10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

 ☒      Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2022

or

☐         Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 001-31567

Central Pacific Financial Corp.

(Exact name of registrant as specified in its charter)

Hawaii	99-0212597
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

220 South King Street, Honolulu, Hawaii 96813

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:

(808) 544-0500

Securities registered pursuant to Section 12(b) of the Act: 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, No Par Value	CPF	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

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

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

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

Large Accelerated Filer	o	Accelerated Filer	x
Non-Accelerated Filer	o	Smaller Reporting Company	☐
		Emerging Growth Company	☐

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

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

As of June 30, 2022, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $574,351,000. As of January 31, 2023, the number of shares of common stock of the registrant outstanding was 26,969,310 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s proxy statement for the 2023 annual meeting of shareholders are incorporated by reference into Part III of this annual report on Form 10-K to the extent stated herein. The proxy statement will be filed within 120 days after the end of the fiscal year covered by this annual report on Form 10-K.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

Form 10-K

Table of Contents

		Page
Part I.
Item 1.	Business	4
Item 1A.	Risk Factors	19
Item 1B.	Unresolved Staff Comments	34
Item 2	Properties	34
Item 3	Legal Proceedings	34
Item 4	Mine Safety Disclosures	34
Part II.
Item 5	Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	35
Item 6	[Reserved]	36
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	37
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	74
Item 8	Financial Statements and Supplementary Data	75
Item 9	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	144
Item 9A	Controls and Procedures	144
Item 9B	Other Information	144
Item 9C	Disclosure Regarding Foreign Jurisdictions That Prevent Inspections	144
Part III.
Item 10	Directors, Executive Officers and Corporate Governance	145
Item 11	Executive Compensation	145
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	145
Item 13	Certain Relationships and Related Transactions, and Director Independence	145
Item 14	Principal Accountant Fees and Services	145
Part IV.
Item 15	Exhibits and Financial Statement Schedules	146
Exhibits		147
Item 16	Form 10-K Summary	149
Signatures		149

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PART I

Forward-Looking Statements and Factors that Could Affect Future Results

Certain statements contained in this annual report on Form 10-K that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"), notwithstanding that such statements are not specifically identified. In addition, certain statements may be contained in our future filings with the U.S. Securities and Exchange Commission ("SEC"), in press releases and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital position, net interest margin or other financial items; (ii) statements of plans, objectives and expectations of Central Pacific Financial Corp. or its management or Board of Directors, including those relating to business plans, use of capital resources, products or services and regulatory developments and regulatory actions; (iii) statements of future economic performance including anticipated performance results in light of our Banking-as-a-Service ("BaaS") initiative; and (iv) statements of assumptions underlying or relating to any of the foregoing. Words such as "believes," "plans," "anticipates," "expects," "intends," "forecasts," "hopes," "targeting," "continue," "remain," "will," "should," "estimates," "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

While we believe that our forward-looking statements and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect. Accordingly, actual results could differ materially from those in such statements or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include but are not limited to:

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

•the effects of inflation and changes in market interest rates;

•increase in inventory or adverse conditions in the real estate market and deterioration in the construction industry;

•adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates, deterioration in asset quality and losses in our loan portfolio;

•our ability to successfully implement and achieve the objectives of our BaaS initiatives, including adoption of the initiatives by customers and risks faced by any of our bank collaborations including reputational and regulatory risk;

•the impact of local, national, and international economies and events (including natural disasters such as wildfires, volcanic eruptions, hurricanes, tsunamis, storms, earthquakes and pandemic virus and disease, including COVID-19) on the Company’s business and operations and on tourism, the military and other major industries operating within the Hawaii market and any other markets in which the Company does business;

•deterioration or malaise in domestic economic conditions, including any destabilization in the financial industry and deterioration of the real estate market, as well as the impact of declining levels of consumer and business confidence in the state of the economy in general and in financial institutions in particular;

•changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements;

•the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), changes in capital standards, other regulatory reform and federal and state legislation, including but not limited to regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), government-sponsored enterprise reform, and any related rules and regulations which affect our business operations and competitiveness;

•the costs and effects of legal and regulatory developments, including legal proceedings or regulatory or other governmental inquiries and proceedings and the resolution thereof, the results of regulatory examinations or reviews and the effect of, and our ability to comply with, any regulatory orders or actions we are or may become subject to;

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•ability to successfully implement our initiatives to lower our efficiency ratio;

•the effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System (the "FRB" or the "Federal Reserve");

•securities market and monetary fluctuations, including the anticipated replacement of the London Interbank Offered Rate ("LIBOR") Index and the impact on our loans and debt which are tied to that index and uncertainties regarding potential alternative reference rates, including the Secured Overnight Financing Rate ("SOFR");

•negative trends in our market capitalization and adverse changes in the price of the Company’s common stock;

•political instability;

•acts of war or terrorism;

•pandemic virus and disease, including COVID-19;

•changes in consumer spending, borrowings and savings habits;

•failure to maintain effective internal control over financial reporting or disclosure controls and procedures;

•the ability to address deficiencies in our internal controls over financial reporting or disclosure controls and procedures;

•cybersecurity and data privacy breaches and the consequences therefrom;

•technological changes and developments;

•changes in the competitive environment among financial holding companies and other financial service providers;

•the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board ("FASB") and other accounting standard setters and the cost and resources required to implement such changes;

•our ability to attract and retain key personnel;

•changes in our organization, compensation and benefit plans; and

•our success at managing any of the risks involved in the foregoing items.

For further information with respect to factors that could cause actual results to materially differ from the expectations or projections stated in the forward-looking statements, please see also "Risk Factors" under Part I, Item 1A of this report. We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this Form 10-K. Forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events except as required by law.

ITEM 1.    BUSINESS

General

Central Pacific Financial Corp., a Hawaii corporation and bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "BHC Act"), was organized on February 1, 1982. Our principal business is to serve as a holding company for our bank subsidiary, Central Pacific Bank, which was incorporated in its present form in the state of Hawaii on March 16, 1982 in connection with the holding company reorganization. Its predecessor entity was incorporated in the state of Hawaii on January 15, 1954. We provide financial results based on a fiscal year ending December 31 as a single reportable segment. As of December 31, 2022, we had total assets of $7.43 billion, total loans of $5.56 billion, total deposits of $6.74 billion and shareholders' equity of $452.9 million.

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When we refer to "the Company," "we," "us" or "our," we mean Central Pacific Financial Corp. and its subsidiaries on a consolidated basis. When we refer to "Central Pacific Financial Corp.," "CPF" or to the holding company, we are referring to the parent company on a standalone basis. We refer to Central Pacific Bank herein as "our bank" or "the bank."

Through our bank and its subsidiaries, we offer full-service commercial banking with 27 bank branches and 64 ATMs located throughout the state of Hawaii. Our administrative and main offices are located in Honolulu and we have 19 branches on the island of Oahu. We operate four branches on the island of Maui, two branches on the island of Hawaii and two branches on the island of Kauai. In 2021, the Company consolidated a traditional branch on Oahu with other existing nearby branches. With the continued successful customer migration to digital banking services, we consolidated three additional branches in 2022. At the same time, we are continuing to invest in select strategic branch locations, including acquiring real estate and developing fully modernized branches utilizing the concepts we created in our RISE2020 headquarter building revitalization.

Central Pacific Bank is a full-service commercial bank offering a broad range of banking products and services, including accepting time and demand deposits and originating loans. Our bank's deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") up to applicable limits. The bank is not a member of the Federal Reserve System. Our loans include commercial loans, construction loans, commercial and residential mortgage loans and consumer loans.

We derive our income primarily from interest and fees on loans, interest on investment securities and fees received in connection with deposit and other services. Our major operating expenses are the interest paid by our bank on deposits and borrowings, salaries and employee benefits and general operating expenses. Our bank relies substantially on a foundation of locally generated deposits.

Our operations, like those of other financial institutions that operate in our market, are significantly influenced by economic conditions in Hawaii, including the strength of the real estate market and the tourism industry, as well as the fiscal and regulatory policies of the federal and state government and the regulatory authorities that govern financial institutions. See the "Supervision and Regulation" section below for other information about the regulation of our holding company and bank.

Our Services

We offer a full range of banking services and products to businesses, professionals and individuals. We provide our customers with an array of loan products, including residential mortgage loans, commercial and consumer loans and lines of credit, commercial real estate loans and construction loans.

Through our bank, we concentrate our lending activities in five principal areas:

(1)Residential Mortgage Lending.  Residential mortgage loans include fixed-rate and adjustable-rate loans primarily secured by single-family, owner-occupied residences in Hawaii and home equity lines of credit and loans. We typically require loan-to-value ratios of not more than 80%, although higher levels are permitted with accompanying mortgage insurance. First mortgage loans secured by residential properties have an average loan origination size of approximately $0.6 million and marketable collateral. Changes in interest rates, the economic environment and other market factors have impacted, and future changes will likely continue to impact, the marketability and value of collateral and the financial condition of our borrowers and thus the level of credit risk inherent in the portfolio. A portion of our first residential mortgage loan originations are sold in the secondary market and a portion is put into our loan portfolio.

(2)Commercial, Financial and Agricultural Lending.  Loans in this category consist primarily of term loans and lines of credit to small and middle-market businesses and professionals in the state of Hawaii. The borrower's business is typically regarded as the principal source of repayment, although our underwriting policies and practices generally require additional sources of collateral, including real estate and other business assets, as well as personal guarantees where possible to mitigate risk and help to reduce credit losses.

(3)Commercial Mortgage Lending.  Loans in this category consist of loans secured by commercial real estate, including but not limited to, structures and facilities to support activities designated as multi-family residential properties, industrial, warehouse, general office, retail, health care and religious dwellings. Our underwriting policies and practices generally requires net cash flow from the property to cover the debt service while maintaining an appropriate amount of reserves and permits consideration of liquidation of the collateral as a secondary source of repayment.

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(4)Construction Lending.  Construction land development and other land loans encompasses the financing of residential and commercial construction projects.

(5)Consumer Lending.  Loans in this category are generally either unsecured or secured by personal assets, such as automobiles, and the average loan size is generally small.

Beyond the lending function described above, we also offer a full range of deposit products and services including checking, savings and time deposits, cash management and digital banking services, trust services and retail brokerage services.

Our Market Area and Competition

Based on deposit market share among FDIC-insured financial institutions in Hawaii, Central Pacific Bank was the fourth-largest depository institution in the state as of December 31, 2022.

The banking and financial services industry in the state of Hawaii generally, and particularly in our target market areas, is highly competitive. We compete for loans, deposits and customers with other commercial banks, savings banks, securities and brokerage companies, financial technology ("fintech") companies, mortgage companies, insurance companies, finance companies, credit unions and other non-bank financial service providers, including mortgage providers and brokers, operating via the internet and other technology platforms. Some of these competitors are much larger by total assets and capitalization, and have greater access to capital markets.

In order to compete with the other financial services providers in the state of Hawaii, we principally rely upon personal relationships between customers and our officers, directors and employees, and specialized services tailored to meet the needs of our customers and the communities we serve. We believe we remain competitive by offering flexibility and superior service levels to our customers, coupled with competitive interest rate pricing, strong digital technology and local promotional activities.

For further discussion of factors affecting our operations see, "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."

Business Concentrations

No individual or single group of related accounts is considered material in relation to the assets or deposits of our bank, or in relation to the overall business of the Company. However, approximately 76% of our loan portfolio at December 31, 2022 consisted of real estate-related loans, including residential mortgage loans, home equity loans, commercial mortgage loans and construction loans. See "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition—Loan Portfolio."

Our business activities are focused primarily in Hawaii. Consequently, our results of operations and financial condition are impacted by the general economic trends in Hawaii, particularly in the commercial and residential real estate markets. During periods of economic strength, the real estate market and the real estate industry typically perform well; during periods of economic weakness, they typically are adversely affected.

Our Subsidiaries

Central Pacific Bank is the wholly-owned principal subsidiary of Central Pacific Financial Corp. As of December 31, 2022, other wholly-owned subsidiaries include CPB Capital Trust IV and CPB Statutory Trust V.

In January 2020, the bank acquired a 50% ownership interest in a mortgage loan origination and brokerage company, Oahu HomeLoans, LLC. The bank concluded that the investment meets the consolidation requirements under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810, "Consolidation." The bank also concluded that the entity meets the definition of a variable interest entity and that we are the primary beneficiary of the variable interest entity. Accordingly, the investment has been consolidated into our financial statements. In March 2022, Oahu HomeLoans, LLC was terminated.

Central Pacific Bank also owns 50% of Gentry HomeLoans, LLC, Haseko HomeLoans, LLC and Island Pacific HomeLoans, LLC, which are accounted for under the cost method and are included in unconsolidated entities in the Company's consolidated balance sheets.

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The Company sponsors the Central Pacific Foundation, which is not consolidated in the Company's financial statements.

Supervision and Regulation

General

The Company and the bank are subject to significant regulation and restrictions by federal and state laws and regulatory agencies for the protection of depositors and the FDIC deposit insurance fund, borrowers, and the stability of the United States of America ("U.S.") banking system. The following discussion of statutes and regulations is a summary and does not purport to be complete nor does it address all applicable statutes and regulations. This discussion is also qualified in its entirety by reference to the statutes and regulations referred to in this discussion. We cannot predict whether or when new legislative initiatives may be proposed or enacted or new regulations or guidance may be promulgated nor the effect new laws, regulations and supervisory policies and practices may have on community banks generally or on our financial condition and results of operations. Such developments could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions. We also cannot predict whether or when regulatory requirements may be reduced or eliminated and the overall affect such reduction or elimination may have on the Company and the bank.

Regulatory Agencies

Central Pacific Financial Corp. is a legal entity separate and distinct from its subsidiaries. As the bank holding company for Central Pacific Bank, Central Pacific Financial Corp. is regulated under the BHC Act and is subject to inspection, examination and supervision by the FRB. It is also subject to Hawaii's Code of Financial Institutions and is subject to inspection, examination and supervision by the Hawaii Division of Financial Institutions ("DFI").

The Company is subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as administered by the SEC. Our common stock is listed on the New York Stock Exchange ("NYSE") under the trading symbol "CPF," and we are subject to the rules of the NYSE for companies listed there. In addition to the enforcement powers of the bank regulatory agencies we are subject to, the SEC and the NYSE have the ability to take enforcement actions against us.

In addition, the Company is also subject to the accounting oversight and corporate governance requirements of the Sarbanes-Oxley Act of 2002, including, among other things, required executive certification of financial presentations, requirements for board audit committees and their members, and disclosure of controls and procedures and establishment and testing on internal control over financial reporting.

Central Pacific Bank, as a Hawaii state-chartered bank, is subject to primary supervision, periodic examination and regulation by the DFI and FDIC and is also subject to certain regulations promulgated by the Consumer Financial Protection Bureau ("CFPB"), Federal Trade Commission ("FTC"), and FRB. In periodic examinations, the DFI, FDIC, and FRB assesses our financial condition, capital resources, asset quality, management, earnings prospects, liquidity, market sensitivity and other aspects of our operations. These bodies also determine whether our management is effectively managing the bank and the holding company and whether we are in compliance with all applicable laws or regulations.

Legislative and Regulatory Developments

The federal banking agencies continue to implement the remaining requirements in the Dodd-Frank Act, as well as promulgating other regulations and guidelines intended to assure the financial strength and safety and soundness of banks and the stability of the U.S. banking system. We continue to believe there will be an increased focus on regulatory compliance, supervision and examination during the remainder of President Biden’s term of office.

Capital Adequacy Requirements

Bank holding companies and banks are subject to various regulatory capital requirements administered by state and federal banking agencies. The Basel III Capital Rule, which initially became effective on January 1, 2015, has now been fully phased in. The risk-based capital guidelines for bank holding companies and banks require capital ratios that vary based on the perceived degree of risk associated with a banking organization's operations for both transactions reported on the balance sheet as assets, such as loans, and those recorded as off-balance sheet items, such as commitments, letters of credit and recourse arrangements. The risk-based capital ratio is determined by classifying assets and certain off-balance sheet financial instruments into weighted categories, with higher levels of capital being required for those categories perceived as representing greater risks

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and dividing its qualifying capital by its total risk-adjusted assets and off-balance sheet items. Bank holding companies and banks engaged in significant trading activity may also be subject to the market risk capital guidelines and be required to incorporate additional market and interest rate risk components into their risk-based capital standards.

The Federal Reserve monitors our capital adequacy on a consolidated basis, and the FDIC and the DFI monitor the capital adequacy of our bank. The Company and the bank are required to maintain minimum risk-based and leverage capital ratios, as well as a Capital Conservation Buffer, pursuant to the Basel III Capital Rule.

These rules implement the Basel III international regulatory capital standards in the United States, as well as certain provisions of the Dodd-Frank Act. These quantitative calculations are minimums, and the Federal Reserve, FDIC or DFI may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.

Under the Basel III Capital Rule, the Company's and the bank's assets, exposures and certain off-balance sheet items are subject to risk weights used to determine the institutions' risk-weighted assets. These risk-weighted assets are used to calculate the following minimum capital ratios for the Company and the bank:

•Tier 1 Leverage Ratio, equal to the ratio of Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets and certain other deductions).

•Common Equity Tier 1 ("CET1") Risk-Based Capital Ratio, equal to the ratio of CET1 capital to risk-weighted assets. CET1 capital primarily includes common stockholders' equity subject to certain regulatory adjustments and deductions, including with respect to goodwill, intangible assets and certain deferred tax assets. Certain of these adjustments and deductions were subject to phase-in periods. Hybrid securities, such as trust preferred securities, generally are excluded from being counted as Tier 1 capital. However, for bank holding companies like us that have less than $15 billion in total consolidated assets, certain trust preferred securities were grandfathered in as a component of Tier 1 capital. In addition, because we are a not an advanced approach banking organization, we were permitted to make a one-time permanent election to exclude accumulated other comprehensive income items from regulatory capital. We made this election in order to avoid significant variations in our levels of capital depending upon the impact of interest rate fluctuations on the fair value of our bank’s available-for-sale securities portfolio.

•Tier 1 Risk-Based Capital Ratio, equal to the ratio of Tier 1 capital to risk-weighted assets. Tier 1 capital is primarily comprised of CET1 capital, perpetual preferred stock and certain qualifying capital instruments.

•Total Risk-Based Capital Ratio, equal to the ratio of total capital, including CET1 capital, Tier 1 capital and Tier 2 capital, to risk-weighted assets. Tier 2 capital primarily includes qualifying subordinated debt and qualifying allowance for credit losses. Tier 2 capital also includes, among other things, certain trust preferred securities.

The total minimum regulatory capital ratios and well-capitalized minimum ratios are reflected in the charts below. The Federal Reserve has not yet revised the well-capitalized standard for bank holding companies to reflect the higher capital requirements imposed under the Basel III Capital Rule. For purposes of the Federal Reserve's Regulation Y, including determining whether a bank holding company meets the requirements to be a financial holding company, bank holding companies, such as the Company, must maintain a Tier 1 Risk-Based Capital Ratio of 6.0% or greater and a Total Risk-Based Capital Ratio of 10.0% or greater. If the Federal Reserve were to apply the same or a very similar well-capitalized standard to bank holding companies as that applicable to the bank, the Company's capital ratios as of December 31, 2022 would exceed such revised well-capitalized standard. The Federal Reserve may require bank holding companies, including the Company, to maintain capital ratios substantially in excess of mandated minimum levels, depending upon general economic conditions and a bank holding company's particular condition, risk profile and growth plans.

Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on our operations or financial condition. Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Company's or the bank's ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications.

In addition to meeting the minimum capital requirements, under the Basel III Capital Rule, the Company and the bank must also maintain the required Capital Conservation Buffer to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. The Capital Conservation Buffer is calculated as a ratio of CET1 capital

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to risk-weighted assets, and it effectively increases the required minimum risk-based capital ratios. The Capital Conservation Buffer requirement is now at its fully phased-in level of 2.5%.

The Tier 1 Leverage Ratio is not impacted by the Capital Conservation Buffer, and a banking institution may be considered well-capitalized while remaining out of compliance with the Capital Conservation Buffer.

The table below summarizes the capital requirements that the Company and the bank must satisfy to avoid limitations on capital distributions and certain discretionary bonus payments (i.e., the required minimum capital ratios plus the Capital Conservation Buffer):

	Minimum Basel III Regulatory Capital Ratio Plus Capital Conservation Buffer
CET1 risk-based capital ratio	7.0	%
Tier 1 risk-based capital ratio	8.5	%
Total risk-based capital ratio	10.5	%

As of December 31, 2022, the Company and the bank are well-capitalized for regulatory purposes. For a tabular presentation of the Company’s and the bank’s capital ratios as of December 31, 2022, see Note 25 - Parent Company and Regulatory Restrictions to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data".

If the Company were to cross the $10 billion or more asset threshold, its compliance costs and regulatory requirements, would increase.

In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms (the standards are commonly referred to as “Basel IV”). Among other things, these standards revise the Basel Committee's standardized approach for credit risk (including by recalibrating risk weights and introducing new capital requirements for certain “unconditionally cancellable commitments,” such as unused credit card lines of credit) and provides a new standardized approach for operational risk capital. Under the Basel framework, as amended, these standards will generally be effective on January 1, 2023, with an aggregate output floor phasing in through January 1, 2028. Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to advanced approaches institutions, and not to the Company and the bank. The impact of Basel IV on us will depend on the manner in which it is implemented by the federal bank regulators.

Prompt Corrective Action Provisions

The Federal Deposit Insurance Act requires the federal bank regulatory agencies to take "prompt corrective action" with respect to a depository institution if that institution does not meet certain capital adequacy standards, including requiring the prompt submission of an acceptable capital restoration plan. Depending on the bank's capital ratios, the agencies' regulations define five categories in which an insured depository institution will be placed: well-capitalized, adequately capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized. At each successive lower capital category, an insured bank is subject to more restrictions, including restrictions on the bank's activities, operational practices or the ability to pay dividends or executive bonuses. Based upon its capital levels, a bank that is classified as well-capitalized, adequately capitalized, or under-capitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment.

The prompt corrective action standards were also changed as the Basel III Capital Rule ratios became effective. Under the new standards, in order to be considered well-capitalized, the bank will be required to meet the new common equity Tier 1 ratio of 6.5%, an increased Tier 1 ratio of 8% (increased from 6%), a total capital ratio of 10% (unchanged) and a leverage ratio of 5% (unchanged).

The federal banking agencies also may require banks and bank holding companies subject to enforcement actions to maintain capital ratios in excess of the minimum ratios otherwise required to be deemed well capitalized, in which case institutions may no longer be deemed to be well capitalized and may therefore be subject to certain restrictions on items such as brokered deposits.

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The Coronavirus Aid, Relief, and Economic Security Act

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law on March 27, 2020 to provide national emergency economic relief measures. Many of the CARES Act’s programs are dependent upon the direct involvement of U.S. financial institutions, such as the Company and the bank, and have been implemented through rules and guidance adopted by federal departments and agencies, including the U.S. Department of Treasury, the Federal Reserve and other federal banking agencies, including those with direct supervisory jurisdiction over the Company and the bank. Furthermore, as the on-going COVID-19 pandemic evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19.

On December 21, 2020, Congress passed a $900 billion aid package, or the Consolidated Appropriations Act, 2021, which extended certain relief provisions under the March 2020 CARES Act, provided additional funds for the Paycheck Protection Program ("PPP") and extended the time of the PPP to March 31, 2021. This legislation also permitted second PPP loans to certain entities which are subject to forgiveness subject to meeting certain required criteria. It is possible that Congress will enact supplementary COVID-19 response legislation, including amendments to the CARES Act or new bills comparable in scope to the CARES Act. The Company continues to assess the impact of the CARES Act and other statues, regulations and supervisory guidance related to the COVID-19 pandemic.

Paycheck Protection Program. The CARES Act amended the SBA’s loan program, in which the bank participates, to create a guaranteed, unsecured loan program, the PPP, to fund operational costs of eligible businesses, organizations and self-employed persons during COVID-19. In June 2020, the Paycheck Protection Program Flexibility Act was enacted, which among other things, gave borrowers additional time and flexibility to use PPP loan proceeds. The bank issued approximately $879.8 million in aggregate loans under the PPP in the two years ended December 31, 2020 and 2021, of which approximately $877.1 million had been forgiven or repaid by December 31, 2022.

Troubled Debt Restructuring and Loan Modifications for Affected Borrowers. The CARES Act permitted banks to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise have been characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the COVID-19 emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. The federal banking agencies also issued guidance to encourage banks to make loan modifications for borrowers affected by COVID-19 and to assure banks that they will not be criticized by examiners for doing so. Set to expire on December 31, 2020, the Consolidated Appropriations Act, 2021 was signed into law and extended this relief to the earlier of 60 days after the end of the COVID-19 emergency declaration or January 1, 2022. This relief ended on January 1, 2022. The Company applied the guidance to qualifying loan modifications which reduced the number of TDRs that were reported.

Federal Reserve Programs and Other Recent Initiatives Related to COVID-19

Main Street Lending Program. The CARES Act encouraged the Federal Reserve, in coordination with the Secretary of the Treasury, to establish or implement various programs to help midsize businesses, nonprofits, and municipalities. On April 9, 2020, the Federal Reserve proposed the creation of the Main Street Lending Program (“MSLP”) to implement certain of these recommendations. On June 15, 2020, the Federal Reserve Bank of Boston opened the MSLP for lender registration. The MSLP supports lending to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic. The MSLP operates through five facilities: the Main Street New Loan Facility, the Main Street Priority Loan Facility, the Main Street Expanded Loan Facility, the Nonprofit Organization New Loan Facility, and the Nonprofit Organization Expanded Loan Facility. The bank was a registered lender but did not originate any of these loans. The MSLP terminated on January 18, 2021. The bank continues to monitor developments related thereto.

