weightings of these in total vary across the NEOs, in each case the weighting of each of the two Corporate Goals comprise half of the weighting within this category. See “2021 Key Financial Highlights” above for performance results related to Corporate Goals. Business Plan Goals vary not only in weighting across the NEOs, but each NEO has different combinations of specific Business Plan goals that are relevant to their role. See “Business Plan Goals” above for details and performance results related to Business Plan Goals. Personal Goals, as noted above, also vary across the NEOs and may include community involvement, financial results, process improvement, leadership and development.

In January 2022, the Committee approved the payment of cash incentives to NEOs. The incentive amounts were allocated considering each NEO’s target opportunity as well as their contribution to our strong performance in 2021. Based on the NEOs’ performance ratings, the table below summarizes the Committee approved annual incentive payment to our NEO’s based on 2021 performance.

In addition to the annual bonuses (non-equity incentive plan compensation) discussed above, the company paid a housing-related bonus to Kevin V. Dahlstrom in the amount of $175,000, and a discretionary bonus in the amount of $182,000 representing the approximate value of the RSU shares that otherwise would have vested on February 15, 2022 (date following Mr. Dahlstrom’s transition from the Bank to lead Swell) (described in the Business Plan Goals section). The $182,000 is the approximate RSU value Mr. Dahlstrom would have realized if he had transitioned from the Bank after February 15, 2022, and recognizes his outstanding contributions and achievements in 2021.

We use annual grants of long-term equity incentives (“LTIs”) to encourage ownership, foster retention, and align executives’ interests with the long-term interests of shareholders. As with our AIP, the Committee annually reviews the design, performance metrics and target opportunities for our NEOs. For 2021 LTI grants, components of performance metrics, performance targets and payouts opportunities were established in line with market practice including the designs and practices of companies in our

Compensation Peer Group and of local Hawaii companies with whom we compete for talent. For 2021, the Committee has approved LTI awards based on an equal balance between time-based RSUs subject to annual vesting and performance-based PSUs. The number of shares earned under the PSUs is based 50% on a ROA metric and 50% on a rTSR metric as follows:

The actual number of shares earned will be based on the following grids, with straight-line interpolation between achievement levels:

In 2021, the Committee recommended to the Board, and the Board approved, annual long-term equity grants (made in February 2021) with both performance and time features. The incentive opportunity for each NEO as well as the plan design was developed in consultation with our compensation consultant. The Committee reviewed the equity opportunities to align with our pay-for-performance philosophy and to provide competitive incentive opportunities for our NEOs. The annual equity opportunity received by each NEO was determined as a percentage of base salary as follows:

To recognize strong performance and the need to provide adequate retention hold in the competitive Hawaii market at an important time for the Company, the Committee took the following additional steps related to 2021 equity awards:

In February 2021, the NEOs received annual long-term equity grants of PSUs and RSUs under the 2013 Stock Compensation Plan. The grants were divided equally between performance-based PSUs and time-based awards RSUs such that the number of RSUs and the target number of PSUs each represents 50% of the equity mix for each NEO. In addition, the PSUs are equally split with half of the PSUs earned based on average Return on Assets (ROA) and the other half earned based on relative Total Shareholder Return (rTSR) to companies in the SNL U.S. Bank $5-10 Billion Asset Index. For Mr. Yonamine and Ms. Ngo the PSUs use a two-year average (2021 and 2022) for measuring ROA performance and a two-year period from February 15, 2021 through February 15, 2023 for measuring rTSR performance. For Messrs. Morimoto, Dahlstrom, and Martines the PSUs use a three-year average (2021, 2022 and 2023) for measuring ROA performance and a three-year period from February 15, 2021 through February 15, 2024 for measuring rTSR performance. The PSUs that are earned cliff-vest on February 15, 2023 for Mr. Yonamine and Ms. Ngo and on February 15, 2024 for Messrs. Morimoto, Dahlstrom, and Martines. The number of shares earned is based upon the level of attainment of the ROA and rTSR performance metrics. The ROA targets were based on a three-year financial forecast (the first two years of the forecast for the PSUs granted to Mr. Yonamine and Ms. Ngo) that was utilized by Management and the Board in their strategic planning and capital planning process using reasonable assumptions of the economy and market interest rates that were largely aligned with market consensus estimates at the time. The selection of the SNL U.S. Bank $5-10 Billion Asset Index for the rTSR metric was based on a more robust and balanced approach to assess against a large group of 56 comparable bank peers. If a given threshold is not achieved, no shares are earned or issued. The stretch opportunity is capped at 200% of target for both the ROA and rTSR metrics. With respect to the grant of RSUs, vesting is time-based, wherein the grant vests in equal annual amounts over a three-year period. for Messrs. Morimoto, Dahlstrom and Martines and over a two-year period for Mr. Yonamine and Ms. Ngo.