Temporary Regulatory Capital Relief related to Impact of Current Expected Credit Losses ("CECL"). Concurrent with enactment of the CARES Act, federal banking agencies issued an interim final rule that delays the estimated impact on regulatory capital resulting from the adoption of CECL. The interim final rule provides banking organizations that implement CECL before the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay. The federal banking agencies have since issued a final rule that makes certain technical changes to the interim final rule. The changes in the final rule apply only to those banking organizations that elect the CECL transition relief provided under the rule. The Company elected this option.

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Volcker Rule

In December 2013, the federal bank regulatory agencies adopted final rules that implement a part of the Dodd-Frank Act commonly referred to as the "Volcker Rule." Under these rules and subject to certain exceptions, banking entities are restricted from engaging in activities that are considered proprietary trading and from sponsoring or investing in certain entities, including hedge or private equity funds that are considered "covered funds." Notwithstanding these provisions, in July 2019, the federal bank regulatory agencies finalized a rule which provides that community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5 percent or less of total consolidated assets, such as the bank, are excluded from the Volcker Rule.

Brokered Deposits

The FDIC limits the ability to accept brokered deposits to those insured depository institutions that are well-capitalized. Institutions that are less than well capitalized cannot accept, renew or roll over any brokered deposit unless they have applied for and been granted a waiver by the FDIC. As of December 31, 2022, the bank did not have any deposit liabilities categorized as brokered deposits.

Bank Holding Company Regulation

As contained in both federal and state banking laws and regulations, a wide range of requirements and restrictions apply to bank holding companies and their subsidiaries which:

•require regular periodic reports and such additional reports of information as the Federal Reserve may require;

•require bank holding companies to meet or exceed minimum capital requirements (see the "Capital Adequacy Requirements" section above and the "Capital Resources" section in the MD&A);

•require that bank holding companies serve as a source of financial and managerial strength to subsidiary banks and commit resources as necessary to support each subsidiary bank. The source-of-strength doctrine most directly affects bank holding companies where a bank holding company's subsidiary bank fails to maintain adequate capital levels. In such a situation, the subsidiary bank will be required by the bank's federal regulator to take "prompt corrective action" (see the "Prompt Corrective Action Provisions" section above);

•limit dividends payable to shareholders and restrict the ability of bank holding companies to obtain dividends or other distributions from their subsidiary banks;

•require a bank holding company to terminate an activity or terminate control of or liquidate or divest certain subsidiaries, affiliates or investments if the Federal Reserve believes the activity or the control of the subsidiary or affiliate constitutes a significant risk to the financial safety, soundness or stability of any bank subsidiary;

•require the prior approval for changes in senior executive officers or directors and prohibit golden parachute payments, including change in control agreements, or new employment agreements with such payment terms, which are contingent upon termination when a bank holding company is deemed to be in troubled condition;

•regulate provisions of certain bank holding company debt, including the authority to impose interest ceilings and reserve requirements on such debt and require prior approval to purchase or redeem securities in certain situations;

•require prior approval for the acquisition of 5% or more of the voting stock of a bank or bank holding company by bank holding companies or other acquisitions and mergers with other banks or bank holding companies and require the regulators to consider certain competitive, management, financial, and anti-money laundering compliance impact on the U.S.; and

•require prior notice and/or prior approval of the acquisition of control of a bank or a bank holding company by a shareholder or individuals acting in concert with ownership or control of 10% of the voting stock being a presumption of control.

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Change in Bank Control

Federal law and regulation set forth the types of transactions that require prior notice under the Change in Bank Control Act (“CIBCA”). Pursuant to CIBCA and Regulation Y, any person (acting directly or indirectly) that seeks to acquire control of a bank or its holding company must provide prior notice to the Federal Reserve. A “person” includes an individual, bank, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or any other form of entity. A person acquires "control" of a banking organization whenever the person acquires ownership, control, or the power to vote 25 percent or more of any class of voting securities of the institution. The applicable regulations also provide for certain other "rebuttable" presumptions of control. In April 2020, the Federal Reserve adopted a final rule to revise its regulations related to determinations of whether a company has the ability to exercise a controlling influence over another company for purposes of the BHCA. The final rule expands and codifies the presumptions for use in such determinations. By codifying the presumptions, the final rule provides greater transparency on the types of relationships that the Federal Reserve generally views as supporting a facts and circumstances determination that one company controls another company. The Federal Reserve’s final rule applies to questions of control under the BHCA, but does not extend to CIBCA or applicable provisions of Hawaii law.

Other Restrictions on the Company's Activities

Subject to prior notice or Federal Reserve approval, bank holding companies may generally engage in, or acquire shares of companies engaged in, activities determined by the Federal Reserve to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Bank holding companies that elect and retain "financial holding company" status pursuant to the Gramm-Leach-Bliley Act of 1999 ("GLBA") may engage in these non-banking activities and broader securities, insurance, merchant banking and other activities that are determined to be "financial in nature" or are incidental or complementary to activities that are financial in nature without prior Federal Reserve approval. Pursuant to the GLBA and the Dodd-Frank Act, in order to elect and retain financial holding company status, a bank holding company and all depository institution subsidiaries of that bank holding company must be well capitalized and well managed, and, except in limited circumstances, depository subsidiaries must be in satisfactory compliance with the Community Reinvestment Act ("CRA"), which requires banks to help meet the credit needs of the communities in which they operate. Failure to sustain compliance with these requirements or correct any non-compliance within a fixed time period could lead to the required divestiture of subsidiary banks or the termination of all activities that do not conform to those permissible for a bank holding company. The Company has not elected financial holding company status and neither the Company nor the bank has engaged in any activities determined by the Federal Reserve to be non-banking and financial in nature or incidental or complementary to activities that are financial in nature.

Dividends

It is the Federal Reserve's policy that bank holding companies should generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention is consistent with the organization's expected future needs and financial condition. It is also the Federal Reserve's policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of strength to their banking subsidiaries. The Federal Reserve has also discouraged payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong. The Company is also subject to restrictions on dividends under applicable Hawaii law. There can be no assurance of the amount of dividends that the Company will pay to its shareholders in the future or that the Company will continue to pay dividends to shareholders at all.

The bank is a legal entity that is separate and distinct from its holding company. CPF is dependent on the performance of the bank for funds which may be received as dividends from the bank for use in the operation of CPF and the ability of CPF to pay dividends to shareholders. Subject to regulatory and statutory restrictions, including restrictions under applicable Hawaii law and federal regulation, future cash dividends by the bank will depend upon management's assessment of future capital requirements, contractual restrictions and other factors.

Regulation of the Bank

As a Hawaii state-chartered bank whose deposits are insured by the FDIC, the bank is subject to regulation, supervision, and regular examination by the DFI, and by the FDIC, as the bank's primary Federal regulator. Specific federal and state laws and regulations which are applicable to banks regulate, among other things, the scope of their business, their investments, their reserves against deposits, the timing of the availability of deposited funds, their activities relating to dividends, investments, loans, the nature and amount of collateral for certain loans, servicing and foreclosing on loans, transactions with affiliates,

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officers, directors and other insiders, borrowings, capital requirements, certain check-clearing activities, branching, and mergers and acquisitions.

FDIC and DFI Enforcement Authority

The federal and Hawaii regulatory structure gives the bank regulatory agencies extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. The regulatory agencies have adopted guidelines to assist in identifying and addressing potential safety and soundness concerns before an institution's capital becomes impaired. The guidelines establish operational and managerial standards generally relating to: (1) internal controls, information systems, and internal audit systems; (2) loan documentation; (3) credit underwriting; (4) interest-rate exposure; (5) asset growth and asset quality; and (6) compensation, fees, and benefits. Further, the regulatory agencies have adopted safety and soundness guidelines for asset quality and for evaluating and monitoring earnings to ensure that earnings are sufficient for the maintenance of adequate capital and reserves. If, as a result of an examination, the DFI or the FDIC should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, market sensitivity, or other aspects of the bank's operations are unsatisfactory or that the bank or its management is violating or has violated any law or regulation, the DFI and the FDIC, and separately the FDIC as insurer of the bank's deposits, have residual authority to:

•require affirmative action to correct any conditions resulting from any violation or practice;

•direct an increase in capital and the maintenance of higher specific minimum capital ratios, which may preclude the bank from being deemed well capitalized and restrict its ability to accept certain brokered deposits;

•restrict the bank's growth geographically, by products and services, or by mergers and acquisitions, including bidding in FDIC receiverships for failed banks;

•enter into or issue informal or formal enforcement actions, including required Board resolutions, memoranda of understanding, written agreements and consent or cease and desist orders or prompt corrective action orders to take corrective action and cease unsafe and unsound practices;

•require prior approval of senior executive officer or director changes; remove officers and directors and assess civil monetary penalties; and

•terminate FDIC insurance, revoke the charter and/or take possession of and close and liquidate the bank or appoint the FDIC as receiver, which for a Hawaii state-chartered bank would result in a revocation of its charter.

Mergers and Acquisitions

On July 9, 2021, President Biden signed an “Executive Order on Promoting Competition in the American Economy”. Included within the order is a sweeping recommendation that the Attorney General, in consultation with the heads of the FRB, FDIC and Office of the Comptroller of the Currency ("OCC") review current practices and adopt a plan within 180 days for the “revitalization” of bank merger oversight to provide more extensive scrutiny of mergers. In 2021 and 2022, various bank regulatory agencies have sought public comments and requested additional information regarding laws, regulations and policies regarding merger transactions involving financial institutions. We will continue to evaluate the impact of any changes to the regulations related to implementing this executive order and their impact to our financial condition, results of operations, and/or business strategies, which cannot be predicted at this time.

Deposit Insurance

The FDIC is an independent federal agency that insures deposits through the Deposit Insurance Fund (the "DIF") up to prescribed statutory limits of federally insured banks and savings institutions and safeguards the safety and soundness of the banking and savings industries. The Dodd-Frank Act revised the FDIC's DIF management authority by setting requirements for the Designated Reserve Ratio (the "DRR", calculated as the DIF balance divided by estimated insured deposits) and redefining the assessment base which is used to calculate banks' quarterly assessments. The amount of FDIC assessments paid by each DIF member institution is based on its asset size and its relative risk of default as measured by regulatory capital ratios and other supervisory factors. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. The FDIC has set the DRR at 2.00%. In October 2022, in order to increase the likelihood that the reserve ratio would be restored to at least 1.35% by the statutory deadline of September 30, 2029, the FDIC increased the initial base deposit insurance

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assessment rate schedules uniformly by 2 basis points. The increase in assessment rates are effective as of January 1, 2023 and is applicable beginning with the first quarterly assessment period of 2023.

If there are additional bank or financial institution failures or if the FDIC otherwise determines or if our asset size or risk of default increases, we may be required to pay higher FDIC premiums. Any future increases in FDIC insurance premiums may have a material and adverse effect on our earnings and could have a material adverse effect on the value of, or market for, our common stock.

Incentive Compensation

Under regulatory guidance applicable to all banking organizations, incentive compensation policies must be consistent with safety and soundness principles. Under this guidance, financial institutions must review their compensation programs to ensure that they: (i) provide employees with incentives that appropriately balance risk and reward and that do not encourage imprudent risk, (ii) are compatible with effective controls and risk management, and (iii) are supported by strong corporate governance, including active and effective oversight by the banking organization’s board of directors. Monitoring methods and processes used by a banking organization should be commensurate with the size and complexity of the organization and its use of incentive compensation. During 2016, as required by the Dodd-Frank Act, the federal bank regulatory agencies and the SEC proposed revised rules on incentive-based payment arrangements at specified regulated entities having at least $1 billion of total assets. These proposed rules have not been finalized. In October 2022, the SEC adopted final rules implementing the incentive-based compensation recovery (clawback) provisions of the Dodd-Frank Act. The final rule requires the stock exchanges to, among other things, establish listing standards, for listed companies which must develop and implement policies for the recovery of erroneously awarded incentive-based compensation received by former or current executive officers. The SEC’s final rules became effective on January 27, 2023 and the NYSE has until February 26, 2023 to propose new clawback listing standards which must become effective by November 28, 2023.

Cybersecurity

Federal regulators have issued multiple statements regarding cybersecurity stating that financial institutions need to design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution. In addition, a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack involving destructive malware. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack. In November 2021, the federal banking agencies adopted a final rule, with compliance required by May 1, 2022, that requires banking organizations to notify their primary banking regulator within 36 hours of determining that a “computer-security incident” has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver banking products and services to a material portion of its customer base, its businesses and operations that would result in material loss, or its operations that would impact the stability of the United States. If we fail to observe the regulatory guidance, we could be subject to various regulatory sanctions, including financial penalties.

State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations, including California and New York. Other states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements. We expect this trend of state-level activity in those areas to continue, and are continually monitoring developments in the states in which our customers are located in or in which we conduct business.

In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data. We employ an in-depth, layered, defensive approach that leverages people, processes and technology to manage and maintain cybersecurity controls. We employ a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats. Notwithstanding the strength of our defensive measures, the threat from cyber-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures. While to date we have not detected a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, our systems and those of our customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of internet banking,

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mobile banking and other technology-based products and services by us and our customers. See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity.

Office of Foreign Assets Control ("OFAC") Regulation

The U.S. Treasury Department’s Office of Foreign Assets Control, or OFAC, administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others. OFAC publishes lists of specially designated targets and countries. We are responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence. Failure to comply with these sanctions could have serious financial, legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required. Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations.

Operations and Consumer Compliance Laws

The bank must comply with numerous federal and state anti-money laundering and consumer protection and privacy statutes and implementing regulations, including the USA Patriot Act of 2001, GLBA, the Bank Secrecy Act, the Foreign Account Tax Compliance Act, the CRA, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act, and various federal and state privacy protection laws, including the Telephone Consumer Protection Act and the CAN-SPAM Act. Noncompliance with these laws could subject the bank to lawsuits and could also result in administrative penalties, including, fines and reimbursements. The Company and the bank are also subject to federal and state laws prohibiting unfair or fraudulent business practices, untrue or misleading advertising and unfair competition.

These laws and regulations mandate certain disclosure and reporting requirements and regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, servicing, collecting, and foreclosing on loans, and providing other services. Failure to comply with these laws and regulations can subject the bank to various penalties, including but not limited to enforcement actions, injunctions, fines or criminal penalties, punitive damages, and the loss of certain contractual rights.

The Anti-Money Laundering Act of 2020 ("AMLA"), which amends the Bank Secrecy Act of 1970 (“BSA”), was enacted in January 2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws. Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal processes for BSA compliance; expands enforcement- and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower incentives and protections.

The CRA is intended to encourage insured depository institutions, while operating safely and soundly, to help meet the credit needs of their communities. The CRA specifically directs the federal bank regulatory agencies, in examining insured depository institutions, to assess their record of helping to meet the credit needs of their entire community, including low and moderate income neighborhoods, consistent with safe and sound banking practices. The CRA further requires the agencies to take a financial institution’s record of meeting its community credit needs into account when evaluating applications for, among other things, domestic branches, consummating mergers or acquisitions or holding company formations. In May, 2022, the FDIC, the FRB and the Office of the Comptroller of the Currency ("OCC") jointly proposed rules that would significantly change existing CRA regulations. The proposed rules are intended to increase bank activity in low- and moderate-income communities where there is significant need for credit, more responsible lending, greater access to banking services, and improvements to critical infrastructure. The proposals are intended to modernize and strengthen the rules that implement the CRA by (i) expanding access to credit, investment and basic banking services in the low- and moderate-income ("LMI") communities; (ii) adapting to changes in the banking industry, including mobile and internet banking by modernizing assessment areas while maintaining a focus on branch-based areas; (iii) providing greater clarity, consistency and transparency in the application of the regulations through the use of standardized metrics as part of CRA evaluation and clarifying eligible CRA activities focused on LMI communities and under-served rural communities; (iv) tailoring CRA rules and data collection to bank size and business model; and (v) maintaining a unified approach among the regulators. In particular, the proposed rules would generally apply four tests for banks over $2 billion in assets, including our Bank: a retail lending test; a retail services and products test; a community development financing test and a community development services test. We will continue to evaluate the impact of any changes to the regulations implementing the CRA and their impact to our financial condition, results of operations, and/or liquidity,

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which cannot be predicted at this time. The bank received an "Outstanding" rating in the FDIC's 2022 Community Reinvestment Act Performance Evaluation that measures how financial institutions support their communities in the areas of lending, investment and service.

We will continue to evaluate the impact of any changes to bank and holding company regulations and their impact to our financial condition, results of operations, and/or liquidity, which cannot be predicted at this time.

Consumer Financial Protection Bureau ("CFPB")

The Dodd-Frank Act provided for the creation of the CFPB as an independent entity with broad rule making, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential mortgages, home equity loans and credit cards. The CFPB’s functions include investigating consumer complaints, conducting market research, rule making, and enforcing rules related to consumer financial products and services. CFPB regulations and guidance, including supervision and examination, apply to all covered persons, and banks with $10 billion or more in assets. Banks with less than $10 billion in assets, including the bank, will continue to be examined for compliance by their primary federal banking agency.

The CFPB has finalized a number of significant rules which impact nearly every aspect of the lifecycle of a residential mortgage loan. These rules implement the Dodd-Frank Act amendments to the Equal Credit Opportunity Act, the Truth in Lending Act and the Real Estate Settlement Procedures Act. Among other things, the rules adopted by the CFPB require covered persons including banks making residential mortgage loans to: (i) develop and implement procedures to ensure compliance with an "ability-to-repay" test and identify whether a loan meets a new definition for a "qualified mortgage", in which case a rebuttable presumption exists that the creditor extending the loan has satisfied the ability-to-repay test; (ii) implement new or revised disclosures, policies and procedures for originating and servicing mortgages including, but not limited to, pre-loan counseling, early intervention with delinquent borrowers and specific loss mitigation procedures for loans secured by a borrower's principal residence; (iii) comply with additional restrictions on mortgage loan originator hiring and compensation; (iv) comply with new disclosure requirements and standards for appraisals and certain financial products; and (v) maintain escrow accounts for higher-priced mortgage loans for a longer period of time.

The review of products and practices to prevent unfair, deceptive or abusive acts or practices ("UDAAP") has been a focus of the CFPB, and of banking regulators more broadly. In addition, the Dodd-Frank Act provides the CFPB with broad supervisory, examination and enforcement authority over various consumer financial products and services, including the ability to require reimbursements and other payments to customers for alleged violations of UDAAP. The Dodd-Frank Act also provides the CFPB the ability to impose significant penalties, as well as injunctive relief that prohibits lenders from engaging in allegedly unlawful practices. The CFPB also has the authority to obtain cease and desist orders providing for affirmative relief or monetary penalties. The Dodd-Frank Act does not prevent states from adopting stricter consumer protection standards. State regulation of financial products and potential enforcement actions could also adversely affect the bank’s business, financial condition or results of operations.

The federal bank regulators have adopted rules limiting the ability of banks and other financial institutions to disclose non-public information about consumers to unaffiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a non-affiliated third party. These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. In addition, consumers may also prevent disclosure of certain information among affiliated companies that is assembled or used to determine eligibility for a product or service, such as that shown on consumer credit reports and asset and income information from applications. Consumers also have the option to direct banks and other financial institutions not to share information about transactions and experiences with affiliated companies for the purpose of marketing products or services.

Under the Durbin Amendment to the Dodd-Frank Act, the Federal Reserve adopted rules establishing standards for assessing whether the interchange fees that may be charged with respect to certain electronic debit transactions are “reasonable and proportional” to the costs incurred by issuers for processing such transactions.

Interchange fees, or “swipe” fees, are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. Under the final rules, the maximum permissible interchange fee is equal to no more than 21 cents plus 5 basis points of the transaction value for many types of debit interchange transactions. The Federal Reserve also adopted a rule to allow a debit card issuer to recover one cent per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements required by the Federal Reserve. The Federal Reserve also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product.

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Currently, we qualify for the small issuer exemption from the interchange fee cap, which applies to any debit card issuer that, together with its affiliates, has total assets of less than $10 billion as of the end of the previous calendar year. We will become subject to the interchange fee cap beginning July 1 of the year following the time when our total assets reaches or exceeds $10 billion. Reliance on the small issuer exemption does not exempt us from federal regulations prohibiting network exclusivity arrangements or from routing restrictions.

Commercial Real Estate Concentration Limits

In December 2006, the federal banking regulators issued guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” to address increased concentrations in commercial real estate and construction, or "CRE", loans. In addition, in December 2015, the federal bank agencies issued additional guidance entitled “Statement on Prudent Risk Management for Commercial Real Estate Lending.” Together, these guidelines describe the criteria the agencies will use as indicators to identify institutions potentially exposed to CRE concentration risk. An institution that has (i) experienced rapid growth in CRE lending, (ii) notable exposure to a specific type of CRE, (iii) total reported loans for construction, land development, and other land representing 100% or more of the institution’s total risk-based capital, or (iv) total CRE loans representing 300% or more of the institution’s total risk-based capital, and the outstanding balance of the institutions CRE portfolio has increased by 50% or more in the prior 36 months, may be identified for further supervisory analysis of the level and nature of its CRE concentration risk. As of December 31, 2022, the bank’s construction, land development, and other land loans represented less than 100% of its total risk-based capital. As of December 31, 2022, the bank's total CRE loans represented less than 300% of its total risk-based capital and has increased by less than 50% from the prior 36 months.

Future Legislation and Regulation

Congress may enact, modify or repeal legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact, modify or repeal legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states. Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied. The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of proposed legislation (or modification or repeal of existing legislation) could impact the regulatory structure under which the Company and bank operate and may significantly increase its costs, impede the efficiency of its internal business processes, require the bank to increase its regulatory capital and modify its business strategy, and limit its ability to pursue business opportunities in an efficient manner. Under these circumstances, the Company's business, financial condition, results of operations or prospects may be adversely affected, perhaps materially.

Employees and Human Capital

We believe that the success of our business is largely due to the quality of our employees, the development of each employee's full potential, and our ability to provide timely and satisfying rewards to our employees. At December 31, 2022, we employed 781 persons, 735 on a full-time basis and 46 on a part-time basis. We are not a party to any collective bargaining agreement. At December 31, 2022, our workforce was over 90% ethnically diverse (non-Caucasian or two or more races) and 66% female, with 57% of all management staff having a supervisory role being female.

We encourage and support the growth and development of our employees and, wherever possible, seek to fill positions by promotion and transfer from within the organization. Continual learning and career development are advanced through ongoing development conversations and annual performance reviews with employees, internally developed training programs, conferences, and other training events that employees are encouraged to attend in connection with their job duties. Additionally, we invest in continual learning and development through tuition reimbursement for courses, degree programs and fees paid for certifications. A cohort of two to three high potential employees are sent to the Pacific Coast Banking School annually. Our CPB Toastmasters helps participating employees gain public speaking, communication and leadership skills. Our CPB Women's Leadership Program provides opportunities for CPB's top 80 women leaders to develop leadership skills, build a support network and give back to the broader community through service projects.

The safety, health and wellness of our employees is a top priority. We are able to maintain employee safety while continuing successful operations despite events such as the COVID-19 pandemic. All employees are asked not to come to work when they experience signs or symptoms of illness. On an ongoing basis, we further promote the health and wellness of our employees by strongly encouraging work-life balance, offering flexible work schedules including hybrid and remote, keeping the employee portion of health care premiums to a minimum and sponsoring various wellness programs.

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Employee retention helps us operate efficiently and achieve one of our business objectives, which is being an exceptional service provider. We believe our commitment to living out our core values, actively prioritizing concern for our employees’ well-being, supporting our employees’ career goals, offering a competitive compensation and benefits package that includes health insurance and retirement savings plans, aids in retention of our top-performing employees. In addition to base salary, our compensation program includes variable pay (e.g., commission, incentive, bonus) for all employees. Our variable pay programs are designed to motivate and reward high levels of individual performance that aligns with our corporate strategy and business plan, and contributes to CPB’s success. At December 31, 2022, the average employee has 9 years of service and 35% of our current staff had been with us for ten years or more.

Available Information

Our internet website can be found at www.cpb.bank. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports can be found on our internet website as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC. Copies of the Company's filings with the SEC may also be obtained directly from the SEC's website at www.sec.gov. These documents may also be obtained in print upon request to our Investor Relations Department.

Also posted on our website and available in print upon request to our Investor Relations Department, are the charters for our Audit Committee, Compensation Committee and Corporate Governance Committee, as well as our Corporate Governance Guidelines and Code of Business Conduct and Ethics. Within the time period required by the SEC and NYSE, we will post on our website any amendment to the Code of Business Conduct and Ethics and any waiver applicable to our senior financial officers, as defined by the SEC, and our executive officers or directors. In addition, our website includes information concerning purchases and sales of our equity securities by our executive officers and directors, as well as disclosure relating to certain non-GAAP financial measures (as defined in the SEC's Regulation G) that we may make public orally, telephonically, by webcast, by broadcast or by similar means from time to time.

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ITEM 1A.    RISK FACTORS

Our business faces significant risks, including credit, market/liquidity, operational, legal/regulatory and strategic/reputation risks. The factors described below may not be the only risks we face and are not intended to serve as a comprehensive listing or be applicable only to the category of risk under which they are disclosed. The risks described below are generally applicable to more than one of the following categories of risks. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our business operations. If any of the events or circumstances described in the following factors actually occurs, our business, financial condition and/or results of operations could be materially and adversely affected.

Economic Risks

Difficult economic and market conditions in Hawaii would result in significant adverse effects on us because of the geographic concentration of our business.

Unlike larger national or other regional banks that are more geographically diversified, our business and operations are closely tied to the Hawaii market. The Hawaii economy relies on tourism, real estate, government and other service-based industries. Declines in tourism, fluctuations in foreign exchange rates, increases in energy costs, the availability of affordable air transportation, adverse weather and natural disasters, and local budget issues impact consumer and corporate spending. As a result, such events may contribute to the deterioration in Hawaii's general economic condition, which could adversely impact us and our borrowers.

In addition, the high concentration of Hawaii real estate loans in our portfolio, combined with the deterioration in these sectors caused by an economic downturn, previously had and could have in the future a significantly more adverse impact on our operating results than many other banks across the nation. If our borrowers experience financial difficulty, or if property values securing our real estate loans decline, we will incur elevated credit costs due to the composition and concentration of our loan portfolio, which will have an adverse effect on our financial condition and results of operations.

Our real estate loan operations have a considerable effect on our results of operations.

The performance of our real estate loans depends on a number of factors, including the continued strength of the real estate markets in which we operate. As we have previously seen in the Hawaii and U.S. Mainland construction and real estate markets, the strength of the real estate market and the results of our operations could be negatively affected by an economic downturn.

In addition, declines in the market for commercial property could cause some of our borrowers to suffer losses on their projects, which would negatively affect our financial condition, results of operations and prospects. Declines in housing prices and the supply of existing houses for sale could cause residential developers who are our borrowers to suffer losses on their projects and encounter difficulty in repaying their loans. We cannot assure you that we will have an adequate allowance for credit losses to cover future losses. If we suffer greater losses than we are projecting, our financial condition and results of operations would be adversely affected.

Our ability to maintain adequate sources of funding and liquidity and required capital levels may be negatively impacted by uncertainty in the economic environment which may, among other things, impact our ability to satisfy our obligations.

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of investments or loans, and other sources would have a substantial negative effect on our liquidity which could affect or limit our ability to satisfy our obligations and our ability to grow profitability at the same rate. Our access to funding sources in amounts adequate to finance our activities on terms that are acceptable to us could be impaired by factors that affect us specifically, the financial services industry, or the economy in general. Factors that could detrimentally impact our access to liquidity sources include concerns regarding deterioration in our financial condition, increased regulatory actions against us and a decrease in the level of our business activity as a result of a downturn in the markets in which our loans or deposits are concentrated. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial industry in light of the past turmoil faced by banking organizations and the credit markets. In addition, our financial flexibility could be constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates, including in the current rising interest rate environment.

The management of liquidity risk is critical to the management of our business and our ability to service our customer base. In managing our balance sheet, our primary source of funding is customer deposits. Our ability to continue to attract these deposits

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

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

During 2020 and 2021, our level of deposits increased materially, which was largely driven by customer response to the pandemic including market instability and deposits of PPP funds and government assistance. During 2022, we experienced moderation in our core deposit balances, primarily due to the rising interest rate environment. We cannot assure you that the bank will continue to retain these deposits, particularly as market interest rates continue to increase.

Our line of credit with the FHLB serves as a primary outside source of liquidity. The Federal Reserve discount window also serves as an additional outside source of liquidity. Borrowings under this arrangement are through the Federal Reserve's primary facility under the borrower-in-custody program. The duration of borrowings from the Federal Reserve discount window are generally for a very short period, usually overnight. In the event that these outside sources of liquidity become unavailable to us, we will need to seek additional sources of liquidity, including selling assets. We cannot assure you that we will be able to sell assets at a level to allow us to repay borrowings or meet our liquidity needs.

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

The fiscal, monetary and regulatory policies of the federal government and its agencies could have a material adverse effect on our results of operations.

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

Our net interest income and net interest margin may be negatively impacted during periods of rate tightening due to pressure on our funding costs, particularly if we are unable to realize higher rates on our assets at a pace that matches that of the funding. Changes in the slope of the yield curve, which represents the spread between short-term and long-term interest rates, could also reduce our net interest income and net interest margin. Historically, the yield curve is upward sloping, meaning short-term rates are lower than long-term rates. When the yield curve flattens or inverts, our net interest income and net interest margin could decrease as our cost of funds increases relative to the yield we can earn on our assets.

In a rising interest rate environment, as we are currently experiencing, there is potential for decreased demand for our loan products, an increase in our cost of funds, and the curtailment of economic recovery.

Changes in FRB policies and our regulatory environment are beyond our control, and we are unable to predict what changes may occur or the manner in which any future changes may affect our business, financial condition and results of operation.

Negative developments in the global and U.S. economies could have an adverse effect on us.

Our business and operations are sensitive to business and economic conditions globally and domestically. Adverse economic and business conditions in the U.S. generally, and in our market areas, in particular, could reduce our growth rate, affect our borrowers' ability to repay their loans and, consequently, adversely affect our financial condition and performance. Other economic conditions that affect our financial performance include short-term and long-term interest rates, the prevailing yield curve, inflation (which we are currently experiencing) and price levels (particularly for real estate), monetary policy,

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unemployment and the strength of the domestic economy as a whole. Unfavorable market conditions can result in a deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the number of loan delinquencies, defaults and charge-offs, additional provisions for credit losses, adverse asset values and an overall material adverse effect on the quality of our loan portfolio. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; natural disasters; or a combination of these or other factors.

The COVID-19 pandemic may continue to impact the State of Hawaii and our business.

The COVID-19 pandemic resulted in an extreme decline in tourism to the state of Hawaii in 2020. In 2021 and 2022, we experienced a rebound in tourism, but not to the full extent of pre-pandemic levels. Should economic conditions in the state of Hawaii deteriorate again due to actual or perceived increase in COVID-19 risk, including further spread and new variants, it can negatively impact our results of operations, including our net income. In addition, material adverse effects on our business may include all or a combination of valuation impairments on our investments, loans, mortgage servicing rights, deferred tax assets or counter-party risk derivatives. Further, there is potential that our business operations may be disrupted if our workforce is unable to work effectively, including because of illness, quarantines, government actions, or other restrictions. While the COVID-19 pandemic impact to our business has diminished in 2022, there is potential that it could continue to impact our business, results of operations, and financial condition, as well as our results of operations and our regulatory capital and liquidity ratios.

Credit Risks

A large percentage of our loans are collateralized by real estate and any deterioration in the real estate market may result in additional losses and adversely affect our financial results.

Our results of operations have been, and in future periods, will continue to be significantly impacted by the economy in Hawaii, and to a lesser extent, other markets we are exposed to including California. Approximately 76% of our loan portfolio as of December 31, 2022 was comprised of loans primarily collateralized by real estate, with the significant majority of these loans concentrated in Hawaii.

Deterioration of the economic environment in Hawaii, California or other markets we are exposed to, domestic or foreign, including a decline in the real estate market and single-family home resales or a material external shock, may significantly impair the value of our collateral and our ability to sell the collateral upon foreclosure. In the event of a default with respect to any of these loans, amounts received upon sale of the collateral may be insufficient to recover outstanding principal and interest on the loan.

Our allowance for credit loss methodology resulted in a credit to our provision for credit losses but the credit provision may not continue.

In 2021 and 2022, we recorded a credit to the provision for credit losses. Although other factors of our overall risk profile have improved in recent years and general economic trends and market conditions have stabilized, concerns over the global and U.S. economies still remain. Accordingly, it is possible that the real estate markets we participate in could deteriorate as it did from the latter part of 2007 through 2010. If this occurs, it may result in an increase in loan delinquencies, loan charge-offs, and our allowance for credit losses. Even if economic conditions improve or stay the same, it is possible that we may experience material credit losses and in turn, increases to our allowance for credit losses, due to any number of factors. If that were to occur, we may have to record a provision for credit losses which would have an adverse impact on our net income. Under typical stable portfolio and market conditions, we would generally record a provision for credit losses when there is growth in our loan portfolio.

Our allowance for credit losses may not be sufficient to cover actual credit losses, which could adversely affect our results of operations. Additional credit losses may occur in the future and may occur at a rate greater than we have experienced to date.

As a lender, we are exposed to the risk that our loan customers may not repay their loans according to their terms and that the collateral or guarantees securing these loans may be insufficient to assure repayment. The underwriting and credit monitoring policies and procedures that we have adopted to address this risk may not prevent unexpected losses that could have a material adverse effect on our business, financial condition, results of operations and cash flows. We maintain an allowance for credit losses to provide for loan defaults and non-performance, which also includes increases for new loan growth. While we believe

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that our allowance for credit losses is appropriate to cover expected losses, we cannot assure you that we will not increase the allowance for credit losses further or that regulators will not require us to increase the allowance for credit losses which could have a material adverse effect on our net income and financial condition.

Management makes various assumptions and judgments about the collectability of our loan portfolio, which are regularly reevaluated and are based in part on:

•current economic conditions and their estimated effects on specific borrowers;

•an evaluation of the existing relationships among loans, potential credit losses and the present level of the allowance for credit losses;

•results of examinations of our loan portfolios by regulatory agencies; and

•management's internal review of the loan portfolio.

In determining the size of the allowance for credit loss, we rely on an analysis of our loan portfolio, our experience and a third-party economic forecast. If our assumptions prove to be incorrect, our current allowance for credit losses may not be sufficient to cover the losses.

In addition, third parties, including our federal and state regulators, periodically evaluate the adequacy of our allowance for credit losses and may communicate with us concerning the methodology or judgments that we have raised in determining the allowance for credit losses. As a result of this input, we may be required to assign different grades to specific credits, increase our provision for credit losses, and/or recognize further loan charge offs which could have a material adverse effect on our net income and financial condition. See Note 1 - Summary of Significant Accounting Policies to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data."

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

Our loan portfolio includes commercial, financial and agricultural loans and commercial real estate loans, which are secured by commercial real estate, including but not limited to, structures and facilities to support activities designated as multi-family residential properties, industrial, warehouse, general office, retail, health care and religious dwellings. Commercial, financial and agricultural and commercial real estate loans carry more risk as compared to other types of lending, because they typically involve larger loan balances often concentrated with a single borrower or groups of related borrowers.

Accordingly, charge-offs on commercial, financial and agricultural and commercial real estate loans may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios. In addition, these loans expose a lender to greater credit risk than loans secured by residential real estate. The payment experience on commercial real estate loans that are secured by income producing properties are typically dependent on the successful operation of the related real estate property and thus, may subject us to adverse conditions in the real estate market or to the general economy. The collateral securing these loans typically cannot be liquidated as easily as residential real estate. If we foreclose on these loans, our holding period for the collateral typically is longer than residential properties because there are fewer potential purchasers of the collateral.

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

In addition, federal and state banking regulators may require banks with higher levels of commercial real estate loans to implement more stringent underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for credit losses and capital levels as a result of commercial real estate lending growth and exposures.

We may incur future losses in connection with certain representations and warranties we have made with respect to mortgages that we have sold in the secondary market.

In connection with the sale of mortgage loans into the secondary market, we make representations and warranties, which, if breached, may require us to repurchase such loans, substitute other loans or indemnify the purchasers of such loans for actual losses incurred in respect to such loans. A substantial decline in residential real estate values in the markets in which we

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originated such loans could increase the risk of such consequences. While we currently believe our repurchase risk is low, it is possible that requests to repurchase loans could occur in the future and such requests may have a material adverse effect on our financial condition and results of operations.

Our Banking-as-a-Service ("BaaS") collaboration agreements may expose us to credit risk.

In connection with our collaboration with Swell Financial, Inc. ("Swell") and Elevate Credit, Inc. (“Elevate”), our bank has entered into an agreement with Swell in which Swell markets bank consumer checking and consumer line of credit (“LOC”) accounts using the Swell brand and Swell’s digital platform. A subsidiary of Elevate will be providing the underwriting model for the LOC accounts. There is a credit enhancement agreement in place between the Company and Elevate, in which a subsidiary of Elevate will cover losses on the LOC accounts up to a certain specified amount, and will provide cash collateral to the bank to secure payment of such losses. Further, Elevate is a partial guarantor of losses on the LOC accounts. While the bank believes the cash collateral on deposit at the bank from Elevate's subsidiary will be sufficient to cover any foreseeable losses on the LOC accounts, in the event the cash collateral amount is not adequately maintained or the cash collateral amount is insufficient to cover the losses on the LOC accounts, and Elevate, including its subsidiaries, does not or cannot otherwise meet its obligations under its agreement with the bank, including its obligation under the partial guaranty, the bank may incur losses on the LOC accounts. Losses associated with the LOC accounts (or the portfolios of other third parties with whom we enter into comparable BaaS relationships) in such circumstances could have a material adverse effect on our net income, results of operations and financial condition.

Interest Rate and Liquidity Risks

Our business is subject to interest rate risk and fluctuations in interest rates may adversely affect our earnings.

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

•inflation;

•recession;

•market conditions;

•changes in unemployment;

•the money supply;

•international disorder and instability in domestic and foreign financial markets; and

•governmental actions.

Our asset/liability management strategy may not be able to control our risk from changes in market interest rates and it may not be able to prevent changes in interest rates from having a material adverse effect on our results of operations and financial condition. From time to time, we may reposition our assets and liabilities to reduce our net interest income volatility. Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations.

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If we are unable to effectively manage the composition and risk of our investment securities portfolio, which we expect will continue to comprise a significant portion of our earning assets, our net interest income and net interest margin could be adversely affected.

Our primary sources of interest income include interest on loans, as well as interest earned on investment securities. Interest earned on investment securities represented 13.4% of our interest income in the year ended December 31, 2022, as compared to 11.2% of our interest income in the year ended December 31, 2021. Accordingly, effectively managing our investment securities portfolio to generate interest income while managing the composition and risks (including credit, interest rate and liquidity) associated with that portfolio, including the mix of government agency and non-agency securities, remains important. If we are unable to effectively manage our investment securities portfolio or if the interest income generated by our investment securities portfolio declines, our net interest income and net interest margin could be adversely affected.

We may be adversely impacted by the transition from LIBOR as a reference rate

In 2017, the United Kingdom Financial Conduct Authority ("FCA") announced that after 2021 it would no longer compel banks to submit the rates required to calculate the LIBOR. In March 2021, the FCA and Intercontinental Exchange (ICE) Benchmark Administration (IBA) announced that the publication of the most commonly used U.S. dollar LIBOR settings would be extended through June 30, 2023 and cease publishing other LIBOR settings after December 31, 2021.

In December 2022, the Federal Reserve Board adopted the Adjustable Interest Rate (LIBOR) Act of 2021 to provide a uniform, nationwide solution for so-called tough legacy contracts that do not have clear and practicable provisions for replacing LIBOR after June 30, 2023 and identified replacement benchmark rates based on Secured Overnight Financing Rate ("SOFR") to replace LIBOR. It is expected that the Company will not have any LIBOR-based contracts after June 30, 2023 and they will be replaced by SOFR benchmark rates.

We have loans, derivatives and debt with attributes that are either directly or indirectly dependent on LIBOR. The transition from LIBOR could create considerable costs and additional risk. Since proposed alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR. The transition may change our market risk profile, and require changes to risk and pricing models, valuation tools, product design and hedging strategies. Failure to adequately manage the transition could have a material adverse effect on our business, financial condition, and results of operations.

We rely on the mortgage secondary market for some of our liquidity.

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

We are required to act as a source of financial and managerial strength for our bank.

We are required to act as a source of financial and managerial strength to the bank. We may be required to commit additional resources to the bank at times when we may not be in a financial position to provide such resources or when it may not be in our, or our shareholders’ best interests to do so. Providing such support is more likely during times of financial stress for us and the bank, which may make any capital we are required to raise to provide such support more expensive than it might otherwise be. In addition, any capital loans we make to the bank are subordinate in right of payment to depositors and to certain other indebtedness of the bank.

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We rely on dividends from our subsidiary for most of our revenue.

Because we are a holding company with no significant operations other than our bank, we depend upon dividends from our bank for a substantial portion of our revenues and our liquidity, including as the source of funds for payment of interest and principal on our holding company debt obligations.

Hawaii law only permits the bank to pay dividends out of retained earnings as defined under Hawaii banking law ("Statutory Retained Earnings"), which differs from GAAP retained earnings. As of December 31, 2022, the bank had Statutory Retained Earnings of $145.7 million. In addition, regulatory authorities could limit the ability of the bank to pay dividends to CPF. The inability to receive dividends from the bank could have a material adverse effect on our financial condition, results of operations and prospects.

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

Operational Risks

Our agreements with BaaS partners may produce limited revenue and may expose us to liability for compliance violations by BaaS partners and may require additional resources to review and monitor performance by our BaaS partners.

We previously announced the launch of our BaaS initiative with the goal of expanding our services in Hawaii and on the U.S. Mainland by collaborating with and investing in fintech companies. In conjunction with that initiative, we are collaborating with Elevate Credit, Inc. and Swell Financial, Inc. where the bank serves as the bank sponsor for a new consumer banking application. There is a risk that our BaaS partners may change their strategic focus or business model; these changes could impact the Company’s business arrangement with our BaaS partners and may adversely impact the Company's financial projections and financial returns on our BaaS programs.

We may enter into agreements with other BaaS partners pursuant to which we will provide certain banking services for the BaaS partner customers. Ensuring contractual and regulatory compliance with these agreements will require additional internal and external resources which will increase our compliance costs and could adversely affect our business. Our agreements with our partners will also have varying terms and may be terminated by the parties under certain circumstances. If our BaaS partners are not successful in achieving customer acceptance of their programs or terminate the agreements before the end of their respective terms, our revenue under the various agreements may be limited or may cease altogether. In addition, our bank regulators may hold us responsible for the activities of our bank partners with respect to various aspects of the marketing or administration of their programs, which may result in increased operational and compliance costs for us or potentially compliance violations as a result of BaaS partner activities, any of which could have a material adverse effect on our financial condition or results of operations.

The strategy of offering BaaS has been adopted by other institutions with which we compete.

Other online banking operations as well as the online banking programs of other banks have instituted BaaS strategies similar to ours. As a consequence, we anticipate that we will encounter competition in this area currently and in the future. This competition may increase our costs, reduce our revenues or revenue growth or make it difficult for us to compete effectively in obtaining these relationships.

Managing reputational risk is important to attracting and maintaining customers, investors and employees

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

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Consumer protection initiatives related to the foreclosure process could materially affect our ability as a creditor to obtain remedies.

In 2011, Hawaii revised its rules for nonjudicial, or out-of-court, foreclosures. Prior to the revision, most lenders used the nonjudicial foreclosure method to handle foreclosures in Hawaii, as the process was less expensive and quicker than going through the court foreclosure process. After the revised rules went into effect, many lenders ended up forgoing nonjudicial foreclosures entirely and filing all foreclosures in court, which has created a backlog and slowed the judicial foreclosure process. Many lenders continue to exclusively use the judicial foreclosure process, making the foreclosure process very lengthy. Additionally, the joint federal-state settlement with several mortgage servicers over abuse of foreclosure practices creates further uncertainty for us and the mortgage servicing industry in general with respect to implementation of mortgage loan modifications and loss mitigation practices going forward. The manner in which these issues are ultimately resolved could impact our foreclosure procedures, which in turn could adversely affect our business, financial condition or results of operations.

Our deposit customers may pursue alternatives to deposits at our bank or seek higher yielding deposits causing us to incur increased funding costs.

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

The occurrence of fraudulent activity, data privacy breaches, failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition and results of operations.

As a financial institution, we are susceptible to fraudulent activity, information security breaches and cybersecurity-related incidents that may be committed against us, our customers or our business partners (including by our own employees and consultants), which may result in financial losses or increased costs to us or our customers or our business partners, disclosure or misuse of our information or our client information, misappropriation of assets, privacy breaches against our clients, litigation, or damage to our reputation. Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Information security breaches and cybersecurity-related incidents may include fraudulent or unauthorized access to systems used by us, our vendors, or our clients, denial or degradation of service attacks, and malware or other cyber-attacks. In recent periods, there continues to be a rise in electronic fraudulent activity, security breaches and cyber-attacks within the financial services industry, especially in the commercial banking sector due to cyber criminals targeting commercial bank accounts. Consistent with industry trends, we have also experienced an increase in attempted electronic fraudulent activity, security breaches and cybersecurity-related incidents in recent periods. Moreover, in recent periods, several large corporations, including financial institutions and retail companies, have suffered major data breaches, in some cases exposing not only confidential and proprietary corporate information, but also sensitive financial and other personal information of their customers and employees and subjecting them to potential fraudulent activity. Some of our clients may have been affected by these breaches, which increase their risks of identity theft, credit card fraud and other fraudulent activity that could involve their accounts with us.

Information pertaining to us and our clients is maintained, and transactions are executed, on the networks and systems of us, our clients and certain of our third-party partners, such as our online banking or reporting systems. The secure maintenance and transmission of confidential information, as well as execution of transactions over these systems, are essential to protect us and our clients against fraud and security breaches and to maintain our clients' confidence. Breaches of information security also may occur, and in infrequent cases have occurred, through intentional or unintentional acts by those having access to our systems or our clients' or counterparties' confidential information, including employees. In addition, increases in criminal activity levels and sophistication, advances in computer capabilities, new discoveries, vulnerabilities in third-party technologies (including browsers and operating systems) or other developments could result in a compromise or breach of the technology, processes and controls that we use to prevent fraudulent transactions and to protect data about us, our clients and underlying transactions, as well as the technology used by our clients to access our systems. Although we have developed, and continue to invest in, systems and processes that are designed to detect and prevent data security breaches and cyber-attacks and periodically test our security, we may fail to anticipate or adequately mitigate breaches of security or experience data privacy

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breaches that could result in loss of business to us and/or clients, damage to our reputation, the incurrence of additional expenses, disruption to our business, our inability to grow our online services or other businesses, additional regulatory scrutiny or penalties, including resulting violations of law (whether federal or one or more various states) or our exposure to civil litigation and possible financial liability — any of which could have a material adverse effect on our business, financial condition and results of operations.

More generally, publicized information concerning security and cyber-related problems and other data privacy breaches could inhibit the use or growth of digital or web-based applications or solutions as a means of conducting commercial or retail transactions. Such publicity may also cause damage to our reputation as a financial institution. As a result, our business, financial condition and results of operations could be materially adversely affected.

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

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

Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition.

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

Financial services companies depend on the accuracy and completeness of information about customers and counterparties.

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

We operate in a highly competitive industry and market area.

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

The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can virtually offer any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Technology has also lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can.

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

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

•the ability to expand our market position;

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

•the rate at which we introduce new products and services relative to our competitors;

•customer satisfaction with our level of service; and

•industry and general economic trends.

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

In addition, the soundness of our financial condition may also affect our competitiveness. Customers may decide not to do business with the bank due to its financial condition.

We are subject to environmental liability risk associated with our bank branches and any real estate collateral we acquire upon foreclosure.

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

Our business could be adversely affected by unfavorable actions from rating agencies.

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

Risks Related to Legal, Compliance and Regulatory Matters

Governmental regulation and regulatory actions against us may impair our operations or restrict our growth.

As a regulated financial institution, we are subject to significant governmental supervision and regulation. These regulations affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things. Statutes and regulations affecting our business may be changed at any time and the interpretation of these statutes and regulations by examining authorities may also change. In addition, regulations may be adopted that increase expenses associated with running our business and adversely affect our earnings.

There can be no assurance that such statutes and regulations, any changes thereto or to their interpretation will not adversely affect our business. In particular, these statutes and regulations, and any changes thereto, could subject us to additional costs (including legal and compliance costs), limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things. In addition to governmental supervision and regulation, we are subject to changes in other federal and state laws, including changes in tax laws, which could materially affect us and the banking industry generally. We are subject to the rules and regulations of the FRB, the FDIC and the DFI, and certain rules and regulations promulgated by the CFPB. In addition, we are subject to the rules and regulation of

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the NYSE and the SEC and are subject to enforcement actions and other punitive actions by these agencies. If we fail to comply with federal and state regulations, the regulators may limit our activities or growth, impose fines on us or in the case of our bank regulators, ultimately require our bank to cease its operations. Bank regulations can hinder our ability to compete with financial services companies that are not regulated in the same manner or are less regulated. Federal and state bank regulatory agencies regulate many aspects of our operations. These areas include:

•the capital that must be maintained;

•the kinds of activities that can be engaged in;

•the kinds and amounts of investments that can be made;

•the locations of offices;

•insurance of deposits and the premiums that we must pay for this insurance;

•procedures and policies we must adopt;

•conditions and restrictions on our executive compensation; and

•how much cash we must set aside as reserves for deposits.

In addition, bank regulatory authorities may bring enforcement actions against banks and bank holding companies, including CPF and the bank, for unsafe or unsound practices in the conduct of their businesses or for violations of any law, rule or regulation. Enforcement actions against us, including any condition imposed in writing by the appropriate bank regulatory agency or any written agreement with the authority, could include a federal conservatorship or receivership for the bank, the issuance of additional orders that could be judicially enforced, the imposition of civil monetary penalties, the issuance of directives to enter into a strategic transaction, whether by merger or otherwise, with a third-party, the termination of insurance of deposits, the issuance of removal and prohibition orders against institution-affiliated parties, and the enforcement of such actions through injunctions or restraining orders. In addition, if we were to grow beyond $10 billion in assets, we would be subject to enhanced CFPB examination and our compliance costs would increase.

We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

The Bank Secrecy Act, the USA PATRIOT Act of 2001, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network is authorized to impose significant civil money penalties for violations of those requirements and has engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service. We are also subject to increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control and compliance with the Foreign Corrupt Practices Act. If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could materially and adversely affect our business, financial condition and results of operations.

Regulatory capital standards impose enhanced capital adequacy requirements on us.

Increased regulatory capital requirements (and the associated compliance costs), which have been adopted by federal banking regulators, impose additional capital requirements on our business. The administration of existing capital adequacy laws as well as adoption of new laws and regulations relating to capital adequacy, or more expansive or aggressive interpretations of existing laws and regulations, could have a material adverse effect on our business, liquidity, financial condition and results of operations and could substantially restrict our ability to pay dividends, repurchase any of our capital stock, or pay executive bonuses. In addition, increased regulatory capital requirements as well as our financial condition could require us to raise additional capital which would dilute our existing shareholders at the time of such capital issuance.