The two-year vesting period for PSUs and RSUs for Mr. Yonamine and Ms. Ngo was selected because our succession planning process is in progress, and to focus these executives on near-term key initiatives; in particular, on achieving the company’s digital objectives for Mr. Yonamine; and for Ms. Ngo on driving greater progress on our ESG plan, as well as, laying a stronger foundation for the company’s enterprise risk management plan. The intent for Mr. Yonamine and Ms. Ngo over the approximately two years following grant, is to drive execution on the Company's succession plan, including laying a firm foundation for the Company's future, and positioning a successor well for the smooth and effective transition into the CEO role. As noted above, the Company continues to execute on its executive succession plan, with the promotion of Mr. Martines to President and Chief Operating Officer, effective January 1, 2022. The number of annual RSUs and PSUs granted in February 2021 to NEOs is provided in the table below.

In addition to annual LTI awards, the Company made a broader set of supplemental awards to the NEOs, other than the CEO, and to six other senior officers of the Company. In order to maintain stability in the executive leadership team, particularly given the dynamic job market, and to bring executives up to market norms, the Committee believed it was necessary to grant these supplemental awards. The awards were designed to address retention issues at the bank in the context of our small, local, and hyper-competitive market for qualified talent. Our NEOs have historically had relatively small unvested equity holdings making the cost for a local competitor to recruit them relatively low. As a bank with a small leadership team, turnover is not only disruptive, but also creates operational risk from a timing, compensation, resource and business perspective, and creates increased opportunity cost and replacement cost upon the loss of key employees. The supplemental awards were made in the form of RSUs that vest over a three-year period, except that for A. Catherine Ngo the RSUs vest over a two-year period in line with the vesting provisions of her annual equity award. In addition, the supplemental RSU award required individuals to sign non-compete/non-solicit agreements, in which each individual has agreed that for a period of one year after the date of termination, the individual will not work for another financial institution in Hawaii and will not solicit any Bank customer or use information about any such customer for any business purpose that competes with Bank or any of its business, product or service. In addition, each individual has agreed that for a period of two years after separation the individual will not solicit any Bank employee to work for another company. We consider these supplemental awards to be a one-time event.

The number of RSUs granted in February 2021 as part of the supplemental award to NEOs is provided in the table below.

NEOs are provided the same level of employee benefits as all other employees of the Company and the Bank. As such, they are eligible to participate in the Company 401(k) Retirement Savings Plan as well as standard health, life and disability insurance benefits. In addition, NEOs receive certain perquisites such as transportation services and relocation benefits. The total amounts of these items are reflected in the “All Other Compensation” column of the Summary Compensation Table. The Committee believes that these items enhance the effectiveness of our key executives and are consistent with industry practices in comparable banking companies. The Committee regularly reviews the benefits and perquisites we provide.

Our long-term incentive plan currently permits us to cancel or terminate outstanding awards for any reason, and to recover awards that are based on materially inaccurate information or have encouraged unnecessary and/or excessive risk. Likewise, our current annual incentive plan permits us to recover any payment that is based on materially inaccurate information or has encouraged unnecessary and/or excessive risk. In addition, Section 304 of the Sarbanes-Oxley Act mandates the recovery of incentive awards that would not have otherwise been paid in the event we are required to restate our financial statements due to noncompliance with any financial reporting requirements as a result of misconduct. In that case, the CEO and CFO must reimburse us for (1) any bonus or other incentive or equity-based compensation received during the twelve (12) months following the first public issuance of the non-complying document, and (2) any profits realized from the sale of our securities during those twelve (12) months. Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires the Securities and Exchange Commission to direct national securities exchanges to prohibit the listing of any security that fails to adopt a compliant clawback policy for any current or former executive officer if the company is required to file a financial restatement as a result of material noncompliance with applicable securities laws. This clawback applies to incentive-based compensation during the 3-year period preceding the date on which the issuer is required to prepare an accounting restatement, based on the erroneous data, in excess of what would have been paid to the executive officer under the accounting restatement. The Securities Exchange Commission has proposed but has not yet finalized rules directing the NYSE and other national securities exchanges to implement Section 954 of the Dodd-Frank Act.