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

Our operations are subject to extensive federal, state and local environmental statutes, rules and regulations. Compliance with these legal requirements require us to incur costs for, among other things, installation and operation of pollution control equipment, emissions monitoring and fees, remediation and permitting at our branches and other facilities. These expenditures and other associated costs associated with compliance have been significant in the past and may increase in the future which could have an adverse effect on our financial condition and results of operations.

We are subject to various legal claims and litigation.

From time to time, customers, employees and others whom we do business with, or are regulated by, as well as our shareholders, can make claims and take legal action against us. Regardless of whether these claims and legal actions are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the market perception of us and our products and services, as well as impact customer demand for our products and services. Any financial liability or reputational damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations. Even if these claims and legal actions do not result in a financial liability or reputational damage, defending these claims and actions have resulted in, and will continue to result in, increased legal and professional services costs, which adds to our noninterest expense and negatively impacts our operating results.

Risks Related to an Investment in the Company's Securities

The market price of our common stock could decline.

The trading price of our common stock may fluctuate widely as a result of a number of factors, many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations could adversely affect the market price of our common stock. Among the factors that could affect our stock price are:

•failure to comply with all of the requirements of any governmental orders or agreements we may become subject to and the possibility of resulting action by the regulators;

•deterioration of asset quality;

•the incurrence of losses;

•actual or anticipated quarterly fluctuations in our operating results and financial condition;

•changes in revenue or earnings/losses estimates or publication of research reports and recommendations by financial analysts;

•failure to meet analysts' revenue or earnings/losses estimates;

•speculation in the press or investment community;

•strategic actions by us or our competitors, such as mergers, acquisitions, restructurings, changes in products or markets, or public offerings;

•additions or departures of key personnel;

•actions by institutional shareholders;

•fluctuations in the stock price and operating results of our competitors;

•future sales of other equity or debt securities, including our common stock;

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•general market conditions and, in particular, developments related to market conditions for the financial services industry;

•proposed or adopted regulatory changes or developments;

•breaches in our security systems and loss of customer data;

•anticipated or pending investigations, proceedings or litigation that involve or affect us; or

•domestic and international economic factors unrelated to our performance.

The stock market generally may experience significant volatility. In addition, the trading volume in our common stock may fluctuate more than usual and cause significant price variations to occur. Accordingly, the common stock that you purchase may trade at a price lower than that at which they were purchased. Volatility in the market price of our common stock may prevent individual shareholders from being able to sell their shares when they want or at prices they find attractive.

A significant decline in our stock price could result in substantial losses for shareholders and could lead to costly and disruptive securities litigation.

Anti-takeover provisions in our restated articles of incorporation and bylaws and applicable federal and state law may limit the ability of another party to acquire us or a significant block of common stock, which could cause our stock price to decline.

Various provisions of our restated articles of incorporation and bylaws and certain other actions we have taken could delay or prevent a third-party from acquiring us, even if doing so might be beneficial to our shareholders. These include, among other things, the authorization to issue "blank check" preferred stock by action of the Board of Directors acting alone, thus without obtaining shareholder approval. In addition, applicable provisions of federal and state law require regulatory approval in connection with certain acquisitions of our common stock and super-majority voting provisions in connection with certain transactions. In particular, both federal and state law limit the acquisition of ownership of certain percentage thresholds of our common stock without providing prior notice to the regulatory agencies and obtaining prior regulatory approval or non-objection or being able to rely on an exemption from such acquisition. See the "Supervision and Regulation" section. We are also subject to the provisions of the Hawaii Control Share Acquisitions Act which prohibits the consummation of a “control share acquisition” (with threshold ranges starting at 10% and set at 10% intervals up to a majority) unless approved by our shareholders or otherwise exempt. Unless approved or otherwise exempt, for a period of one year after acquisition, the shares acquired by a person in a control share acquisition will be (i) denied voting rights, (ii) be nontransferable, and (iii) be subject to redemption at our option. Collectively, these provisions of our restated articles of incorporation and bylaws and applicable federal and state law may prevent a merger or acquisition that would be attractive to shareholders, limit the ability of another party to acquire a significant block of our common stock, and could limit the price investors would be willing to pay in the future for our common stock.

Our common stock is equity and therefore is subordinate to our subsidiaries' indebtedness and preferred stock.

Our common stock constitutes equity interests and does not constitute indebtedness. As such, common stock will rank junior to all current and future indebtedness and other non-equity claims on us with respect to assets available to satisfy claims against us, including in the event of our liquidation. We may, and the bank and our other subsidiaries may also, incur additional indebtedness from time to time and may increase our aggregate level of outstanding indebtedness. As of December 31, 2022, we had (i) $50.0 million in face amount of trust preferred securities outstanding and accrued and unpaid dividends thereon of $0.2 million and (ii) $55.0 million in principal amount of subordinated notes outstanding and accrued and unpaid interest thereon of $0.4 million. Additionally, holders of common stock are subject to the prior dividend and liquidation rights of any holders of our preferred stock that may be outstanding from time to time. The Board of Directors is authorized to cause us to issue additional classes or series of preferred stock without any action on the part of our stockholders. If we issue preferred shares in the future that have a preference over our common stock with respect to the payment of dividends or upon liquidation, or if we issue preferred shares with voting rights that dilute the voting power of the common stock, then the rights of holders of our common stock or the market price of our common stock could be adversely affected.

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There is a limited trading market for our common stock and as a result, you may not be able to resell your shares at or above the price you pay for them at the time you otherwise may desire.

Although our common stock is listed for trading on the NYSE, the volume of trading in our common shares is lower than many other companies listed on the NYSE. A public trading market with depth, liquidity and orderliness depends on the presence in the market of willing buyers and sellers of our common shares at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. As a result, you may not be able to resell your common stock at or above the price you pay or at the time(s) you otherwise may desire.

The soundness of other financial institutions could adversely affect us.

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. There is no assurance that any such losses would not materially and adversely affect our results of operations.

Our common stock is not insured and you could lose the value of your entire investment.

An investment in our common stock is not a deposit and is not insured against loss by the government or any governmental

agency.

Risks Related to Technology

We continually encounter technological change.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. In addition, there are a limited number of qualified persons in our local marketplace with the knowledge and experience required to effectively maintain our information technology systems and implement our technology initiatives. Failure to successfully attract and retain qualified personnel, or keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.

General Risk Factors

We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects.

Competition for qualified employees and personnel in the banking industry is intense and there is a limited number of qualified persons with knowledge of, and experience in, the regional banking industry, especially in the Hawaii market. The process of recruiting personnel with the combination of skills and attributes required to carry out our strategies is often lengthy. Our success depends to a significant degree upon our ability to attract and retain qualified management, loan origination, finance, administrative, marketing, and technical personnel, and upon the continued contributions of our management and personnel. In particular, our success has been and continues to be highly dependent upon the abilities of key executives, including our President and Chief Executive Officer, our Senior Executive Vice President and Chief Financial Officer, and our other executive officers and certain other employees.

Natural disasters and other external events (including pandemic viruses or disease) could have a material adverse affect on our financial condition and results of operations.

Our branch offices as well as a substantial majority of our loan portfolio is in the state of Hawaii. As a result, natural disasters and other severe weather occurrences such as tsunamis, volcanic eruptions, hurricanes and earthquakes and other adverse external events, including the effects of any pandemic viruses or diseases (such as the COVID-19 pandemic), could have a significant effect on our ability to conduct our business and adversely affect the tourism and visitor industry in the state of Hawaii. Such events could affect the ability of our borrowers to repay their outstanding loans, impair the value of collateral

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securing our loans, cause significant property damage, result in loss of revenue, adversely impact our deposit base and/or cause us to incur additional expenses. Accordingly, the occurrence of any such natural disasters, severe weather events, or other occurrences over which we have no control could have a material adverse effect on our business, which, in turn, could adversely affect our financial condition and results of operations.

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ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

We hold title to the land and building in which our Main branch office and headquarters, Hilo branch office, Kailua-Kona branch office, Pearl City branch office, Kaneohe branch office and certain operations offices are located. We also hold title to a portion of the land on which our operations center is located. The remaining portion of the land where our operations center is located is leased, as are all remaining branch and support office facilities. We also own four floors of a commercial office condominium in downtown Honolulu where certain bank training classes are held and residential mortgage sales and operations are located. In 2021, we acquired title to land in Kahului, Maui where the Company intends to build its new branch and regional office. In 2022, we acquired title to land in Lihue, Kauai and Honolulu, Oahu where the Company intends to build new branches.

We occupy or hold leases for approximately 40 other properties including office space for our remaining branches. These leases expire on various dates through 2045 and generally contain renewal options for periods ranging from 5 to 15 years. For additional information relating to lease rental expense and commitments as of December 31, 2022, see Note 18 - Operating Leases to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data."

ITEM 3.    LEGAL PROCEEDINGS

Certain claims and lawsuits have been filed or are pending against us arising in the ordinary course of business. In the opinion of management, all such matters are of a nature that, if disposed of unfavorably, would not have a material adverse effect on our consolidated results of operations or financial position. See Note 22 - Contingent Liabilities and Other Commitments to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data."

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NYSE under the ticker symbol "CPF." Set forth below is a line graph comparing the cumulative total stockholder return on the Company's common stock, based on the market price of the common stock and assuming reinvestment of dividends, with the Russell 2000 Index and the Standard and Poor's ("S&P") SmallCap 600 Commercial Bank Index for the five year period commencing December 31, 2017 and ending December 31, 2022. The graph assumes the investment of $100 on December 31, 2017.

Indexed Total Annual Return

(as of December 31, 2022)

 

	December 31,
Index	2017		2018		2019		2020		2021		2022
Central Pacific Financial Corp.	$	100.00	$	84.01	$	105.32	$	71.10	$	109.34	$	82.28
Russell 2000 Index	100.00		88.99		111.70		134.00		153.85		122.41
S&P 600 Banks Index	100.00		90.15		108.69		95.59		129.76		119.53

As of February 7, 2023, there were 2,966 shareholders of record, excluding individuals and institutions for which shares were held in the names of nominees and brokerage firms.

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Dividends

Dividends are payable at the discretion of the Board of Directors and there can be no assurance that the Board of Directors will continue to pay dividends at the same rate, or at all, in the future. Our ability to pay cash dividends to our shareholders is subject to restrictions under federal and Hawaii law, including restrictions imposed by the FRB and covenants set forth in various agreements we are a party to, including covenants set forth in trust preferred securities and subordinated notes.

Under the terms of our trust preferred securities and subordinated notes, our ability to pay dividends with respect to common stock would be restricted if our obligations under our trust preferred securities and subordinated notes were not current. Our obligations on our outstanding trust preferred securities and subordinated notes are current as of December 31, 2022.

Additionally, our ability to pay dividends depends on our ability to obtain dividends from our bank. As a Hawaii state-chartered bank, the bank may only pay dividends to the extent it has retained earnings as defined under Hawaii banking law ("Statutory Retained Earnings"), which differs from GAAP retained earnings. As of December 31, 2022, the bank had Statutory Retained Earnings of $145.7 million. In addition, the bank's regulators could impose limitations or conditions on the bank's ability to pay dividends to the Company.

See "Part I, Item 1. Business — Supervision and Regulation — Regulatory Actions" for a discussion on regulatory restrictions.

Issuer Purchases of Equity Securities

On January 25, 2022, the Company's Board of Directors approved a share repurchase authorization of up to $30.0 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the "2022 Repurchase Plan").

During the three months and year ended December 31, 2022, the Company repurchased 241,203 shares and 868,613 shares of common stock, respectively, at an aggregate cost of $4.9 million and $20.7 million, respectively, under the Company's 2022 Repurchase Plan. As of December 31, 2022, $10.3 million remained available for repurchase under the Company's 2022 Repurchase Plan.

In January 2023, we announced a new $25.0 million repurchase program which replaces the 2022 Repurchase Plan. We cannot provide any assurance as to whether or not we will continue to repurchase common stock under our share repurchase program.

	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Number of Shares that May Yet Be Purchased Under the Program	Dollar Value of Shares Purchased as Part of Publicly Announced Programs		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program
October 1-31, 2022	89,500	$	20.68	89,500	—	$	1,851,114	$	13,340,754
November 1-30, 2022	87,284	20.41		87,284	—	1,781,145		11,559,609
December 1-31, 2022	64,419	20.04		64,419	—	1,290,818		10,268,791
Total	241,203	20.41		241,203	—	$	4,923,077	10,268,791

Information relating to compensation plans under which equity securities of the Registrant are authorized for issuance is set forth under "Part III, Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."

ITEM 6.                RESERVED

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ITEM 7.                                                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

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

We strive to provide exceptional customer service and products that meet our customers' needs. Our products and services consist primarily of the following:

•Loans: Our loans consist of commercial, financial and agricultural, commercial mortgage, and construction loans to small and medium-sized companies, business professionals, and real estate investors and developers, as well as residential mortgage, home equity and consumer loans to local homeowners and individuals. Our lending activities contribute to a key component of our revenues reported in interest income.

•Deposits: We offer a full range of deposit products and services including checking, savings and time deposits, cash management, and digital banking services. We also maintain a broad branch and ATM network in the state of Hawaii. The interest paid on such deposits has a significant impact on our interest expense, an important factor in determining our earnings. In addition, fees and service charges on deposit accounts contribute to our revenues.

Additionally, we offer wealth management products and services, such as non-deposit investment products, annuities, insurance, investment management, asset custody and general consultation and planning services.

Executive Overview

In 2022, we believe we delivered strong financial performance for the Company while managing risks in the operating environment.

•We recorded net income of $73.9 million, or $2.68 per diluted common share in 2022, compared to $79.9 million, or $2.83 per diluted common share in 2021.

•We recorded return on average assets ("ROA") and return on average shareholders' equity ("ROE") ratios of 1.01% and 15.47%, respectively, in 2022, compared to ROA and ROE ratios of 1.13% and 14.38%, respectively, in 2021.

•Asset quality remains strong as our nonperforming assets totaled $5.3 million, or 0.07% of total assets at December 31, 2022, compared to $5.9 million, or 0.08% of total assets at December 31, 2021.

•We realized strong core loan growth of $542.6 million, or 10.8% (excluding Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans), or total loan growth of $453.8 million, or 8.9% (including PPP loans) in 2022.

•We also realized deposit growth of $97.1 million, or 1.5% in 2022.

•Our capital position and consistent profitability allowed us to increase our regular cash dividends paid from $0.96 per share in 2021 to $1.04 per share in 2022. In addition, we repurchased 868,613 shares of common stock under our share repurchase program for $20.7 million, or an average of $23.88 per share.

Basis of Presentation

Management's discussion and analysis of financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements under "Part II, Item 8. Financial Statements and Supplementary Data."

Banking-as-a-Service ("BaaS") Initiative

In January 2022, the Company announced the launch of a new BaaS initiative with the goal of expanding the Company both in and beyond Hawaii by investing in or collaborating with leading fintech companies. The BaaS initiative is being developed based on the successful product development and launch strategies used in the Company's new Shaka digital product. Shaka, Hawaii’s first all-digital checking account, was launched in November 2021 with a VIP waitlist campaign and a large social

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media influencer campaign. The Company is also in the process of developing additional complementary Shaka product and service offerings.

In the first quarter of 2022, the Company continued its BaaS initiatives with a minority equity investment in Swell Financial, Inc. ("Swell"), a new fintech company. During the fourth quarter of 2022, Swell launched a consumer banking application that combines checking, credit and more into one integrated account, with Central Pacific Bank serving as the bank sponsor. In addition, the Company is also collaborating with Swell and Elevate Credit, Inc. ("Elevate"), a provider of digital solutions. During the fourth quarter of 2022, Elevate announced that it had entered into a definitive agreement to be acquired by Park Cities Asset Management, LLC, who is also the largest investor in Swell. Swell did not have a material impact to the Company's financial statements during the year ended December 31, 2022.

COVID-19 Pandemic

The Company deployed a remote workforce plan at the onset of the pandemic in 2020 and has been able to continue operations without disruption as well as maintain its systems and internal controls in light of the measures the Company has taken to prevent the spread of the novel coronavirus disease ("COVID-19"). The Company continues to actively monitor COVID-19 case counts and trends for the safety and protection of our employees and customers. The Company has implemented a gradual, phased-in return-to-office plan that includes a portion of the workforce continuing with flexible, remote work schedules. Over 95% of the Company's employees are fully vaccinated as of December 31, 2022.

The COVID-19 pandemic caused significant disruption in the local, national and global economies and financial markets. In 2020 and 2021, the COVID-19 pandemic led the U.S. government to take unprecedented actions to support individuals, businesses and the broader national economy. In response to the anticipated economic effects of COVID-19, the Board of Governors of the Federal Reserve System (the "FRB") took a number of actions that have significantly affected the financial markets in the United States, including actions that resulted in substantial decreases in market interest rates in 2020 and 2021.

The Company was actively involved in several of the major government and regulatory programs during the pandemic. Through guidance from regulatory agencies, the Company prudently worked with its borrowers impacted by COVID-19 to defer principal payments, interest, and fees. The Company provided initial three-month principal and interest payment forbearance for our residential mortgage customers, and three-month principal and interest payment deferrals for our consumer customers. Both residential mortgage and consumer customers were granted extensions to their forbearance or deferral, if needed. The Company deferred either the full loan payment or the principal component of the loan payment for generally three to six months for its commercial real estate and commercial, financial and agricultural loan customers on a case-by-case basis depending on need. Loans on active payment forbearance or deferrals granted to borrowers impacted by the COVID-19 pandemic peaked at $605 million in May 2020. As of December 31, 2022, there were no loans remaining on active payment forbearance or deferral.

In accordance with the revised interagency guidance issued in April 2020 and Section 4013 of the CARES Act, banks were provided an option to elect to not account for certain loan modifications related to COVID-19 as TDRs as long as the borrowers were not more than 30 days past due as of February 29, 2020 (time of modification program implementation) and December 31, 2019, respectively. This relief ended on January 1, 2022. As of December 31, 2022, there were no loans with modifications that did not meet the criteria under Section 4013 of CARES Act or the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised)".

The bank is a Small Business Administration ("SBA") approved lender and actively participated in assisting customers with loan applications for the SBA’s Paycheck Protection Program, or PPP, which was part of the CARES Act. PPP loans have a two or five-year term and earn interest at 1%. The SBA paid the originating bank a processing fee ranging from 1% to 5% based on the size of the loan, which the Company is recognizing over the life of the loan. The SBA began accepting submissions for the initial round of PPP loans on April 3, 2020. In April 2020, the Paycheck Protection Program and Health Care Enhancement Act added an additional round of funding for the PPP. In June 2020, the Paycheck Protection Program Flexibility Act of 2020 was enacted, which among other things, gave borrowers additional time and flexibility to use PPP loan proceeds. Through the end of the second round in August 2020, the Company funded over 7,200 PPP loans totaling $558.9 million and received gross processing fees of $21.2 million.

In December 2020, the Consolidated Appropriations Act, 2021 was passed which among other things, included a third round of funding and a new simplified forgiveness procedure for PPP loans of $150,000 or less. During 2021, the Company funded over 4,600 loans totaling $320.9 million in the third round, which ended on May 31, 2021, and received additional gross processing fees of $18.4 million.

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The Company developed a PPP forgiveness portal and, with assistance from a third party vendor, has assisted its customers with obtaining forgiveness from the SBA. We have received forgiveness payments from the SBA and repayments from borrowers totaling $877.1 million as of December 31, 2022. A total outstanding balance of $2.7 million and net deferred fees of $0.1 million remain as of December 31, 2022.

Business Environment

The majority of our operations are concentrated in the state of Hawaii. As a result, our performance is significantly influenced by the strength of the real estate markets, the tourism industry and economic environment in Hawaii. Macroeconomic conditions also influence our performance. A favorable business environment is generally characterized by expanding gross state product, low unemployment and rising personal income; while an unfavorable business environment is characterized by the reverse.

Following the solid performances of our leading economic indicators in 2019, Hawaii's economy was greatly impacted by the COVID-19 pandemic in 2020 and Hawaii's visitor industry continued to be impacted by the COVID-19 pandemic in 2021. On March 26, 2022, the state of Hawaii's mask mandate, Safe Travels Program, and Emergency Proclamation on COVID-19 ended, effectively ending all government-imposed restrictions related to COVID-19.

In 2022, with restrictions lifted, Hawaii's visitor industry improved significantly. According to preliminary year-end statistics from the Hawaii Tourism Authority ("HTA"), approximately 9.2 million total visitors arrived in the state in the year ended December 31, 2022, mainly from the U.S. West and U.S. East as international travelers to Hawaii have not returned in a meaningful way. This was an increase of approximately 36.4% from the 6.8 million visitor arrivals in the year ended December 31, 2021, and is at approximately 89% of the pre-pandemic and record year in 2019. The HTA also reported that total spending by visitors was $19.3 billion in the year ended December 31, 2022, which increased by approximately 47% from the $13.1 billion in the year ended December 31, 2021, and increased by approximately 8.9% from the pre-pandemic and record year in 2019. According to a recent report by the University of Hawaii Economic Research Organization ("UHERO"), total visitor arrivals are expected to increase to approximately 9.7 million in 2023 and visitor spending is expected to be approximately $20.9 billion in 2023.

The Department of Labor and Industrial Relations reported that Hawaii's seasonally adjusted annual unemployment rate was 3.2% in the month of December 2022, The unemployment rate of 3.2% in December 2022 fell below the national seasonally adjusted unemployment rate of 3.5%. UHERO projects Hawaii's seasonally adjusted annual unemployment rate to be around 3.6% in 2023.

Hawaii's economy is measured by the growth of real personal income and real gross state product. The State of Hawaii's Department of Business, Economic Development and Tourism ("DBEDT") is expected to report real personal income declined by approximately 4.6% but real gross state product grew by approximately 2.6% for 2022. DBEDT projects real personal income to grow by 0.7% and real gross state product to grow by 1.7% for 2023.

Real estate lending is a primary focus for us, including residential mortgage and commercial mortgage loans. As a result, we are dependent on the strength of Hawaii's real estate market. According to the Honolulu Board of Realtors, the median resale price for a single-family home on Oahu exceeded $1 million in all months during 2022. For the year ended December 31, 2022, the median price for a single-family home on Oahu was $1,105,000, representing an increase of 11.6% from the median resale price of $990,000 for the year ended December 31, 2021. The median resale price for condominiums on Oahu was $510,000 for the year ended December 31, 2022, representing an increase of 7.4% from the median resale price of $475,000 for the year ended December 31, 2021. Oahu unit sales volume decreased by 23.2% for single-family homes, and decreased by 11.8% for condominiums in 2022 from 2021 due to rising mortgage interest rates.

As we have seen in the past, our operating results are significantly impacted by the economy in Hawaii and the composition of our loan portfolio. Loan demand, deposit growth, provision for credit losses, asset quality, noninterest income and noninterest expense are all affected by changes in economic conditions. If the residential and commercial real estate markets we have exposure to deteriorate, our results of operations would be negatively impacted. See the "Overview of Results of Operations—Concentrations of Credit Risk" section for a further discussion on how a deteriorating real estate market, combined with the concentration risk within our portfolio, could have a significant negative impact on our asset quality and credit losses.

Changes in monetary policy, including changes in interest rates, could influence, among other things, (i) the amount of interest we receive on loans and securities, (ii) the amount of interest we pay on deposits and borrowings, (iii) our ability to originate loans and obtain deposits, and (iv) the fair value of our assets and liabilities.

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In an attempt to help the overall economy during the pandemic, the FRB kept interest rates low through its targeted Fed Funds rate. In an effort to rein in inflation, the FRB aggressively increased interest rates during 2022. During the first quarter of 2022, the FRB increased the Federal Funds target range by 25 bp for the first time since 2018 to 0.25-0.50%. During the second quarter of 2022, the FRB increased the Federal Funds target range by 50 bp (the largest rate hike since 2000) in May and another 75 bp (the largest rate hike since 1994) in June to end the quarter at a target range of 1.50-1.75%. In July, September and November 2022, the FRB hiked rates for the fourth, fifth and sixth time this year by an additional 75 bp each. In December 2022, the FRB increased rates for the seventh consecutive time in 2022. The latest 50 bp increase brings the target range to 4.25-4.50%, which is the highest it has been in 15 years. Federal Reserve officials have indicated that they intend to keep interest rates high in 2023. The Company anticipates its average loan yield will continue to increase in the rising interest rate environment. Deposit and borrowing costs will also increase. The extent will depend on the competitive market environment and the Company's ability to retain and grow lower cost deposits. Such factors will influence the future direction of the net interest margin.

In addition to the impacts from changes in monetary policy, other economic conditions may impact financial results in future periods. Inflationary concerns, labor shortages, changes to the political and regulatory environment, supply chain disruptions, including geopolitical conflicts, could adversely impact the economy which could negatively impact our financial results as well as our customers’ creditworthiness. In light of these potential issues, we continue to monitor our liquidity. Refer to "Part II, Item 7 - Liquidity and Borrowing Arrangements" for discussion.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires that management make a number of judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expense in the financial statements and the related disclosures made. Various elements of our accounting policies, by their nature, involve the application of highly sensitive and judgmental estimates and assumptions. Some of these policies and estimates relate to matters that are highly complex and contain substantial inherent uncertainties. Actual amounts and values as of the balance sheet dates may be materially different than the amounts and values reported due to the inherent uncertainty in the estimation process. Also, future amounts and values could differ materially from those estimates due to changes in values and circumstances after the balance sheet date.

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

The Company identified a significant accounting policy which involves a higher degree of judgment and complexity in making certain estimates and assumptions that affect amounts reported in our consolidated financial statements. At December 31, 2022, the significant accounting policy which we believed to be the most critical in preparing our consolidated financial statements is the determination of the allowance for credit losses. This is further described in Note 1 - Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements in this report.

On January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which created material changes to the Company’s existing critical accounting policy that existed at December 31, 2019. Effective January 1, 2020 through December 31, 2022, the significant accounting policy which we believe to be the most critical in preparing our consolidated financial statements is the determination of the allowance for credit losses on loans.

Allowance for Credit Losses on Loans

Management considers the policies related to the allowance for credit losses ("ACL") on loans as the most critical to the financial statement presentation. The total ACL on loans includes activity related to allowances calculated in accordance with Accounting Standards Codification (“ASC”) 326, "Financial Instruments – Credit Losses". The ACL is established through provisioning of current expected credit losses as a charge to current earnings. Loan losses are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed while allowance is credited if subsequent recoveries are made. The amount maintained in the ACL reflects management’s continuing evaluation of the estimated credit losses expected to be recognized over the life of the loans in our loan portfolio at the balance sheet date. Allowance for credit losses is measured on a collective basis when similar risk characteristics exist. We stratify the loan portfolio into homogeneous groups of loans that possess similar loss potential characteristics and calculate the net amount expected to be collected over the

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life of the loans to estimate the expected credit losses in the loan portfolio. The Company’s methodologies for estimating the ACL consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. Refer to Note 1 - Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements in this report for further discussion of the risk factors considered by management in establishing the ACL.

Overview of Results of Operations

2022 vs. 2021 Comparison

In 2022, we recognized net income of $73.9 million, or fully diluted earnings per common share ("EPS") of $2.68, compared to net income of $79.9 million, or EPS of $2.83, in 2021. Our ROA and ROE for 2022 was 1.01% and 15.47%, respectively, compared to 1.13% and 14.38%, respectively, in 2021.

We recorded a credit to the provision for credit losses of $1.3 million in 2022, compared to a credit to the provision of $14.6 million in 2021.

Net interest income increased by $4.5 million from 2021 to 2022, primarily driven by higher average loans and investment securities balances and higher yields earned on interest-earning assets, partially offset by lower net interest income and fees on PPP loans, combined with higher deposit and borrowing costs due to the increase in interest rates in 2022.

Other operating income increased by $4.9 million from 2021 to 2022. The increase in other operating income was primarily due to the gain on sale of Visa Class B common stock and higher service charges on deposit accounts, partially offset by lower mortgage banking income and lower income from bank-owned life insurance. See Table 4 - Components of Other Operating Income for more information.

Other operating expense increased by $2.9 million from 2021 to 2022. The increase was primarily due to higher pension expense (included in other) and higher computer software expense, partially offset by lower directors' deferred compensation plan expense (included in other), lower salaries and employee benefits expense, and lower advertising expense. The higher pension expense is primarily attributable to the termination and settlement of the Company's defined benefit retirement plan resulting in a one-time noncash settlement charge of $4.9 million. See Table 5 - Components of Other Operating Expense for more information.

2021 vs. 2020 Comparison

In 2021, we recognized net income of $79.9 million, or EPS of $2.83, compared to net income of $37.3 million, or EPS of $1.32, in 2020. Our ROA and ROE for 2021 was 1.13% and 14.38%, respectively, compared to 0.58% and 6.85%, respectively, in 2020.

We recorded a credit to the provision for credit losses of $14.6 million in 2021, compared to a debit of $42.1 million in 2020. The credit to the provision for credit losses in 2021 was driven by the improved economic forecast assumptions used in our credit reserve modeling, improvements in the loan portfolio and lower net charge-offs in 2021.

Net interest income increased by $13.4 million from 2020 to 2021, primarily driven by higher net interest income and fees on PPP loans, combined with lower deposit and borrowing costs due to the historically low interest rate environment we were operating in during 2021, partially offset by lower yields earned on the loans and investment securities portfolios.

Other operating income decreased by $2.1 million from 2020 to 2021. The decrease in other operating income was primarily due to lower mortgage banking income, partially offset by higher ATM fees included in other service charges and fees. See Table 4 - Components of Other Operating Income for more information.

Other operating expense increased by $11.3 million from 2020 to 2021. The increase in other operating expense was primarily due to higher salaries and employee benefits, higher legal and professional expenses, higher advertising expense, and higher directors' deferred compensation plan expense. The higher salaries and employee benefits in 2021 is primarily attributable to strategic hirings for the Company's RISE2020 and BaaS initiatives, higher incentive compensation due to stronger Company performance, and non-recurring severance costs. See Table 5 - Components of Other Operating Expense for more information.

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Net Interest Income

The following table sets forth information concerning average interest-earning assets and interest-bearing liabilities and the yields and rates thereon. Net interest income, when expressed as a percentage of average interest-earning assets, is referred to as "net interest margin." Interest income, which includes loan fees and resultant yield information, is expressed on a taxable-equivalent basis using a federal statutory tax rate of 21%. Table 2 presents an analysis of changes in components of net interest income between years. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: (i) changes in volume and (ii) changes in rates. The change in volume is calculated as change in average balance, multiplied by prior period average yield/rate. The change in rate is calculated as change in average yield/rate, multiplied by current period volume. The change in interest income not solely due to change in volume or change in rate has been allocated proportionately to change in volume and change in average yield/rate.

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Table 1. Average Balances, Interest Income and Expense, Yields, and Rates (Taxable-Equivalent)

	2022						2021						2020
(Dollars in thousands)	Average Balance		Average Yield/ Rate		Amount of Interest		Average Balance		Average Yield/ Rate		Amount of Interest		Average Balance		Average Yield/ Rate		Amount of Interest
Assets
Interest-earning assets:
Interest-bearing deposits in other financial institutions	$	80,096	0.92	%	$	740	$	191,967	0.14	%	$	262	$	13,980	0.33	%	$	46
Investment securities, excluding valuation allowance:
Taxable (1)	1,455,246		1.93		28,062		1,269,900		1.77		22,505		1,037,209		2.25		23,371
Tax-exempt (1)	159,120		2.55		4,056		101,877		2.45		2,496		96,217		3.15		3,028
Total investment securities	1,614,366		1.99		32,118		1,371,777		1.82		25,001		1,133,426		2.33		26,399
Loans, incl. loans-held-for-sale (2)	5,298,573		3.78		200,280		5,071,516		3.82		193,778		4,855,169		3.83		186,129
Federal Home Loan Bank ("FHLB") stock	10,197		3.63		370		7,933		3.09		245		12,591		3.81		480
Total interest-earning assets	7,003,232		3.33		233,508		6,643,193		3.30		219,286		6,015,166		3.54		213,054
Noninterest-earning assets	337,029						434,832						403,495
Total assets	$	7,340,261					$	7,078,025					$	6,418,661
Liabilities and Equity
Interest-bearing liabilities:
Interest-bearing demand deposits	$	1,438,232	0.06	%	$	806	$	1,300,022	0.03	%	$	384	$	1,078,589	0.05	%	$	510
Savings and money market deposits	2,208,630		0.19		4,188		2,099,388		0.06		1,240		1,830,972		0.13		2,416
Time deposits up to $250,000	245,599		0.70		1,723		230,705		0.34		795		257,708		0.75		1,921
Time deposits over $250,000	494,943		0.89		4,391		551,831		0.22		1,197		696,650		0.80		5,568
Total interest-bearing deposits	4,387,404		0.25		11,108		4,181,946		0.09		3,616		3,863,919		0.27		10,415
FHLB advances and other short-term borrowings	37,211		2.84		1,055		607		0.30		2		89,904		0.80		718
Long-term debt	105,732		4.66		4,930		105,488		3.88		4,097		117,100		3.08		3,602
Total interest-bearing liabilities	4,530,347		0.38		17,093		4,288,041		0.18		7,715		4,070,923		0.36		14,735
Noninterest-bearing deposits	2,216,645						2,117,423						1,691,958
Other liabilities	115,478						116,936						111,859
Total liabilities	6,862,470						6,522,400						5,874,740
Shareholders' equity	477,775						555,600						543,919
Non-controlling interest	16						25						2
Total equity	477,791						555,625						543,921
Total liabilities and equity	$	7,340,261					$	7,078,025					$	6,418,661
Net interest income					$	216,415					$	211,571					$	198,319
Interest rate spread			2.95	%					3.12	%					3.18	%
Net interest margin			3.09	%					3.18	%					3.30	%
(1) At amortized cost.
(2) Includes nonaccrual loans.

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Table 2. Analysis of Changes in Net Interest Income (Taxable-Equivalent)

	2022 Compared to 2021						2021 Compared to 2020
	Increase (Decrease) Due to Change In:						Increase (Decrease) Due to Change In:
(Dollars in thousands)	Volume		Rate		Net Change		Volume		Rate		Net Change
Interest-earning assets
Interest-bearing deposits in other financial institutions	$	(155)	$	633	$	478	$	583	$	(367)	$	216
Investment securities, excluding valuation allowance:
Taxable	3,251		2,306		5,557		5,233		(6,099)		(866)
Tax-exempt	1,401		159		1,560		179		(711)		(532)
Total investment securities	4,652		2,465		7,117		5,412		(6,810)		(1,398)
Loans, incl. loans-held-for-sale	8,631		(2,129)		6,502		8,163		(514)		7,649
FHLB stock	70		55		125		(178)		(57)		(235)
Total interest-earning assets	13,198		1,024		14,222		13,980		(7,748)		6,232
Interest-bearing liabilities
Interest-bearing demand deposits	37		385		422		118		(244)		(126)
Savings and money market deposits	66		2,882		2,948		338		(1,514)		(1,176)
Time deposits up to $250,000	51		877		928		(199)		(927)		(1,126)
Time deposits over $250,000	(125)		3,319		3,194		(1,162)		(3,209)		(4,371)
Total interest-bearing deposits	29		7,463		7,492		(905)		(5,894)		(6,799)
FHLB advances and other short-term borrowings	110		943		1,053		(713)		(3)		(716)
Long-term debt	9		824		833		(355)		850		495
Total interest-bearing liabilities	148		9,230		9,378		(1,973)		(5,047)		(7,020)
Net interest income	$	13,050	$	(8,206)	$	4,844	$	15,953	$	(2,701)	$	13,252

The banking and financial services industry in the state of Hawaii generally, and particularly in our target market areas, is highly competitive. Net interest income is our primary source of earnings and is derived primarily from the difference between the interest we earn on loans and investments and the interest we pay on deposits and borrowings. Net interest income (expressed on a taxable-equivalent basis) totaled $216.4 million in 2022, which increased by $4.8 million, or 2.3%, from $211.6 million in 2021, which increased by $13.3 million, or 6.7%, from net interest income of $198.3 million recognized in 2020. The increase in net interest income for 2022 was primarily the result of higher average investment securities and loan balances, combined with higher average yields on investment securities and core loans (or total loans excluding PPP loans), partially offset by lower net interest income and fees on PPP loans, and higher deposit and borrowing costs due to the rising interest rate environment in 2022. In 2022, the Company recognized net interest income and fees on PPP loans of $3.6 million, compared to $26.4 million in 2021.

Average yields earned on our interest-earning assets increased by 3 bp in the year ended December 31, 2022, from the year ended December 31, 2021. The increase in average yields earned on interest-earning assets in 2022 was primarily attributable to the 17 bp increase in average yields earned on investment securities and the 15 bp increase in average yields earned on core loans (or total loans excluding PPP loans). Excluding net interest income and fee on PPP loans, the normalized average yield on core loans was 3.73%% in 2022, compared to the normalized average yield on core loans of 3.58%% in 2021.

Average rates paid on our interest-bearing liabilities in the year ended December 31, 2022 increased by 20 bp from the year ended December 31, 2021. The increase in average rates paid on our interest-bearing liabilities in 2022 was primarily attributable to the rising interest rate environment in 2022.

In the first quarter of 2022, the Company entered into a forward starting interest rate swap on certain municipal debt securities with a notional amount of $115.5 million. The Company will pay the counterparty a fixed rate of 2.095% and will receive a

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floating rate based on the Federal Funds effective rate. This transaction has an effective date of March 31, 2024 and a maturity date of March 31, 2029.

In the third quarter of 2021, $104.4 million in available-for-sale securities were sold as part of an investment portfolio rebalancing strategy. We received $104.5 million in gross proceeds and reinvested the proceeds in $98.8 million in higher yield investment securities with an average yield of 1.55% and a weighted average life of 6.1 years. The investment securities sold had an average yield of 1.13% and a weighted average life of 2.6 years. Gross realized gains and losses on the sale of the investment securities were $1.1 million and $1.0 million, respectively. The specific identification method was used as the basis for determining the cost of all securities sold.

In the second quarter of 2021, $175.0 million in available-for-sale were sold as part of an investment portfolio rebalancing strategy. We received $175.0 million in gross proceeds and reinvested the proceeds in $186.1 million in higher yield investment securities with an average yield of 1.70% and a weighted average life of 6.9 years. The investment securities sold had an average yield of -0.11% and a weighted average life of 1.6 years. Gross realized losses and gains on the sale of the investment securities were $2.2 million and $2.2 million, respectively. The specific identification method was used as the basis for determining the cost of all securities sold.

Interest Income

Our primary sources of interest income include interest on loans, which represented 85.8%, 88.4%, and 87.4% of taxable-equivalent interest income in 2022, 2021 and 2020, respectively, as well as interest earned on investment securities, which represented 13.8%, 11.4% and 12.4% of taxable-equivalent interest income, respectively. Interest income expressed on a taxable-equivalent basis of $233.5 million in 2022 increased by $14.2 million, or 6.5%, from the $219.3 million earned in 2021, which increased by $6.2 million, or 2.9%, from the $213.1 million earned in 2020.

The increase in interest income in 2022 from 2021 was primarily due to higher average investment securities balances of $242.6 million, which contributed to an increase of $4.7 million in current year interest income, and higher average core loan (or total loans excluding PPP loans) balances of $227.1 million, which contributed to an increase of $14.9 million in current year interest income. In addition, the average yield earned on investment securities and the average normalized yield on core loans (or total loans excluding PPP) increased by 17 bp and 15 bp, respectively, which increased interest income by approximately $2.5 million and $15.2 million, respectively. These increases were partially offset by the aforementioned decline in PPP net interest income and loan fees from $26.4 million in 2021 to $3.6 million in 2022.

The increase in interest income in 2021 from 2020 was primarily due to higher net interest income and fees on PPP loans of $26.4 million in 2021, compared to $12.2 million in 2020, due to higher forgiveness and payoffs, combined with the $238.4 million increase in average investment securities which contributed to an increase of $5.4 million in interest income. These increases were partially offset by a decline in average yields earned on the investment securities portfolio of 51 bp, which contributed to decline in interest income of $6.8 million. In addition, the normalized average yield on core loans (or total loans excluding PPP loans) declined by 29 bp.

Interest Expense

In 2022, interest expense was $17.1 million which represented an increase of $9.4 million, or 121.6%, compared to interest expense of $7.7 million in 2021, which was a decrease of $7.0 million, or 47.6%, compared to $14.7 million in 2020.

In 2022, the increases in the average rates paid on interest-bearing deposits of 16 bp, FHLB advances and other short-term borrowings of 254 bp, and long-term debt of 78 bp, contributed to the increase in interest expense in 2022 from 2021 of $7.5 million, $0.9 million, and $0.8 million, respectively.

In 2021, the decreases in the average rates paid on savings and money market deposits of 7 bp, time deposits up to $250,000 of 41 bp, and time deposits of over $250,000 of 58 bp, contributed to the decrease in interest expense in 2021 from 2020 of $1.5 million, $0.9 million, and $3.2 million, respectively. In addition, the decreases in average time deposits over $250,000 and FHLB advances and other short-term borrowings contributed to the decrease in 2021 interest expense of $1.2 million and $0.7 million, respectively.

Net Interest Margin

Our net interest margin was 3.09%, 3.18% and 3.30% in 2022, 2021 and 2020, respectively. The decrease in our net interest margin in 2022 from 2021 was primarily due to the lower recognition of net loan fees related to loans originated and forgiven

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under the PPP, combined with higher rates paid on interest-bearing deposits and borrowings. Excluding the PPP net interest income and net loan fees of $3.6 million, $26.4 million, and $12.2 million in the years ended December 31, 2022, 2021, and 2020, respectively, our net interest margin was 3.05%, 2.96%, and 3.29% in the years ended December 31, 2022, 2021, and 2020, respectively.

The decrease in our net interest margin in 2021 from 2020 was primarily due to lower yields on our interest-earning assets due to the historically low interest rate environment we were operating in during 2021 due to the pandemic environment. Average yields earned on interest-earning assets declined by 24 bp, led by declines in average yields earned on investment securities of 51 bp. Excluding net interest income and fees on PPP loans, our normalized average yield on loans declined by 29 bp. These decreases were partially offset by a 18 bp decrease in average rates paid on interest-bearing liabilities.

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with GAAP, the Company also uses non-GAAP financial measures in addition to our GAAP results. The Company believes non-GAAP financial measures may provide useful information for evaluating our cash operating performance, ability to service debt, compliance with debt covenants and measurement against competitors. This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be comparable to similarly entitled measures reported by other companies.

Table 3. Non-GAAP Financial Measures

	Year Ended December 31,
(dollars in thousands)	2022			2021			2020
Net interest income - Excluding PPP loans	$	211,925		$	184,695		$	185,478
Add: Net interest income on PPP loans	3,638			26,352			12,205
Net interest income - Reported	$	215,563		$	211,047		$	197,683
Average interest earning assets - Excluding PPP loans	$	6,974,032		$	6,253,398		$	5,656,904
Add: Average PPP loans	29,200			389,795			358,262
Average interest earning assets - Reported	$	7,003,232		$	6,643,193		$	6,015,166
Net interest margin - Excluding PPP loans	3.05		%	2.96		%	3.29		%
Add: Impact of PPP loans on net interest margin	0.04			0.22			0.01
Net interest margin - Reported	3.09		%	3.18		%	3.30		%
Interest income and fees on loans - Excluding PPP loans	$	196,642		$	167,426		$	173,924
Add: Net interest income and fees on PPP loans	3,638			26,352			12,205
interest income and fees on loans - Reported	$	200,280		$	193,778		$	186,129
Average core loans - Excluding PPP loans	$	5,269,373		$	4,681,721		$	4,496,907
Add: Average PPP loans	29,200			389,795			358,262
Average total loans - Reported	$	5,298,573		$	5,071,516		$	4,855,169
Average yield on core loans - Excluding PPP loans	3.73		%	3.58		%	3.87		%
Add: Impact of PPP loans on average yield on loans	0.05			0.24			(0.04)
Average yield on total loans - Reported	3.78		%	3.82		%	3.83		%

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Other Operating Income

The following table sets forth components of other operating income and the total as a percentage of average assets for the periods indicated.

Table 4. Components of Other Operating Income

										Dollar Change				Percent Change
	Year Ended December 31,									2022		2021		2022		2021
(Dollars in thousands)	2022			2021			2020			to 2021		to 2020		to 2021		to 2020
Mortgage banking income:
Net loan servicing fees	$	2,259		$	2,733		$	2,754		$	(474)	$	(21)	(17.3)	%	(0.8)	%
Amortization of mortgage servicing rights	(1,295)			(3,468)			(6,167)			2,173		2,699		(62.7)		(43.8)
Net gain on sale of residential mortgage loans	1,778			6,376			16,043			(4,598)		(9,667)		(72.1)		(60.3)
Unrealized gain (loss) on interest rate locks	8			98			(76)			(90)		174		(91.8)		(228.9)
Loan placement fees	1,060			1,993			1,128			(933)		865		(46.8)		76.7
Service charges on deposit accounts	8,197			6,358			6,234			1,839		124		28.9		2.0
Other service charges and fees	19,025			18,367			14,867			658		3,500		3.6		23.5
Income from fiduciary activities	4,565			5,075			4,829			(510)		246		(10.0)		5.1
Income from bank-owned life insurance	1,865			3,493			3,803			(1,628)		(310)		(46.6)		(8.2)
Net gains (losses) on sales of investment securities	8,506			150			(201)			8,356		351		5,570.7		(174.6)
Other:
Equity in earnings of unconsolidated entities	186			364			415			(178)		(51)		(48.9)		(12.3)
Net loss on sales of foreclosed assets	—			—			(15)			—		15		N.M.		(100.0)		(*)
Income recovered on nonaccrual loans previously charged-off	279			261			180			18		81		6.9		45.0
Other recoveries	100			81			126			19		(45)		23.5		(35.7)
Commissions on sale of checks	307			307			279			—		28		—		10.0
Other	1,079			872			999			207		(127)		23.7		(12.7)
Total other operating income	$	47,919		$	43,060		$	45,198		$	4,859	$	(2,138)	11.3		(4.7)
Total other operating income as a percentage of average assets	0.65		%	0.61		%	0.70		%
(*) Not meaningful ("N.M.")

Total other operating income of $47.9 million in 2022 increased by $4.9 million, or 11.3%, from the $43.1 million earned in 2021, which decreased by $2.1 million, or 4.7%, from the $45.2 million earned in 2020.

The increase in other operating income in 2022 from 2021 was primarily due to the $8.5 million gain on sale of Class B common stock of Visa, Inc. ("Visa") and higher service charges on deposit accounts of $1.8 million. Due to transfer restrictions on the Visa Class B common stock and the lack of a readily determinable fair value, the investment was carried at the Company's zero cost basis, therefore the entire net proceeds from the sale of $8.5 million were recorded as a gain on sale of investment securities. These increases were partially offset by lower mortgage banking income of $3.9 million and lower income from bank-owned life insurance ("BOLI") of $1.6 million. The lower mortgage banking income was primarily attributable to fewer loans sold as a result of the increases in interest rates in 2022. The Company's Home Loans division recorded $568.2 million in loan originations in 2022, down from $1.18 billion in loan originations in 2021. The lower amortization of mortgage servicing rights (included in mortgage banking income) was primarily attributable to the increase in market interest rates. The decline in income from BOLI in 2022 from 2021 was primarily attributable to significant market volatility. The Company has certain company-owned life insurance policies used to hedge its deferred compensation plans, which are tied to the equity markets and had losses in 2022, therefore, the Company has also recognized offsetting negative deferred compensation expense in other operating expenses.

The decrease in other operating income in 2021 from 2020 was primarily due to lower mortgage banking income of $6.0 million and lower bank-owned life insurance of $0.3 million, partially offset by higher other service charges and fees of $3.5 million. The lower mortgage banking income was attributable to fewer loans sold as more loans were placed in our

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residential mortgage loan portfolio in 2021 compared to 2020, combined with thinner gain on sale margins. The Company's Home Loans division had another impressive year with $1.18 billion in loan originations in 2021, down just slightly from the record $1.20 billion in loan originations in 2020. The lower amortization of mortgage servicing rights (included in mortgage banking income) was primarily attributable to the increase in market interest rates. These decreases were partially offset by higher other service charges and fees, primarily attributable to higher ATM and debit card fees. During the second quarter of 2020, certain service charges were suspended to support our customers through the pandemic. In addition, there were less transactional activity due to the pandemic resulting in lower service charges on deposit accounts and other service charges and fees during 2020.

Other Operating Expense

The following table sets forth components of other operating expense and the total as a percentage of average assets for the periods indicated.

Table 5. Components of Other Operating Expense

										Dollar Change				Percent Change
	Year Ended December 31,									2022		2021		2022		2021
(Dollars in thousands)	2022			2021			2020			to 2021		to 2020		to 2021		to 2020
Salaries and employee benefits	$	88,781		$	90,213		$	83,848		$	(1,432)	$	6,365	(1.6)	%	7.6	%
Net occupancy	16,963			16,133			15,162			830		971		5.1		6.4
Legal and professional services	10,792			10,452			9,035			340		1,417		3.3		15.7
Computer software expense	14,840			13,304			12,717			1,536		587		11.5		4.6
Communication expense	2,958			3,271			3,225			(313)		46		(9.6)		1.4
Equipment	4,238			4,344			4,531			(106)		(187)		(2.4)		(4.1)
Advertising expense	4,151			5,495			3,791			(1,344)		1,704		(24.5)		44.9
Other:
Pension plan and SERP expense	5,339			1,254			1,253			4,085		1		325.8		0.1
Foreclosed asset expense	1			3			71			(2)		(68)		(66.7)		(95.8)
Charitable contributions	453			179			272			274		(93)		153.1		(34.2)
FDIC insurance assessment	2,322			2,197			1,857			125		340		5.7		18.3
Miscellaneous loan expenses	1,339			1,657			1,708			(318)		(51)		(19.2)		(3.0)
ATM and debit card expenses	3,025			3,149			2,289			(124)		860		(3.9)		37.6
Armored car expenses	1,068			891			966			177		(75)		19.9		(7.8)
Entertainment and promotions	1,513			1,289			797			224		492		17.4		61.7
Stationery and supplies	722			903			890			(181)		13		(20.0)		1.5
Directors' fees and expenses	1,290			876			863			414		13		47.3		1.5
Directors' deferred compensation plan expense	(1,029)			1,292			(911)			(2,321)		2,203		(179.6)		(241.8)
Branch consolidation costs	612			436			1,631			176		(1,195)		40.4		(73.3)
Litigation settlement	—			—			750			—		(750)		N.M.		(100.0)		(*)
FHLB advance prepayment fee	—			—			747			—		(747)		N.M.		(100.0)		(*)
Loss (gain) on disposal of fixed assets	5			101			552			(96)		(451)		(95.0)		(81.7)
Other	6,603			5,607			5,693			996		(86)		17.8		(1.5)
Total other operating expense	$	165,986		$	163,046		$	151,737		$	2,940	$	11,309	1.8		7.5
Total other operating expense as a percentage of average assets	2.26		%	2.30		%	2.36		%
(*) Not meaningful ("N.M.")
Note: Certain amounts reported in prior years in the financial statements have been reclassified to conform to the current year’s presentation.

Total other operating expense of $166.0 million in 2022 increased by $2.9 million, or 1.8%, from total operating expense of $163.0 million in 2021, which increased by $11.3 million, or 7.5%, compared to 2020.