On October 25, 2006, we adopted guidelines regarding the equity grant process and related controls. The guidelines, which were reviewed and readopted (with minor changes) on May 20, 2011, are to help ensure that all equity grants are reported and disclosed correctly and accurately, are properly accounted for, and receive proper tax treatment. The grant guidelines are designed to avoid making regular grants during a regularly scheduled Company blackout period, to avoid having the timing of grant dates be affected by material nonpublic information, and to confirm the use of no less than the closing price of our stock on the grant date. Grants take place on the fifteenth (15th) day of February, May, August and November or the next available trading day if the fifteenth falls on a holiday or weekend.

On May 31, 2012, the Board reinstated Stock Ownership Guidelines applicable to all Board members and executive officers of the Company and Bank. The purpose of the guidelines is to define ownership expectations for these individuals to more closely align with our shareholders.

The following is a summary of the Stock Ownership Guidelines currently applicable.

Ms. Ngo and Messrs. Morimoto and Martines have currently met the requirement. Mr. Yonamine has not yet met the requirement (given that he joined the Company only in 2018), but is on track to meet the requirement within the 5-year time-frame. Mr. Dahlstrom left the company on 12/31/21, therefore the Stock Ownership Guidelines no longer apply to him.

None of the current NEOs has an employment agreement with the Company and each is employed on an “at will” basis.

None of our NEOs has a change in control agreement. All NEOs hold unvested restricted stock units (RSUs and PSUs) granted under the Company’s 2013 Stock Compensation Plan. Recent awards under this plan provide for accelerated vesting upon a change-in-control only if employment also terminates in connection with the change-in-control. See the “Potential Payments Upon Change-in-Control” section later in this document.

We consider tax and accounting implications in designing our compensation programs. For example, in selecting long-term incentive compensation elements, the Committee reviews the projected expense amounts and expense timing associated with alternative types of awards. Under current accounting rules (i.e., Financial Accounting Standard ASC Topic 718), we must expense the grant-date fair value of share-based grants such as stock options, restricted stock, restricted stock units, performance shares, and SARs settled in our stock. The grant-date fair value is amortized and expensed over the service period or vesting period of the grant. In contrast, awards that are not share-based (e.g., phantom stock) are expensed based on a value that may fluctuate widely over the vesting period and is not fixed at grant date. In selecting appropriate incentive devices, the Committee reviews extensive modeling analyses and considers the related tax and accounting issues. Section 162(m) of the Internal Revenue Code generally places a limit on the tax deduction for compensation in excess of $1 million paid any tax year to any of our NEOs or to anyone who was a NEO at any time after December 31, 2016. Beginning in 2018, performance-based compensation is subject to this deduction limit unless paid pursuant to an agreement in effect on November 2, 2017, and not thereafter modified. The Committee has retained the flexibility, however, to pay compensation including incentive compensation, that would exceed the $1 million deduction limit of Section 162(m) of the Internal Revenue Code, and as a result may not be deductible by us for income tax purposes because the Committee believes that doing so permits it to make compensation decisions that are consistent with the best interests of our shareholders.

As of December 31, 2021, the Committee was composed entirely of the following five (5) independent Directors: Wayne K. Kamitaki (Chair), Christine H. H. Camp, Duane K. Kurisu, Saedene Ota and Crystal K. Rose. None of the Committee members were or are current or former officers or employees of the Company. Relationships that members of the Committee have had and/or maintain with the Company are described in the “CORPORATE GOVERNANCE AND BOARD MATTERS - Director Independence and Relationships” section.

The table below summarizes the total compensation earned by each of the NEOs for the fiscal years ended December 31, 2021, 2020 and 2019 to the extent such executives served as NEOs during such periods. The material terms of compensation of the NEOs are discussed above in the “Compensation and Discussion Analysis”.