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The increase in total other operating expense in 2022, compared to 2021, was primarily due to higher pension plan and SERP expenses of $4.1 million, higher computer software expense of $1.5 million, and higher net occupancy expense of $0.8 million, partially offset by lower directors' deferred compensation plan expenses of $2.3 million, lower salaries and employee benefits of $1.4 million, and lower advertising expense of $1.3 million. The increase in pension plan and SERP expense was primarily attributable to a one-time non-cash charge of $4.9 million related to the termination and settlement of the Company's defined benefit retirement plan. The lower directors' deferred compensation plan expenses was primarily due to volatility in the equity markets.

The increase in total other operating expense in 2021, compared to 2020, was primarily due to a higher salaries and employee benefits of $6.4 million, higher net occupancy expense of $1.0 million, higher legal and professional services of $1.4 million, higher advertising expense of $1.7 million, and higher directors' deferred compensation plan expenses of $2.2 million. The increase in salaries and employee benefits is primarily due to strategic hiring for our RISE2020 and BaaS initiatives, higher incentive compensation due to improved Company performance and nonrecurring severance payments. The higher advertising expense is primarily due to the Company's new branding along with marketing expenses for our new Shaka product. Fluctuations in the directors' deferred compensation expense are primarily due to volatility in the equity markets. These increases were partially offset by several nonrecurring expenses in late 2020 which included: $1.6 million in branch consolidation costs related to the consolidation of three in-store branches and one traditional branch in 2020 compared to $0.4 million in branch consolidation costs related to the consolidation of one traditional branch in 2021, $0.8 million in settlements of legal proceedings, a $0.7 million FHLB advance prepayment fee, and $0.6 million in losses on disposal of fixed assets in 2020, compared to $0.1 million in losses in 2021.

The following table sets forth a reconciliation to our efficiency ratio for each of the dates indicated and the impact of the reclassification of the provision for credit losses in the consolidated statements of income:

Table 6. Reconciliation of Efficiency Ratio

	Year Ended December 31,
(Dollars in thousands)	2022			2021			2020
As Reclassified:
Total other operating expenses	$	165,986		$	163,046		$	151,737
Net interest income	215,563			211,047			197,683
Total other operating income	47,919			43,060			45,198
Total revenue	$	263,482		$	254,107		$	242,881
Efficiency ratio	63.00		%	64.16		%	62.47		%
Unadjusted:
Total other operating expenses	$	165,986		$	163,046		$	154,731
Net interest income	$	215,563		$	211,047		$	197,683
Total other operating income	47,919			43,060			45,198
Total revenue	$	263,482		$	254,107		$	242,881
Efficiency ratio	63.00		%	64.16		%	63.71		%
Impact of Change:
Total operating expenses	$	—		$	—		$	(2,994)
Net interest income	—			—			—
Total other operating income	—			—			—
Total revenue	$	—		$	—		$	—
Efficiency ratio	—		%	—		%	(1.24)		%

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A key measure of operating efficiency tracked by management is the efficiency ratio, which is calculated by dividing total other operating expenses by total pre-provision revenue (net interest income plus other operating income). Management believes that the efficiency ratio provides useful supplemental information that is important to a proper understanding of the company's core business results by investors. Our efficiency ratio should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to the efficiency ratio presented by other companies.

Our efficiency ratio improved to 63.00% in 2022, compared to 64.16% in 2021 and 62.47% (as reclassified) in 2020. The improvement in our efficiency ratio in 2022 compared to 2021, was primarily driven by the aforementioned increases in net interest income and other operating income, offset by the increase in other operating expense.

In 2021, the provision for off-balance sheet credit exposures was reclassified from other operating expense and is now included in the provision for credit losses in the consolidated statements of income. The efficiency ratio in 2020 has been adjusted retrospectively to reflect this change.

Income Taxes

In 2022, the Company recorded income tax expense of $24.8 million, compared to $25.8 million in 2021, and $11.8 million in 2020. Our effective tax rate was 25.2% in 2022 compared to 24.4% in 2021 and 24.0% in 2020.

The decrease in income tax expense in 2022 from 2021 was primarily due to lower pre-tax income. The increase in the effective tax rate in 2022 from 2021 was primarily attributable to lower tax-exempt income from BOLI, decreasing the impact of net favorable permanent differences.

The increase in income tax expense and the effective tax rate in 2021 from 2020 was primarily attributable to higher pre-tax income, primarily due to a credit to the provision for credit losses.

As of December 31, 2022, the valuation allowance on our net deferred tax assets ("DTA") totaled $3.4 million, which related to our DTA from net apportioned net operating loss ("NOL") carryforwards for California state income tax purposes as we do not expect to generate sufficient income in California to utilize the DTA. Net of this valuation allowance, the Company's net DTA totaled $48.5 million as of December 31, 2022, compared to a net DTA of $25.8 million as of December 31, 2021, and is included in other assets in the Company's consolidated balance sheets.

On August 16, 2022, the Inflation Reduction Act ("IRA") of 2022 was signed into law to implement new tax provisions and provide various incentives and tax credits. The IRA created a 15% corporate alternative minimum tax and an excise tax of 1% on stock repurchases from publicly traded U.S. corporations, among other changes. As of December 31, 2022, the Company has determined that neither this Act nor changes to income tax laws or regulations in other jurisdictions have a significant impact on income tax expense.

Financial Condition

Total assets of $7.43 billion at December 31, 2022 increased by $13.7 million, or 0.2%, from the $7.42 billion at December 31, 2021, and total liabilities of $6.98 billion at December 31, 2022 increased by $119.1 million, or 1.7%, from the $6.86 billion at December 31, 2021. The increase in total assets and total liabilities in 2022 was primarily due to our strong loan and deposit growth.

Loan Portfolio

Our lending activities are focused on commercial, financial and agricultural loans, commercial mortgages, and construction loans to small and medium-sized companies, business professionals, and real estate investors and developers, as well as residential mortgages, home equity and consumer loans to local home-buyers and individuals. Our strategy for generating commercial loans has traditionally relied upon teams of commercial real estate and commercial banking officers organized by geographical and industry lines who are responsible for client prospecting and business development.

To manage credit risk (i.e., the ability of borrowers to repay their loan obligations), management analyzes the borrower's financial condition, repayment source, collateral and other factors that could impact credit quality, such as national and local economic conditions and industry conditions related to respective borrowers. The general underwriting guidelines require analysis and documentation to include among other things, overall credit worthiness of borrower, guarantor support, use of funds, loan term, minimum equity, loan-to-value standards, repayment terms, sources of repayment, covenants, pricing, collateral, insurance, and documentation standards. All loan requests considered by us should be for a clearly defined legitimate

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purpose with a determinable primary source, as well as alternate sources of repayment. All loans should be supported by appropriate documentation including, current financial statements, credit reports, collateral information, asset verification, tax returns, title reports, and appraisals (where appropriate).

We score consumer and small business loans using underwriting matrices ("Scorecards") developed based on the results of an analysis from a reputable national credit scoring company commissioned by our bank. The Scorecards use the attributes that were determined to most highly correlate with probability of repayment.  Those attributes include, but are not limited to the following: (i) credit score, (ii) credit limit amount, and (iii) debt-to-income ratio.

Loans totaled $5.56 billion at December 31, 2022, which increased by $453.8 million, or 8.9%, from the $5.10 billion at December 31, 2021, which increased by $137.5 million, or 2.8%, from the $4.96 billion held at December 31, 2020. Core loans, or total loans excluding PPP loans, increased by $542.6 million, or 10.8%, in 2022. The increase in our loan portfolio in 2022 was largely due to strong demand from new and existing customers. The increase in total loans included net increases in the following loan portfolios: other commercial, financial, and agricultural of $13.8 million, or 2.6%, construction of $43.9 million, or 35.7%, residential mortgage of $65.0 million, or 3.5%, home equity of $102.1 million, or 16.0%, commercial mortgage of $142.9 million, or 11.7%, and consumer of $174.9 million, or 28.0%. These increases were offset by a net decrease in the PPP loan portfolio of $88.8 million. In 2022, we did not foreclose on any loans. In addition, we recorded loan charge-offs of $8.4 million.

The following table sets forth information regarding outstanding loans, net of deferred (fees) costs, by category as of the dates indicated.

Table 7. Loans by Categories

(Dollars in thousands)	December 31, 2022		December 31, 2021
Commercial, financial and agricultural:
SBA PPP	$	2,555	$	91,327
Other	543,947		530,121
Real estate:
Construction	166,723		122,867
Residential mortgage	1,940,999		1,875,980
Home equity	739,380		637,249
Commercial mortgage	1,363,075		1,220,204
Consumer	798,787		623,901
Total loans, net of deferred fees and costs	5,555,466		5,101,649
Allowance for credit losses	(63,738)		(68,097)
Net loans	$	5,491,728	$	5,033,552

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The following table sets forth the geographic distribution of our loan portfolio, net of deferred (fees) costs, and related ACL as of the dates indicated.

Table 8. Loans by Geographic Distribution

	December 31, 2022						December 31, 2021
(Dollars in thousands)	Hawaii		U.S.  Mainland		Total		Hawaii		U.S.  Mainland		Total
Commercial, financial and agricultural:
SBA PPP	$	2,555	$	—	$	2,555	$	87,459	$	3,868	$	91,327
Other	383,665		160,282		543,947		422,388		107,733		530,121
Real estate:
Construction	150,208		16,515		166,723		122,867		—		122,867
Residential mortgage	1,940,999		—		1,940,999		1,875,980		—		1,875,980
Home equity	739,380		—		739,380		637,249		—		637,249
Commercial mortgage	1,029,708		333,367		1,363,075		922,146		298,058		1,220,204
Consumer	346,789		451,998		798,787		333,843		290,058		623,901
Total loans, net of deferred fees and costs	4,593,304		962,162		5,555,466		4,401,932		699,717		5,101,649
Allowance for credit losses	(45,169)		(18,569)		(63,738)		(55,808)		(12,289)		(68,097)
Net loans	$	4,548,135	$	943,593	$	5,491,728	$	4,346,124	$	687,428	$	5,033,552

Commercial, Financial and Agricultural - Small Business Administration Payroll Protection Program

The bank is a SBA approved lender and actively participated in assisting customers with loan applications for the SBA’s Paycheck Protection Program, or PPP, which was part of the CARES Act. PPP loans have a two or five-year term and earn interest at 1%. The SBA pays the originating bank a processing fee ranging from 1% to 5%, based on the size of the loan, which the Company is recognizing over the life of the loan. The Company saw tremendous interest in the PPP. The SBA began accepting submissions for the initial round of PPP loans on April 3, 2020. In April 2020, the Paycheck Protection Program and Health Care Enhancement Act added an additional round of funding for the PPP. In June 2020, the Paycheck Protection Program Flexibility Act of 2020 was enacted, which among other things, gave borrowers additional time and flexibility to use PPP loan proceeds. Through the end of the second round in August 2020, the Company funded over 7,200 PPP loans totaling $558.9 million and received gross processing fees of $21.2 million. In December 2020, the Consolidated Appropriations Act, 2021 was passed which among other things, included a third round of funding and a new simplified forgiveness procedure for PPP loans of $150,000 or less. During 2021, the Company funded over 4,600 loans totaling $320.9 million in the third round, which ended on May 31, 2021, and received additional gross processing fees of $18.4 million. The Company developed a PPP forgiveness portal and with assistance from a third party vendor has assisted its customers with applying for forgiveness from the SBA. We have received forgiveness payments and repayments from borrowers totaling over $877.1 million as of December 31, 2022. A total outstanding balance of $2.7 million and net deferred fees of $0.1 million remain as of December 31, 2022.

Commercial, Financial and Agricultural - Other

Loans in this category consist primarily of term loans and lines of credit to small and middle-market businesses and professionals. The borrower's business is typically regarded as the principal source of repayment, although our underwriting policy and practice generally requires additional sources of collateral, including real estate and other business assets, as well as personal guarantees where possible to mitigate risk. Risk of credit losses could be greater in this loan category relative to secured loans where a greater percentage of the loan amount is usually covered by collateral. Nonetheless, any collateral or personal guarantees obtained on commercial loans can mitigate the increased risk and help to reduce credit losses.

Our approach to commercial lending involves teams of lending and cash management personnel who focus on relationship development including loans, deposits and other bank services to new and existing commercial clients.

In 2022, our commercial, financial, and agricultural loan portfolio, excluding PPP loans, increased by $13.8 million, which was attributable to an increase in the U.S. Mainland portfolio of $52.5 million, offset by a decline in the Hawaii portfolio of $38.7 million. Our commercial, financial, and agricultural loan portfolio, excluding PPP loans, decreased by $15.0 million in 2021.

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Real Estate—Construction

Construction loans include both residential and commercial development projects. Each construction project is evaluated for economic viability. Construction loans pose higher credit risks than typical secured loans. In addition to the financial strength of the borrower, construction loans have the added element of completion risk, which is the risk that the project will not be completed on time and within budget, resulting in additional costs that could affect the economic viability of the project and market risk at the time construction is complete.

In 2022, our construction loan portfolio increased by $43.9 million. Our construction loan portfolio decreased by $2.5 million in 2021. These fluctuations are driven by the start and completion of construction projects and are consistent with a normal construction cycle.

Interest Reserves

Our policies require interest reserves for construction loans, including loans to build commercial buildings, residential developments (both large tract projects and individual houses), and multi-family projects.

The outstanding principal balance of loans with interest reserves was $68.6 million at December 31, 2022, compared to $51.3 million in the prior year, while remaining interest reserves was $10.5 million, or 15.3% of the outstanding principal balance of loans with interest reserves at December 31, 2022, compared to $5.2 million, or 10.1% of the outstanding principal balance of loans with interest reserves at December 31, 2021.

Interest reserves allow the Company to advance funds to borrowers to make scheduled payments during the construction period. These advances typically are capitalized and added to the borrower's outstanding loan balance, although we have the right to demand payment under certain circumstances. Our policy is to determine if interest reserve amounts are appropriately included in each project's construction budget and are adequate to cover the expected duration of the construction period.

The amount, terms, and conditions of the interest reserve are established when a loan is originated, although we generally have the option to demand payment if the credit profile of the borrower changes. We evaluate the viability and appropriateness of the construction project based on the project's complexity and feasibility, the timeline, as well as the creditworthiness of the borrowers, sponsors and/or guarantors, and the value of the collateral.

In the event that unfavorable circumstances alter the original project schedule (e.g., cost overruns, project delays, etc.), our policy is to evaluate whether or not it is appropriate to maintain interest capitalization or demand payment of interest in cash and we will work with the borrower to explore various restructuring options, which may include obtaining additional equity and/or requiring additional collateral. We may also require borrowers to directly pay scheduled interest payments.

Our process for determining that construction projects are moving as planned are detailed in our lending policies and guidelines. Prior to approving a loan, the Company and borrower generally agree on a construction budget, a proforma monthly disbursement schedule, and sales/leaseback assumptions. As each project progresses, the projections are measured against actual disbursements and sales/lease results to determine if the project is on schedule and performing as planned.

The specific monitoring requirements for each loan vary depending on the size and complexity of the project and the experience and financial strength of the borrower, sponsor and/or guarantor. At a minimum, to ensure that loan proceeds are properly disbursed and to assess whether it is appropriate to capitalize interest or demand cash payment of interest, our monitoring process generally includes:

•Physical inspection of the project to ensure work has progressed to the stage for which payment is being requested;

•Verification that the work completed is in conformance with plans and specifications and items for which disbursement is requested are within budget; and

•Determination that there continues to be satisfactory project progress.

In certain rare circumstances, we may decide to extend, renew, and/or restructure the terms of a construction loan. Reasons for the restructure can range from cost overruns to project delays and the restructuring can result in additional funds being advanced or an extension of the maturity date of the loan. Prior to the loan being restructured, our policy is to perform a detailed analysis to ensure that the economics of the project remain feasible and that the risks to the Company are within acceptable lending guidelines.

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Real Estate—Mortgage

The following table sets forth information with respect to the composition of the Real Estate—Mortgage loan portfolio as of the dates indicated.

Table 9. Mortgage Loan Portfolio Composition

	December 31, 2022				December 31, 2021
(Dollars in thousands)	Amount		Percent		Amount		Percent
Residential:
Closed-end loans	$	1,940,999	48.0	%	$	1,875,980	50.2	%
Home equity line-of-credit ("HELOC")	739,380		18.3		637,249		17.1
Subtotal	2,680,379		66.3		2,513,229		67.3
Commercial mortgage	1,363,075		33.7		1,220,204		32.7
Total mortgage loans	$	4,043,454	100.0	%	$	3,733,433	100.0	%

Residential

Residential mortgage loans include fixed-rate and adjustable-rate loans primarily secured by single-family owner-occupied primary residences in Hawaii. Maximum loan-to-value ratios of 80% are typically required for fixed-rate and adjustable-rate loans secured by single-family owner-occupied residences, although higher levels are permitted with accompanying mortgage insurance. First mortgage loans secured by residential properties generally carry a moderate level of credit risk. With an average loan origination size of approximately $0.6 million, marketable collateral and a stable Hawaii residential real estate market, credit losses on residential mortgage loans have been minimal during the past several years. However, economic conditions including unemployment levels, future changes in interest rates and other market factors can impact the marketability and value of collateral and thus the level of credit risk inherent in the portfolio.

Closed-end residential mortgage loan balances as of December 31, 2022 totaled $1.94 billion, increasing by $65.0 million, or 3.5%, from the $1.88 billion held at year-end 2021, which increased by $185.8 million, or 11.0%, from the $1.69 billion held at year-end 2020. The increase in closed-end residential mortgage loan balances in 2022 was primarily due to a higher amount of loans placed in the residential mortgage portfolio.

Residential mortgage loans held for sale at December 31, 2022 totaled $1.1 million, a decrease of $2.4 million, or 68.7%, from the December 31, 2021 balance of $3.5 million, which decreased by $13.2 million, or 78.8%, from the December 31, 2020 balance of $16.7 million. We did not securitize any residential mortgage loans in 2022, 2021 and 2020.

Home Equity

Home equity lines of credit ("HELOCs"), which typically carry floating or fixed interest rates, are underwritten according to policy and guidelines reviewed and approved by the Board of Directors. All HELOCs originated since early 2011 have a ten-year draw period followed by a 20-year repayment period during which the principal balance will be fully amortized. HELOCs are underwritten using a qualifying payment which assumes the line is fully drawn and is amortizing as if it was in the repayment period. Underwriting criteria include a minimum FICO score, maximum debt-to-income ratio ("DTI"), and maximum combined loan-to-value ratio ("CLTV"). HELOCs are monitored based on default, delinquency, end of draw period, and maturity.

HELOC balances as of December 31, 2022 totaled $739.4 million, increasing by $102.1 million, or 16.0%, from the $637.2 million held at December 31, 2021, which increased by $86.0 million, or 15.6%, from the $551.3 million held at December 31, 2020.

Commercial Mortgage

Real estate mortgage loans secured by commercial properties continue to represent a sizable portion of our loan portfolio. Our policy with respect to commercial mortgages is that loans be made for sound purposes, have a definite source and/or plan of repayment established at inception, and be backed up by reliable secondary sources of repayment and satisfactory collateral

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with good marketability. Loans secured by commercial property carry a greater risk than loans secured by residential property due to operating income risk. Operating income risk is the risk that the borrower will be unable to generate sufficient cash flow from the operation of the property. The commercial real estate market and interest rate conditions through economic cycles will impact risk levels.

Commercial mortgage balances as of December 31, 2022 totaled $1.36 billion, increasing by $142.9 million, or 11.7%, from the $1.22 billion held at December 31, 2021, which increased by $63.9 million, or 5.5%, from the $1.16 billion held at December 31, 2020. The increase in commercial mortgage balances in 2022 was primarily due to increased demand from both new and existing customers.

Consumer Loans

The following table sets forth the major components of our consumer loan portfolio as of the dates indicated.

Table 10. Consumer Loan Portfolio Composition

	December 31, 2022				December 31, 2021
(Dollars in thousands)	Amount		Percent		Amount		Percent
Automobile	$	368,266	46.1	%	$	298,415	47.8	%
Purchased unsecured consumer	314,925		39.4		205,599		33.0
Other revolving credit plans	80,351		10.1		78,673		12.6
Student loans	1,064		0.1		1,862		0.3
Other	34,181		4.3		39,352		6.3
Total consumer	$	798,787	100.0	%	$	623,901	100.0	%

For consumer loans, credit risk is managed on a pooled basis. Considerations include an evaluation of the quality, character and inherent risks in the loan portfolio, current and projected economic conditions and past loan loss experience. Consumer loans represent a moderate credit risk. Loans in this category are generally either unsecured or secured by personal assets such as automobiles. The average loan size is generally small and risk is diversified among many borrowers. Our policy is to utilize credit-scoring systems for most of our consumer loans, which offer the ability to modify credit exposure based on our risk tolerance and loss experience. From time to time, we will tactically deploy funds, which are not utilized in our current short-term core lending markets, by purchasing certain consumer loan portfolios.

Consumer loans totaled $798.8 million at December 31, 2022, increasing by $174.9 million, or 28.0%, from December 31, 2021 of $623.9 million, which increased by $144.5 million, or 30.1%, compared to the $479.4 million held at December 31, 2020.

At December 31, 2022, automobile loans, primarily indirect dealer loans, comprised 46.1% of consumer loans outstanding. Total automobile loans of $368.3 million at December 31, 2022 increased by $69.9 million, or 23.4%, from December 31, 2021 of $298.4 million, which increased by $47.7 million, or 19.0%, from $250.7 million at December 31, 2020.

In 2022, we purchased $106.2 million in U.S. Mainland automobile portfolios, which included a $4.7 million premium over the $101.5 million outstanding balance. In 2021, we purchased a U.S. Mainland automobile loan portfolio totaling $76.5 million, which included a $5.1 million premium over the $71.4 million outstanding balance. We did not purchase any U.S. Mainland automobile loan portfolios in 2020.

Purchased unsecured consumer loans of $314.9 million at December 31, 2022 increased by $109.3 million, or 53.2%, from December 31, 2021 of $205.6 million, which increased by $108.4 million, or 111.6%, from $97.2 million at December 31, 2020.

In 2022, we purchased $217.2 million in U.S. Mainland unsecured consumer loans under forward flow purchase agreements with outstanding balances totaling $229.3 million, reflecting a net discount of $12.1 million In 2021, we purchased U.S. Mainland unsecured consumer loans under forward flow purchase agreements with outstanding balances totaling $199.8 million for $190.2 million, reflecting a net discount of $9.6 million. In 2020, we purchased U.S. Mainland unsecured consumer loans under forward flow purchase agreements with outstanding balances totaling $54.8 million for $53.2 million, reflecting a net discount of $1.6 million.

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Other revolving credit plans loans include extensions of credit to individuals and totaled $80.4 million at December 31, 2022, which increased by $1.7 million, or 2.1%, from December 31, 2021 of $78.7 million, which increased by $3.7 million, or 4.9%, from $75.0 million at December 31, 2020.

Total student loans of $1.1 million at December 31, 2022 decreased by $0.8 million, or 42.9%, from December 31, 2021 of $1.9 million, which decreased by $1.2 million, or 38.5%, from $3.0 million at December 31, 2020, primarily due to run-off.

Other consumer loans of $34.2 million at December 31, 2022 decreased by $5.2 million, or 13.1%, from December 31, 2021 of $39.4 million, which decreased by $14.2 million, or 26.5%, from $53.5 million at December 31, 2020.

Concentrations of Credit Risk

As of December 31, 2022, approximately $4.21 billion, or 75.8% of loans outstanding were real estate-related, including construction loans, residential mortgage loans, home equity loans, and commercial mortgage loans. As of December 31, 2021, approximately $3.86 billion, or 75.6% of loans outstanding were real estate-related, including construction loans, residential mortgage loans, home equity loans, and commercial mortgage loans.

The majority of our loans are made to companies and individuals with headquarters in, or residing in, the state of Hawaii. Consistent with our focus of being a Hawaii-based bank, 82.7% of our loan portfolio was concentrated in the Hawaii market while 17.3% was concentrated in the U.S. Mainland as of December 31, 2022. As of December 31, 2021, 86.3% and 13.7% were concentrated in the Hawaii market and U.S. Mainland, respectively.

Our foreign credit exposure as of December 31, 2022 and December 31, 2021 was minimal and did not exceed 1% of total assets.

Maturities and Sensitivities of Loans to Changes in Interest Rates

At December 31, 2022, all PPP loans were fixed-rate. Commercial, financial and agricultural loans, excluding PPP loans, were 52.6% fixed-rate and 47.4% variable-rate. Real estate construction loans were 40.2% fixed-rate and 59.8% variable-rate. Residential mortgage loans were 85.9% fixed-rate and 14.1% variable-rate. Home equity lines and loans were 12.8% fixed-rate and 87.2% variable-rate. Commercial mortgage loans were 55.0% fixed-rate and 45.0% variable-rate. Consumer loans were 90.8% fixed-rate and 9.2% variable-rate.

Commercial loans and commercial mortgage loans with variable interest rates are underwritten at the current market rate of interest. For commercial loans and commercial real estate loans with a fixed-rate period that are not fully amortizing, the loans are underwritten at the current market rate of interest. At the expiration of the fixed-rate period and/or maturity, the projected loan balance at that time is underwritten at an interest rate based on the current interest rate plus two percent per annum (2%).

Qualifying payments for our variable-rate residential mortgage loans with initial fixed-rate periods of five years or less are calculated using the greater of the note rate plus 2% per annum or the fully indexed rate. Payments for our variable-rate loans with a fixed-rate period of greater than five years are calculated using the greater of the note rate or the fully indexed rate. The qualifying payment for our HELOCs is based on the fully indexed rate plus the required principal plus interest payment due during the repayment period assuming the line was fully drawn. Our consumer lines of credit use a qualifying payment based on a percentage of the credit limit that exceeds the actual required fully indexed interest rate payment calculation.

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The following table sets forth the maturity distribution and sensitivities of the loan portfolio to changes in interest rates at December 31, 2022. Maturities are based on contractual maturity dates and do not factor in principal amortization. This differs from the assumptions used in Table 22 - Interest Rate Sensitivity.

Table 11. Maturity Distribution and Sensitivities of Loans to Changes in Interest Rates

	Maturing
	One Year or Less		Over One Through Five Years		Over Five Through Fifteen Years		Over  Fifteen Years		Total
	(Dollars in thousands)
Commercial, financial and agricultural - PPP:
With fixed interest rates	$	—	$	2,654	$	—	$	—	$	2,654
With variable interest rates	—		—		—		—		—
Total commercial, financial and agricultural - PPP	—		2,654		—		—		2,654
Commercial, financial and agricultural - Other:
With fixed interest rates	2,813		136,845		146,692		—		286,350
With variable interest rates	21,790		171,025		14,467		50,863		258,145
Total commercial, financial and agricultural - other	24,603		307,870		161,159		50,863		544,495
Construction:
With fixed interest rates	1,777		7,269		57,110		1,125		67,281
With variable interest rates	13,370		58,595		10,356		17,764		100,085
Total construction	15,147		65,864		67,466		18,889		167,366
Residential mortgage:
With fixed interest rates	767		16,798		223,872		1,426,364		1,667,801
With variable interest rates	10		3,336		14,999		254,310		272,655
Total residential mortgage	777		20,134		238,871		1,680,674		1,940,456
Home equity:
With fixed interest rates	13		15,705		38,061		40,875		94,654
With variable interest rates	3,012		6,329		10,871		622,520		642,732
Total home equity	3,025		22,034		48,932		663,395		737,386
Commercial mortgage:
With fixed interest rates	8,172		169,567		573,330		—		751,069
With variable interest rates	56,251		317,893		239,785		—		613,929
Total commercial mortgage	64,423		487,460		813,115		—		1,364,998
Consumer:
With fixed interest rates	8,290		527,618		93,449		95,720		725,077
With variable interest rates	16,305		31,106		111		26,358		73,880
Total consumer	24,595		558,724		93,560		122,078		798,957
All loans:
With fixed interest rates	21,832		876,456		1,132,514		1,564,084		3,594,886
With variable interest rates	110,738		588,284		290,589		971,815		1,961,426
Gross loans	$	132,570	$	1,464,740	$	1,423,103	$	2,535,899	$	5,556,312

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Provision and Allowance for Credit Losses for Loans

As described above under the "Critical Accounting Policies and Use of Estimates" section, the provision for credit losses ("Provision') for loans is determined by management's ongoing evaluation of the loan portfolio and our assessment of the ability of the ACL for loans to cover expected credit losses for loans. Our methodology for determining the adequacy of the ACL and Provision for loans takes into account many factors, including the level and trend of nonperforming and potential problem loans, net charge-off experience, current repayment by borrowers, fair value of collateral securing specific loans, changes in lending and underwriting standards and general economic factors, nationally and in the markets we serve.

The Company maintains its ACL at an appropriate level as of a given balance sheet date to absorb management's best estimate of expected credit losses in its loan portfolios that will likely be realized over the expected life of our loan portfolio. This is based upon management's comprehensive analysis of the risk profiles particular to the respective loan portfolios. Analysis of the appropriateness of the ACL for loans is performed quarterly to coincide with financial disclosure to the public and to the regulatory agencies and is governed by a Board-approved policy and methodology.

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The following table sets forth certain information with respect to the ACL for loans as of the dates or for the periods indicated.

Table 12. Allowance for Credit Losses for Loans

	Year Ended December 31,
(Dollars in thousands)	2022			2021			2020
Allowance for Credit Losses ("ACL") for Loans
Balance at beginning of period	$	68,097		$	83,269		$	47,971
Adoption of ASU 2016-13	—			—			3,566
Adjusted balance at beginning of period	68,097			83,269			51,537
Charge-offs:
Commercial, financial and agricultural - Other	1,969			1,723			3,026
Real estate:
Residential mortgage	—			—			63
Commercial mortgage	—			—			75
Consumer	6,399			4,402			8,191
Total	8,368			6,125			11,355
Recoveries:
Commercial, financial and agricultural - Other	995			1,004			1,157
Real estate:
Construction	76			1,159			131
Residential mortgage	295			358			229
Home equity	36			9			33
Commercial mortgage	—			73			16
Consumer	2,319			2,673			2,591
Total	3,721			5,276			4,157
Net loan charge-offs	4,647			849			7,198
Provision (credit) for credit losses for loans (1)	288			(14,323)			38,930
Balance at end of period	$	63,738		$	68,097		$	83,269
Average loans outstanding	$	5,298,573		$	5,071,516		$	4,855,169
Ratios:
ACL to total loans	1.15		%	1.33		%	1.68		%
ACL to nonaccrual loans	1,213.83		%	1,157.92		%	1,344.78		%
Net loan charge-offs to average loans outstanding	0.09		%	0.02		%	0.15		%
(1) In 2020, the Company recorded a reserve on accrued interest receivable ("AIR") of $0.2 million for loans on active payment forbearance or deferral, which were granted to borrowers impacted by the COVID-19 pandemic. This reserve was recorded as a contra-asset against AIR with the offset to provision for credit losses. This reserve balance of $0.2 million was reversed during the second quarter of 2021 due to the significant decline in loans on active forbearance or deferral and the Company no longer has a reserve on accrued interest receivable as of December 31, 2021 or 2022. The provision for credit losses presented in this table excludes the provision (credit) for credit losses on AIR.

On January 1, 2020, the Company adopted ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. The Company recorded increases of $3.6 million to the ACL for loans and $0.7 million to the reserve for off-balance sheet credit exposures, included in other liabilities, offset by a net decrease to retained earnings (or a net increase to accumulated deficit) of $3.2 million and a $1.1 million increase to other assets for the related impact to net deferred tax assets as of January 1, 2020 for the cumulative effect of adopting ASU 2016-13.

Our ACL for loans at December 31, 2022 totaled $63.7 million, which decreased by $4.4 million, or 6.4%, from $68.1 million at December 31, 2021, which decreased by $15.2 million, or 18.2%, from $83.3 million at December 31, 2020. When expressed

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as a percentage of total loans, our ACL for loans was 1.15%, 1.33%, and 1.68% as of December 31, 2022, 2021 and 2020, respectively.

During 2022, we recognized a credit to the Provision of $1.3 million, which included a credit to the Provision for off-balance sheet credit exposures of $1.6 million, offset by a debit to the Provision for loans of $0.3 million. During 2021, we recognized a credit to the Provision of $14.6 million, which included a credit to the Provision for loans of $14.3 million, a credit to the Provision for accrued interest receivable of $0.2 million and a credit to the Provision for off-balance sheet credit exposures of $0.1 million. During 2020, we recognized a debit to the Provision of $42.1 million, which included a debit to the Provision for loans of $38.9 million, a debit to the Provision for off-balance sheet credit exposures of $2.9 million and a debit to the Provision for accrued interest receivable of $0.2 million.

The decrease in our ACL for loans as a percentage of total loans from December 31, 2021 to December 31, 2022 and the credit to the Provision in 2022 reflects continued improvements in the economic forecast used in our credit loss modeling and our strong credit quality.

Our ACL for loans as a percentage of our nonaccrual loans increased to 1,213.83% at December 31, 2022 from 1,157.92% at December 31, 2021, which decreased from 1,344.78% at December 31, 2020.

These trends were consistent with the Company's strong credit quality as represented by nonperforming assets of $5.3 million, $5.9 million, and $6.2 million at December 31, 2022, 2021 and 2020, respectively.  Net charge-offs were $4.6 million, $0.8 million, and $7.2 million, respectively, for the years ended December 31, 2022, 2021 and 2020.

The following table sets forth the allocation of the ACL by loan category as of the dates indicated. Our practice is to make specific allocations on impaired loans and general allocations to each loan category based on management's risk assessment and estimated loss rate.

Table 13. Allocation of Allowance for Credit Losses for Loans

	December 31, 2022				December 31, 2021
(Dollars in thousands)	ACL for Loans		Loan Category as a % of Total Loans		ACL for Loans		Loan Category as a % of Total Loans
Commercial, financial and agricultural:
PPP	$	2	—	%	$	77	1.8	%
Other	6,822		9.8		10,314		10.4
Real estate:
Construction	2,867		3.0		3,908		2.4
Residential mortgage	11,804		35.0		12,463		36.8
Home equity	4,114		13.3		4,509		12.5
Commercial mortgage	17,902		24.5		18,411		23.9
Consumer	20,227		14.4		18,415		12.2
Total	$	63,738	100.0	%	$	68,097	100.0	%

The ACL allocated to PPP loans totaled $2 thousand, or 0.1%, of total PPP loans at December 31, 2022, compared to $0.1 million, or 0.1% of related loans outstanding at December 31, 2021.

The ACL allocated to other commercial, financial and agricultural loans totaled $6.8 million, or 1.3%, of total other commercial, financial and agricultural loans at December 31, 2022, compared to $10.3 million, or 1.9%, of related loans outstanding at December 31, 2021.

The ACL allocated to construction loans totaled $2.9 million, or 1.7%, of total construction loans at December 31, 2022, compared to $3.9 million, or 3.2%, of related loans outstanding at December 31, 2021.

The ACL allocated to our residential mortgage loans totaled $11.8 million, or 0.6%, of total residential mortgage loans at December 31, 2022, compared to $12.5 million, or 0.7%, of related loans outstanding at December 31, 2021.

The ACL allocated to our home equity loans totaled $4.1 million, or 0.6%, of total home equity loans at December 31, 2022, compared to $4.5 million, or 0.7%, of related loans outstanding at December 31, 2021.

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The ACL allocated to commercial mortgage loans totaled $17.9 million, or 1.3%, of total commercial mortgage loans at December 31, 2022, compared to $18.4 million, or 1.5%, of related loans outstanding at December 31, 2021.

The ACL allocated to consumer loans totaled $20.2 million, or 2.5% of total consumer loans at December 31, 2022, compared to $18.4 million, or 3.0% of related loans outstanding at December 31, 2021.

The decreases in the ending ACL amount and the ACL as a percentage of loans across all loan categories is primarily due to the continued improvement in credit quality and the economic forecast used in our credit loss modeling.

In accordance with GAAP, loans held for sale and other real estate assets are not included in our assessment of the ACL.

Nonperforming Assets, Accruing Loans Delinquent for 90 Days or More, Restructured Loans Still Accruing Interest

The following table sets forth nonperforming assets ("NPAs"), accruing loans delinquent for 90 days or more and restructured loans still accruing interest as of the dates indicated.

Table 14. Nonperforming Assets, Past Due and Restructured Loans

(Dollars in thousands)	December 31, 2022		December 31, 2021
Nonaccrual loans (1)
Commercial, financial and agricultural - Other	$	297	$	183
Real estate:
Residential mortgage	3,808		4,623
Home equity	570		786
Consumer	576		289
Total nonaccrual loans	5,251		5,881
Other real estate owned ("OREO")
Real estate:
Residential mortgage	—		—
Total OREO	—		—
Total nonperforming assets	5,251		5,881
Accruing loans delinquent for 90 days or more (1)
Commercial, financial and agricultural - Other	39		945
Real estate:
Residential mortgage	559		—
Home equity	—		44
Consumer	1,240		374
Total accruing loans delinquent for 90 days or more	1,838		1,363
Restructured loans still accruing interest (1)
Real estate:
Residential mortgage	1,845		3,768
Commercial mortgage	886		1,043
Consumer	62		92
Total restructured loans still accruing interest	2,793		4,903
Total NPAs, accruing loans delinquent for 90 days or more and restructured loans still accruing interest	$	9,882	$	12,147

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(Dollars in thousands)	December 31, 2022			December 31, 2021
Ratios:
Nonaccrual loans as a percentage of loans	0.09		%	0.12		%
Total NPAs as a percentage of loans and OREO	0.09			0.12
Total NPAs and accruing loans delinquent for 90 days or more as a percentage of loans and OREO	0.13			0.14
Total NPAs, accruing loans delinquent for 90 days or more and restructured loans still accruing interest as a percentage of loans and OREO	0.18			0.24
Classified assets and OREO to tier 1 capital and ACL	6.25			6.42
Year-to-date changes in NPAs:
Balance at beginning of year	$	5,881		$	6,192
Additions	6,774			7,462
Reductions:
Payments	(2,410)			(3,112)
Return to accrual status	(1,677)			(1,358)
Charge-offs, valuation and other adjustments	(3,317)			(3,303)
Total reductions	(7,404)			(7,773)
Balance at end of year	$	5,251		$	5,881
(1) Section 4013 of the CARES Act and the revised Interagency Statement are being applied to loan modifications related to the COVID-19 pandemic as eligible and applicable. These loan modifications are not included in the delinquent or restructured loan balances presented above.

Nonperforming assets, which includes nonaccrual loans, nonperforming loans classified as held for sale, if any, deferrals, and other real estate, totaled $5.3 million, or 0.07% of total assets at December 31, 2022, compared to $5.9 million, or 0.08% of total assets at December 31, 2021. Nonperforming assets at December 31, 2022 were comprised entirely of nonaccrual loans totaling $5.3 million, none of which were loans classified as held for sale.

The decline in 2022 was attributable to $2.4 million in repayments, $1.7 million in loans returned to accrual status and $3.3 million in charge-offs, valuation and other adjustments, partially offset by $6.8 million in gross additions.

Net changes to nonperforming assets by category during 2022 included net decreases in Hawaii residential mortgage loans totaling $0.8 million and Hawaii home equity loans of $0.2 million, partially offset by net increases in consumer loans of $0.3 million and commercial, financial and agricultural loans of $0.1 million.

Loans delinquent for 90 days or more still accruing interest totaled $1.8 million at December 31, 2022, compared to $1.4 million at December 31, 2021.

Troubled debt restructurings ("TDRs") included in nonperforming assets at December 31, 2022 consisted of five Hawaii residential mortgage loans with a combined principal balance of $1.1 million. At December 31, 2021, TDRs included in nonperforming assets consisted of four loans with a principal balance of $0.4 million. There were $2.8 million of TDRs still accruing interest at December 31, 2022, none of which were more than 90 days delinquent. At December 31, 2021, there were $4.9 million of TDRs still accruing interest, none of which were more than 90 days delinquent.

There were no loan payment forbearance or deferrals for borrowers impacted by the COVID-19 pandemic remaining as of December 31, 2022, compared to $0.4 million as of December 31, 2021.

The Company's ratio of classified assets and other real estate owned to tier 1 capital and the ACL decreased from 6.42% at December 31, 2021 to 6.25% at December 31, 2022.

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Investment Portfolio

The following table sets forth the amounts and distribution of investment securities held as of the dates indicated.

Table 15. Distribution of Investment Securities          

	December 31, 2022				December 31, 2021
(Dollars in thousands)	HTM (Amortized Cost)		AFS (Fair Value)		HTM (Amortized Cost)		AFS (Fair Value)
Debt securities:
States and political subdivisions	$	41,840	$	135,752	$	—	$	236,828
Corporate securities	—		30,211		—		40,646
U.S. Treasury obligations and direct obligations of U.S Government agencies	—		25,715		—		35,334
Mortgage-backed securities:
Residential - U.S. government-sponsored entities ("GSEs")	623,043		423,803		—		1,198,816
Residential - Non-government sponsored entities ("Non-GSEs")	—		8,662		—		12,213
Commercial - U.S. GSEs and agencies	—		46,144		—		65,849
Commercial - Non-GSEs	—		1,507		—		42,013
Total	$	664,883	$	671,794	$	—	$	1,631,699

Investment securities totaled $1.34 billion at December 31, 2022, decreasing by $295.0 million, or 18.1%, from the $1.63 billion held at December 31, 2021, which increased by $447.7 million, or 37.8%, from the $1.18 billion at year-end 2020.

The decrease in the investment securities portfolio reflects a market valuation decline on the AFS portfolio of $198.0 million, combined with principal runoff of $201.7 million partially offset by purchases of investment securities of $109.1 million

The significant decline in market valuation on the AFS portfolio was primarily driven by the rising interest rate environment. To mitigate the potential future impact to capital through AOCI, in March 2022, the Company transferred 41 investment securities that were classified as AFS to HTM. The investment securities had an amortized cost basis of $361.8 million and a fair market value of $329.5 million. On the date of transfer, these securities had a total net unrealized loss of $32.3 million. In May 2022, the Company transferred an additional 40 investment securities that were classified as AFS to HTM. The investment securities had an amortized cost basis of $400.9 million and a fair market value of $343.7 million. On the date of transfer, these securities had a total net unrealized loss of $57.2 million. There was no impact to net income as a result of the reclassifications.

In the third quarter of 2021, $104.4 million in available-for-sale securities were sold as part of an investment portfolio rebalancing strategy. We received $104.5 million in gross proceeds and reinvested the proceeds in $98.8 million in higher yield investment securities with an average yield of 1.55% and a weighted average life of 6.1 years. The investment securities sold had an average yield of 1.13% and a weighted average life of 2.6 years. Gross realized gains and losses on the sale of the investment securities were $1.1 million and $1.0 million, respectively. The specific identification method was used as the basis for determining the cost of all securities sold.

In the second quarter of 2021, $175.0 million in available-for-sale were sold as part of an investment portfolio rebalancing strategy. We received $175.0 million in gross proceeds and reinvested the proceeds in $186.1 million in higher yield investment securities with an average yield of 1.70% and a weighted average life of 6.9 years. The investment securities sold had an average yield of -0.11% and a weighted average life of 1.6 years. Gross realized losses and gains on the sale of the investment securities were $2.2 million and $2.2 million, respectively. The specific identification method was used as the basis for determining the cost of all securities sold.

In the fourth quarter of 2020, $89.9 million in available-for-sale securities were sold as part of an investment portfolio rebalancing strategy due to the large downward shift in interest rates and the change in expected prepayments. We received $90.1 million in gross proceeds and reinvested the proceeds in $105.1 million in higher yield, longer duration investment securities with an average yield of 1.27% and a weighted-average life of 4.6 years. The investment securities sold had an average yield of 0.28% and a weighted-average life of 1.2 years. Gross realized gains and losses on the sale of the investment

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securities were $0.5 million and $0.3 million, respectively. The specific identification method was used as the basis for determining the cost of all securities sold.

In the third quarter of 2020, $90.4 million in available-for-sale non-agency commercial mortgage-backed securities with retail mall exposure were sold to mitigate credit risk during the pandemic. The investment securities sold had an average yield of 3.44% and a weighted-average life of 14.03 years. Gross realized losses and gains on the sale of the investment securities were $0.6 million and $0.2 million, respectively. The specific identification method was used as the basis for determining the cost of all securities sold.

Maturity Distribution of Investment Portfolio

The following table sets forth the maturity distribution of the investment portfolio and weighted-average yields by investment type and maturity grouping at December 31, 2022.

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Table 16. Maturity Distribution of Investment Portfolio

Portfolio Type and Maturity Grouping	Carrying Value		Weighted Average Yield (1)
	(Dollars in thousands)
Held-to-maturity portfolio:
Debt securities - States and political subdivisions:
After ten years	$	41,840	2.26	%
Total debt securities - States and political subdivisions	41,840		2.26
Residential mortgage-backed securities - U.S. government-sponsored entities ("GSEs"):
After ten years	623,043		1.93
Total residential mortgage-backed securities - U.S. GSEs	623,043		1.93
Total held-to-maturity portfolio	$	664,883	1.95	%
Available-for-sale portfolio:
Debt securities - States and political subdivisions:
Within one year	$	5,751	2.91	%
After one but within five years	14,934		3.72
After five but within ten years	21,773		3.73
After ten years	93,294		2.29
Total debt securities - States and political subdivisions	135,752		2.70
Debt securities - Corporate:
After five but within ten years	30,211		1.68
Total debt securities - Corporate	30,211		1.68
Debt securities - U.S. Treasury obligations and direct obligations of U.S Government agencies:
After one but within five years	524		4.59
After five but within ten years	18,574		2.78
After ten years	6,617		4.46
Total debt securities - U.S. Treasury obligations and direct obligations of U.S Government agencies	25,715		3.25
Residential mortgage-backed securities - U.S. GSEs:
After five but within ten years	16,486		2.40
After ten years	407,317		2.02
Total residential mortgage-backed securities - U.S. GSEs	423,803		2.03
Residential mortgage-backed securities - Non-government sponsored entities ("Non-GSEs"):
After ten years	8,662		3.33
Total residential mortgage-backed securities - Non-GSEs	8,662		3.33
Commercial mortgage-backed securities - U.S. GSEs and agencies:
After one but within five years	21,904		2.86
After ten years	24,240		1.89
Total commercial mortgage-backed securities - U.S. GSEs and agencies	46,144		2.35
Commercial mortgage-backed securities - Non-GSEs:
After five but within ten years	1,507		4.10
Total commercial mortgage-backed securities - Non-GSEs	1,507		4.10
Total available-for-sale portfolio	$	671,794	2.24	%
Total investment securities	$	1,336,677	2.10	%

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

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The weighted-average yield of the investment portfolio was 2.10% as of December 31, 2022, which increased by 17 bp from 1.93% as of December 31, 2021.

Deposits

The primary source of our funding comes from deposits in the state of Hawaii. In this competitive market, we strive to distinguish ourselves by providing exceptional customer service in our branch offices and through digital channels, and establishing long-term relationships with businesses and their principals. Our focus has been to develop a large, stable base of core deposits, which are comprised of non-interest bearing and interest-bearing demand deposits, savings and money market deposits, and time deposits less than $250,000. Time deposits in amounts of $250,000 and greater are generally considered to be more price-sensitive than relationship-based and are thus given less focus in our marketing and sales efforts.

The following table sets forth the composition of our deposits by category as of the dates indicated.

Table 17. Deposits by Categories

(Dollars in thousands)	December 31, 2022		December 31, 2021
Noninterest-bearing demand deposits	$	2,092,823	$	2,291,246
Interest-bearing demand deposits	1,453,167		1,415,277
Savings and money market deposits	2,199,028		2,225,903
Time deposits less than $100,000	181,547		136,584
Other time deposits of $100,000 to $250,000	148,601		88,873
Core deposits	6,075,166		6,157,883
Government time deposits	290,057		214,950
Other time deposits greater than $250,000	371,000		266,325
Total time deposits greater than $250,000	661,057		481,275
Total deposits	$	6,736,223	$	6,639,158

Total deposits of $6.74 billion at December 31, 2022 increased by $97.1 million, or 1.5%, from total deposits of $6.64 billion at December 31, 2021. Total deposits at December 31, 2021 increased by $843.0 million, or 14.5%, over the year-end 2020 balance of $5.80 billion. The increase in deposits in 2022 reflects net increases in interest-bearing demand deposits of $37.9 million, other time deposits up to $250,000 totaling $104.7 million, government time deposits of $75.1 million, and other time deposits greater than $250,000 (excluding government time deposits) of $104.7 million. The net increases were partially offset by decreases in noninterest-bearing demand deposits of $198.4 million and savings and money market deposits of $26.9 million.

Core deposits totaled $6.08 billion at December 31, 2022 and decreased by $82.72 million, or 1.3%, from December 31, 2021, which increased by $1.02 billion or 19.9% from December 31, 2020. Core deposits as a percentage of total deposits was 90.2% at December 31, 2022, compared to 92.8% at December 31, 2021 and 88.6% at December 31, 2020.

After experiencing large increases in core deposits in 2020 and 2021 primarily due to the deposit of PPP funds and other government stimulus into both new and existing deposit accounts, during the 2022 year, the Company experienced moderation of core deposit balances primarily due to the rising interest rate environment. Going forward, the Company is focused on expanding banking relationships with both commercial and retail customers in the State of Hawaii.

As an FDIC-insured institution, our deposits are insured up to applicable limits by the DFI of the FDIC. The Dodd-Frank Act raised the limit for federal deposit insurance to $250,000 for most deposit accounts. Our total uninsured deposits were $2.34 billion and $2.38 billion as of December 31, 2022 and December 31, 2021, respectively.

The table below sets forth the contractual maturities of our time deposits greater than $250,000 as of December 31, 2022.

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Table 18. Contractual Maturities of Time Deposits Greater Than $250,000

(Dollars in thousands)
Three months or less	$	365,232
Over three months through twelve months	277,204
Over one year through three years	14,670
Over three years	3,951
Total time deposits of more than $250,000	$	661,057

For additional information regarding the contractual maturities of our time deposits, See Note 9 - Deposits to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data."

The table below sets forth information regarding the average balances and average rates paid for certain deposit categories for each of the years indicated. Average balances are computed using daily average balances. The average rate on time deposits, which are most sensitive to changes in market rates, increased by 58 bp in 2022, while savings and money market deposit rates increased by 13 bp. The average rate paid on all deposits increased 11 bp to 0.17% in 2022 from 0.06% in 2021, which decreased from 0.19% in 2020.

Table 19. Average Balances and Average Rates on Deposits

	Year Ended December 31,
	2022				2021
(Dollars in thousands)	Average Balance		Average Rate Paid		Average Balance		Average Rate Paid
Noninterest-bearing demand deposits	$	2,216,645	—	%	$	2,117,423	—	%
Interest-bearing demand deposits	1,438,232		0.06		1,300,022		0.03
Savings and money market deposits	2,208,630		0.19		2,099,388		0.06
Time deposits	740,542		0.83		782,536		0.25
Total	$	6,604,049	0.17		$	6,299,369	0.06

We expect overall deposit rates to continue to increase in 2023 based on the Federal Open Market Committee's recent statements and the expectation of additional interest rate increases in 2023. In addition to the external interest rate environment, the overall direction and magnitude of rate movements in our deposit base will largely depend on the level of deposit growth we need to maintain adequate liquidity and competitive pricing considerations.

Contractual Obligations

The following table sets forth our material contractual obligations (excluding deposit liabilities) as of December 31, 2022.

Table 20. Contractual Obligations

	Payments Due By Period
(Dollars in thousands)	Less Than One Year		Greater Than One Year		Total
Short-term borrowings	$	5,000	$	—	$	5,000
Long-term debt	—		106,547		106,547
SERP obligations	573		8,647		9,220
Operating leases	5,100		39,808		44,908
Purchase obligations	13,904		48,786		62,690
Other long-term liabilities	10,996		13,913		24,909
Total	$	35,573	$	217,701	$	253,274

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Components of short-term borrowings and long-term debt are discussed in Note 10 - Short-Term Borrowings and Note 11 - Long-Term Debt, respectively, to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data." SERP obligations include obligations under our Supplemental Executive Retirement Plans, which are discussed in Note 16 - Pension Plans to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data." Operating leases represent leases on bank premises as discussed in Note 18 - Operating Leases to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data." Purchase obligations represent other contractual obligations to purchase goods or services at specified terms including, but not limited to, software licensing agreements, equipment maintenance contracts and professional service contracts. Other long-term liabilities represent expected payments for unfunded commitments related to our investments in LIHTC partnerships and other unconsolidated entities.

In January 2021, the Board of Directors approved termination of, and authorized Company management to commence taking actions to terminate, the Company's defined benefit retirement plan. Final settlement occurred during the second quarter of 2022. As of December 31, 2022, the Company has no further defined benefit retirement plan liability or ongoing pension expense recognition.

Contractual obligations in Table 20 - Contractual Obligations do not include off-balance sheet arrangements. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees written, forward foreign exchange contracts, forward interest rate contracts and interest rate swaps and options. These instruments and the related off-balance sheet exposures are discussed in detail in Note 23 - Financial Instruments With Off-Balance Sheet Risk to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data."

Capital Resources

In order to ensure adequate levels of capital, we conduct an ongoing assessment of projected sources and uses of capital in conjunction with an analysis of the size and quality of our assets, the anticipated performance of our business, and the level of risk and regulatory capital requirements. As part of this ongoing assessment, the Board of Directors reviews our capital position on an ongoing basis to ensure it is adequate, including, but not limited to, the need for raising additional capital (whether debt and/or equity) or returning capital to our shareholders, including the ability to declare cash dividends or repurchase our securities.

Common and Preferred Equity

Shareholders' equity totaled $452.9 million at December 31, 2022, a decrease of $105.3 million, or 18.9%, from the $558.2 million at December 31, 2021, which increased by $11.5 million, or 2.1%, from December 31, 2020. The decrease in shareholders' equity from December 31, 2021 to December 31, 2022 was primarily attributable to other comprehensive loss of $136.0 million, cash dividends paid of $28.5 million and the repurchase of 868,613 shares of our common stock for a total cost of $20.7 million, under our stock repurchase program, partially offset by net income of $73.9 million. During 2022 we repurchased approximately 3.1% of our common stock outstanding at December 31, 2021.

The increase in shareholders' equity from December 31, 2020 to December 31, 2021 was primarily attributable to net income of $79.9 million, partially offset by accumulated other comprehensive loss of $28.1 million, cash dividends paid of $27.0 million, and the repurchase of 696,894 shares of our common stock for a total cost of $18.7 million, under our stock repurchase program. During 2021 we repurchased approximately 2.5% of our common stock outstanding at December 31, 2020.

When expressed as a percentage of total assets, shareholders' equity was 6.1% at December 31, 2022, compared to 7.5% at December 31, 2021 and 8.3% at December 31, 2020. The decline in the ratio of shareholders' equity to total assets from 2021 to 2022 was primarily due to unrealized losses on available-for-sale investment securities recorded in accumulated other comprehensive loss during the year ended December 31, 2022 due to market volatility and the rising interest rate environment. The decline in our ratio of shareholders' equity to total assets from 2020 to 2021 was primarily attributable to the significant increase in total assets in 2021.

Our book value per share was $16.76, $20.14, and $19.40 at year-end 2022, 2021 and 2020, respectively. The decrease in our book value per share from 2021 was primarily attributable to the decrease in shareholders' equity from December 31, 2021 to December 31, 2022 as described above.

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Trust Preferred Securities

As of December 31, 2022, we have two remaining statutory trusts, CPB Capital Trust IV ("Trust IV") and CPB Statutory Trust V ("Trust V"), which issued a total of $50.0 million in floating rate trust preferred securities. The $30.0 million in floating rate trust preferred securities of Trust IV bear an interest rate of three-month LIBOR plus 2.45% and the $20.0 million in floating rate trust preferred securities of Trust V bear an interest rate of three-month LIBOR plus 1.87%. Our obligations with respect to the issuance of the trust preferred securities constitute a full and unconditional guarantee by the Company of the trusts' obligations with respect to its trust preferred securities. Subject to certain exceptions and limitations, we may elect from time to time to defer subordinated debenture interest payments, which would result in a deferral of dividend payments on the related trust preferred securities, for up to 20 consecutive quarterly periods without default or penalty.

The Company determined that its investments in Trust IV and Trust V did not represent a variable interest and therefore the Company was not the primary beneficiary of each of the trusts. As a result, consolidation of the trusts by the Company was not required.

We also previously had CPB Capital Trust I ("Trust I"), which was canceled in August 2014, and CPB Capital Trust II ("Trust II") and CPB Statutory Trust III ("Trust III"), which were both canceled in January 2019.

Subordinated Notes

On October 20, 2020, the Company completed a $55.0 million private placement of ten-year fixed-to-floating rate subordinated notes, which will be used to support regulatory capital ratios and for general corporate purposes. The Company exchanged the privately placed notes for registered notes with the same terms and in the same aggregate principal amount at the end of the fourth quarter of 2020. The notes bear a fixed interest rate of 4.75% for the first five years through November 1, 2025 and will reset quarterly thereafter for the remaining five years to the then current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York, plus 456 basis points. The notes are redeemable at our option on any interest payment date on or after November 1, 2025. The subordinated notes totaled $54.3 million as of December 31, 2022, and includes $0.7 million in debt issuance costs, which are being amortized over the expected life.

Holding Company Capital Resources

CPF is required to act as a source of strength to the bank under the Dodd-Frank Act. CPF is obligated to pay its expenses and payments on its junior subordinated debentures which fund payments on the outstanding trust preferred securities and subordinated notes.

CPF relies on the bank to pay dividends to it to fund its obligations. As of December 31, 2022, on a stand-alone basis, CPF had an available cash balance of approximately $16.9 million in order to meet its ongoing obligations.

As a Hawaii state-chartered bank, the bank may only pay dividends to the extent it has retained earnings as defined under Hawaii banking law ("Statutory Retained Earnings"), which differs from GAAP retained earnings. As of December 31, 2022 and 2021, the bank had Statutory Retained Earnings of $145.7 million and $114.0 million, respectively.

Dividends are payable at the discretion of the Board of Directors and there can be no assurance that the Board of Directors will continue to pay dividends at the same rate, or at all, in the future. Our ability to pay cash dividends to our shareholders is subject to restrictions under federal and Hawaii law, including restrictions imposed by the FRB and covenants set forth in various agreements we are a party to, including covenants set forth in our subordinated debentures. For further information, see the "Dividends — Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities" section.

Share Repurchases

We repurchase shares of our common stock when we believe such repurchases are in the best interests of the Company and our shareholders.

In January 2021, the Company’s Board of Directors approved a repurchase plan of up to $25 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the "2021 Repurchase Plan").

In 2021, 696,894 shares of common stock, at a cost of $18.7 million, were repurchased under the Company's share repurchase

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program. A total of $6.3 million remained available for repurchase under the 2021 Repurchase Plan at December 31, 2021.

In January 2022, the Company’s Board of Directors approved a new authorization to repurchase up to $30 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the "2022 Repurchase Plan"). The 2022 Repurchase Plan replaced and superseded in its entirety the 2021 Repurchase Plan.

In 2022, 868,613 shares of common stock, at a cost of $20.7 million, were repurchased under the Company's share repurchase programs. A total of $10.3 million remained available for repurchase under the 2022 Repurchase Plan at December 31, 2022.

In January 2023, the Company’s Board of Directors approved a new authorization to repurchase of up to $25 million of its common stock from time to time in the open market or in privately negotiated transactions (the "2023 Repurchase Plan"), pursuant to a newly authorized share repurchase program. The 2023 Repurchase Plan replaces and supersedes in its entirety the 2022 Repurchase Plan. Our ability to repurchase shares is subject to the discretion of our Board of Directors and approval of our regulators, and there can be no assurance that the Board will repurchase shares of our common stock in the future.

Cybersecurity

In recent years, cybersecurity has gained prominence within the financial services industry due to increases in the quantity and sophistication of cyber-attacks, which include significant distributed denial-of-service and credential validation attacks, malicious code and viruses and attempts to breach the security of systems, which, in certain instances, have resulted in unauthorized access to customer account data.

The bank has a number of complex information systems used for a variety of functions by customers, employees and vendors. In addition, third parties with which the bank does business or that facilitate business activities (e.g., vendors, exchanges, clearing houses, central depositories and financial intermediaries) could also be sources of cybersecurity risk to the bank, including with respect to breakdowns or failures of their systems, misconduct by the employees of such parties, or cyber-attacks which could affect their ability to deliver a product or service to the bank.

As a regulated financial institution, we must adhere to the security requirements and expectations of the applicable regulatory agencies, which include requirements related to data privacy, systems availability and business continuity planning, among others. The regulatory agencies have established guidelines for the responsibilities of the Board of Directors and senior management, which include establishing policy, appointing and training personnel, implementing review and testing functions and ensuring an appropriate frequency of updates.

The Board of Directors overall, and its Board Risk Committee more specifically, oversees cybersecurity risk. The Executive Committee overall, and our Chief Legal Officer, our Chief Technology Officer and our Chief Information Officer more specifically, manages the cybersecurity risk at the operational level. Various reports on cybersecurity are provided to our Executive Committee and a quarterly update is provided to the Board Risk Committee and the Board of Directors.

As a complement to the overall cybersecurity infrastructure, the bank utilizes a number of internal training methods, both formally through mandatory courses and informally through written communications and other updates. Internal policies and procedures have been implemented to require the reporting of potential phishing attacks or other security risks. The bank also uses third party services as part of its cybersecurity framework, and any such third parties are required to comply with the bank’s policies regarding information security and confidentiality. In addition, the bank retains third party groups to assess and supplement the bank’s cybersecurity needs. These cyber-attacks have not, to date, resulted in any material disruption to the bank’s operations or harm to its customers and have not had a material adverse effect on the bank’s results of operations; however, there can be no assurance that a sophisticated cyber-attack can be detected or thwarted.

Transaction Risk

Transaction risk is the risk to earnings or capital arising from problems in service, activity or product delivery. This risk is significant within any bank and is interconnected with other risk categories in most activities throughout the Company. Transaction risk is a function of internal controls, information systems, associate integrity, and operating processes. It arises daily throughout the Company as transactions are processed. It pervades all divisions, departments and centers and is inherent in all products and services we offer.

In general, transaction risk by major area is categorized as high, medium or low by the Company. The audit plan ensures that high risk areas are reviewed annually. We utilize internal auditors and independent audit firms to test key controls of

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operational processes and to audit information systems, compliance management programs, loan programs and trust services.

The key to managing transaction risk is in the design, documentation and implementation of well-defined procedures and controls. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, but not absolute, assurances of the effectiveness of these systems and controls, and that the objectives of these controls have been met.

Compliance Risk

Compliance risk is the risk to earnings or capital arising from violations of, or non-conformance with, laws, rules, regulations, prescribed practices, or ethical standards. Compliance risk also arises in situations where the laws or rules governing certain products or activities of the bank’s customers may be ambiguous or untested. Compliance risk exposes us to fines, civil money penalties, payment of damages, and the voiding of contracts. Compliance risk can also lead to a diminished reputation, reduced business value, limited business opportunities, lessened expansion potential, and lack of contract enforceability. The Company utilizes independent external firms to conduct compliance audits as a means of identifying weaknesses in the compliance program.

There is no single or primary source of compliance risk. It is inherent in every activity. Frequently, it blends into operational risk and transaction risk. A portion of this risk is sometimes referred to as legal risk. This is not limited solely to risk from failure to comply with consumer protection laws; it encompasses all laws, as well as prudent ethical standards and contractual obligations. It also includes the exposure to litigation from all aspects of banking, traditional and non-traditional.

Our risk management policies and codes of ethical conduct are cornerstones for controlling compliance risk. An integral part of controlling this risk is the proper training and development of employees. The Director of Compliance is responsible for developing and executing a comprehensive compliance training program. The Director of Compliance, in consultation with our internal and external legal counsel, seeks to provide our employees with adequate training commensurate to their job functions to ensure compliance with banking laws and regulations.

Our risk management policies and programs includes a risk-based audit program aimed at identifying internal control deficiencies and weaknesses. We have in-depth audits performed by an independent audit firm under the direction of the Director of Internal Audit and supplemented by independent external firms, and periodic monitoring performed by our risk management personnel. Annually, an Audit Plan for the Company is developed and presented for approval to the Audit Committee.

Our risk management team conducts periodic monitoring of our compliance efforts with a special focus on those areas that expose us to compliance risk. The purpose of the periodic monitoring is to verify whether our employees are adhering to established policies and procedures. Any material exceptions identified are brought forward to the appropriate department head, the Audit Committee and the Board Risk Committee.

We recognize that customer complaints can often identify weaknesses in our compliance program which could expose us to risk. Therefore, we attempt to ensure that all complaints are given prompt attention. The Director of Compliance reviews formal complaints to determine if a significant compliance risk exists and communicates those findings to our Board Risk Committee.

Strategic Risk

Strategic risk is the risk to earnings or capital arising from adverse decisions or improper implementation of strategic decisions. This risk is a function of the compatibility between an organization’s goals, the resources deployed against those goals and the quality of implementation.

Strategic risks are identified as part of the strategic planning process. Offsite strategic planning sessions, with members of the Board of Directors and Executive Committee, are held annually. The strategic review consists of an economic assessment, competitive analysis, industry outlook and risk and regulatory review.

A primary measurement of strategic risk is peer group analysis. Key performance ratios are compared to peer groups consisting of U.S. banks of comparable size and complexity and banks in the Hawaii market to identify any sign of weakness and potential opportunities.

Another measure is the comparison of the actual results of previous strategic initiatives against the expected results established prior to implementation of each strategy.

71

Asset/Liability Management and Interest Rate Risk

Our earnings and capital are sensitive to risk of interest rate fluctuations. Interest rate risk arises when rate-sensitive assets and rate-sensitive liabilities mature or reprice during different periods or in differing amounts. In the normal course of business, we are subjected to interest rate risk through the activities of making loans and taking deposits, as well as from our investment securities portfolio and other interest-bearing funding sources. Asset/liability management attempts to coordinate our rate-sensitive assets and rate-sensitive liabilities to meet our financial objectives.

Our Asset/Liability Management Policy seeks to maximize the risk-adjusted return to shareholders while maintaining consistently acceptable levels of liquidity, interest rate risk and capitalization. Our Asset/Liability Management Committee, or ALCO, monitors interest rate risk through the use of net interest income simulation and and various hypothetical interest rate scenarios that may include gradual, immediate or non-parallel rate changes. This process is designed to measure the impact of future changes in interest rates on net interest income. Adverse interest rate risk exposures are managed through the shortening or lengthening of the duration of assets and liabilities.

ALCO utilizes a detailed and dynamic simulation model to measure and manage interest rate risk exposures. The simulation incorporates various assumptions which are believed to be reasonable but may impact results. Key modeling assumptions are made around the timing of interest rate changes, the prepayment of mortgage-related assets, pricing spreads of assets and liabilities and the timing and magnitude of deposit rate changes in relation to changes in the overall level of interest rates.

The following reflects our net interest income sensitivity analysis as of December 31, 2022. Net interest income is estimated assuming no balance sheet growth under a flat interest rate scenario. The net interest income sensitivity is measured as the change in net interest income in alternate interest rate scenarios as a percentage of the flat rate scenario. The alternate rate scenarios typically assume rates move up or down 100 bp in either a gradual (defined as the stated change over a 12-month period in equal increments) or an instantaneous, parallel fashion.

	Estimated Net Interest Income Sensitivity
Rate Change	Gradual		Instantaneous
+100bp	0.73	%	1.06	%
-100bp	(1.64)	%	(3.18)	%

Liquidity and Borrowing Arrangements

Our objective in managing liquidity is to maintain a balance between sources and uses of funds in order to economically meet the cash requirements of customers for loans and deposit withdrawals and participate in lending and investment opportunities as they arise. We monitor our liquidity position in relation to changes in loan and deposit balances on a daily basis to assure maximum utilization, maintenance of an adequate level of readily marketable assets and access to short-term funding sources. Our loan-to-deposit ratio at December 31, 2022 was 82.5% compared to 76.8% at December 31, 2021. Our liquidity may be negatively impacted by unforeseen demands on cash or if our deposit customers withdraw funds due to uncertainties surrounding our financial condition or prospects.

Core deposits have historically provided us with a sizable source of relatively stable and low cost funds but are subject to competitive pressure in our market. In addition to core deposit funding, we also have access to a variety of other short-term and long-term funding sources, which include proceeds from maturities of our investment securities, as well as secondary funding sources such as the FHLB, secured repurchase agreements and the Federal Reserve discount window, available to meet our liquidity needs. While we historically have had access to these other funding sources, continued access to these sources may not be guaranteed and can be restricted in the future as a result of market conditions or the Company's and bank's financial position.

The bank is a member of and maintained a $2.23 billion line of credit with the FHLB as of December 31, 2022, of which $2.19 billion remained available as of December 31, 2022. Short-term advances outstanding under this arrangement totaled $5.0 million at December 31, 2022. There were no short-term advances outstanding under this arrangement as of December 31, 2021. There were no long-term advances with the FHLB outstanding at December 31, 2022 and 2021. FHLB advances outstanding at December 31, 2022 were secured by certain real estate loans with a carrying value of $3.28 billion in accordance with the collateral provisions of the Advances Pledge and Security Agreement with the FHLB.

72

The FHLB provides standby letters of credit on behalf of the bank to secure certain public deposits. If the FHLB is required to make a payment on a standby letter of credit, the payment amount is converted to an advance at the FHLB. The standby letters of credit issued on our behalf by the FHLB totaled $36.0 million and $32.2 million at December 31, 2022 and 2021, respectively.

The bank also maintained a line of credit with the Federal Reserve discount window of $75.9 million and $55.4 million as of December 31, 2022 and 2021, respectively. There were no advances outstanding under this arrangement at December 31, 2022 and 2021. Advances under this arrangement would have been secured by certain commercial and commercial real estate loans with a carrying value totaling $125.0 million. The Federal Reserve does not have the right to sell or repledge these loans. See Note 10 - Short-Term Borrowings and Note 11 - Long-Term Debt to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data" for additional information regarding our borrowings.

Our ability to maintain adequate levels of liquidity is dependent on our ability to continue to maintain our strong risk profile and capital base. Our liquidity may also be negatively impacted by weakness in the financial markets and industry-wide reductions in liquidity.

Off-Balance Sheet Arrangements

In the normal course of business, we enter into off-balance sheet arrangements to meet the financing needs of our banking customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees written, forward foreign exchange contracts, forward interest rate contracts, interest rate swaps and options, and risk participation agreements. These instruments and the related off-balance sheet exposures are discussed in detail in Note 23 - Financial Instruments With Off-Balance Sheet Risk to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data." In the unlikely event that we must satisfy a significant amount of outstanding commitments to extend credit, liquidity will be adversely impacted, as will credit risk. The remaining components of off-balance sheet arrangements, primarily interest rate options and forward interest rate contracts related to our mortgage banking activities, are not expected to have a material impact on our consolidated financial position or results of operations.

73

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosures about market risk is set forth under "Part II, Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations—Asset/Liability Management and Interest Rate Risk" and in Note 24 - Fair Value of Financial Assets and Financial Liabilities to the Consolidated Financial Statements under "Part II, Item 8. Financial Statements and Supplementary Data."

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 

Index

	Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 173)	76
Consolidated Balance Sheets	78
Consolidated Statements of Income	79
Consolidated Statements of Comprehensive (Loss) Income	80
Consolidated Statements of Changes in Equity	81
Consolidated Statements of Cash Flows	82
Note 1 - Summary of Significant Accounting Policies	83
Note 2 - Investment Securities	95
Note 3 - Loans	99
Note 4 - Allowance for Credit Losses and Reserve for Off-Balance Sheet Credit Exposures	105
Note 5 - Premises and Equipment	107
Note 6 - Investments in Unconsolidated Entities	107
Note 7 - Mortgage Servicing Rights	108
Note 8 - Derivatives	110
Note 9 - Deposits	112
Note 10 - Short-Term Borrowings	112
Note 11 - Long-Term Debt	113
Note 12 - Equity	114
Note 13 - Revenue from Contracts with Customers	115
Note 14 - Mortgage Banking Income	117
Note 15 - Share-Based Compensation	117
Note 16 - Pension Plans	120
Note 17 - 401(k) Retirement Savings Plan	124
Note 18 - Operating Leases	124
Note 19 - Income Taxes	126
Note 20 - Accumulated Other Comprehensive Income (Loss)	128
Note 21 - Earnings Per Share	130
Note 22 - Contingent Liabilities and Other Commitments	131
Note 23- Financial Instruments with Off-Balance Sheet Risk	131
Note 24 - Fair Value of Financial Assets and Financial Liabilities	132
Note 25 - Parent Company and Regulatory Restrictions	138
Note 26 - Subsequent Events	143

75

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors of

Central Pacific Financial Corp.

Honolulu, Hawaii

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Central Pacific Financial Corp. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive (loss) income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans – Reasonable and Supportable Forecasts - Refer to Notes 1 and 4 to the financial statements

The allowance for credit losses on loans is an accounting estimate of expected credit losses over the estimated life of the Company’s loan portfolio, measured at amortized cost, to be presented at the net amount expected to be collected. The allowance for credit losses on loans was $63,738,000 as of December 31, 2022.

The allowance for credit losses on loans under the current expected credit loss methodology required by ASC 326, Financial Instruments – Credit Losses, is based on relevant available information about the collectability of cash flows, from internal and external sources, including historical information relating to past events, current conditions, and reasonable and supportable forecasts of future economic conditions. Historical credit loss experience provides the basis for the Company’s expected credit loss estimate. The economic forecast used in the current expected credit loss methodology includes both National and Hawaii specific economic indicators. The Company performed a loss driver analysis to determine relevant economic indicators with a strong correlation to the historical loss experience used as the basis for the expected credit loss estimate. Significant management judgments are required in the development and application of reasonable and supportable forecasts.

We identified reasonable and supportable forecasts used in the application of ASC 326 as a critical audit matter because of the significant auditor judgment and audit effort needed to evaluate the judgments made by management, including the need to involve more experienced audit personnel and valuation specialists.

The primary procedures we performed to address this critical audit matter included:

•Testing the effectiveness of controls over the development and application of reasonable and supportable forecasts, including controls addressing:

◦The conceptual design of the reasonable and supportable forecast methodology,

◦Significant judgments and assumptions in the reasonable and supportable forecasts methodology, including the selection and application of economic variables,

◦The accuracy of the reasonable and supportable forecasts calculation, including the completeness, accuracy and relevance of the underlying data.

•Substantively testing management’s process for the development and application of reasonable and supportable forecasts, including:

◦Evaluation of the conceptual design of the reasonable and supportable forecast methodology,

◦Evaluation of significant judgments and assumptions in the reasonable and supportable forecasts methodology, including the selection and application of economic variables,

◦Testing the accuracy of the reasonable and supportable forecasts calculation, including the completeness, accuracy and relevance of the underlying data.

/s/ Crowe LLP

We have served as the Company's auditor since 2018.

Sacramento, California

February 24, 2023

77

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	2022		2021
	(Dollars in thousands)
Assets
Cash and due from financial institutions	$	97,150	$	81,506
Interest-bearing deposits in other financial institutions	14,894		247,401
Investment securities:
Available-for-sale debt securities, at fair value	671,794		1,631,699
Held-to-maturity debt securities, fair value of: $596,780 at December 31, 2022 and none at December 31, 2021	664,883		—
Total investment securities	1,336,677		1,631,699
Loans held for sale	1,105		3,531
Loans	5,555,466		5,101,649
Allowance for credit losses	(63,738)		(68,097)
Loans, net of allowance for credit losses	5,491,728		5,033,552
Premises and equipment, net	91,634		80,354
Accrued interest receivable	20,345		16,709
Investment in unconsolidated entities	46,641		29,679
Mortgage servicing rights, net	9,074		9,738
Bank-owned life insurance	167,967		169,148
Federal Home Loan Bank ("FHLB") stock	9,146		7,964
Right-of-use lease asset	34,985		39,441
Other assets	111,417		68,367
Total assets	$	7,432,763	$	7,419,089
Liabilities and Equity
Deposits:
Noninterest-bearing demand	$	2,092,823	$	2,291,246
Interest-bearing demand	1,453,167		1,415,277
Savings and money market	2,199,028		2,225,903
Time	991,205		706,732
Total deposits	6,736,223		6,639,158
FHLB advances and other short-term borrowings	5,000		—
Long-term debt	105,859		105,616
Lease liability	35,889		40,731
Other liabilities	96,921		75,317
Total liabilities	6,979,892		6,860,822
Contingent liabilities and other commitments (see Note 22)
Equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding none at: December 31, 2022, and December 31, 2021	—		—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 27,025,070 at December 31, 2022 and 27,714,071 at December 31, 2021	408,071		426,091
Additional paid-in capital	101,346		98,073
Retained earnings	87,438		42,015
Accumulated other comprehensive loss	(143,984)		(7,960)
Total shareholders' equity	452,871		558,219
Non-controlling interest	—		48
Total equity	452,871		558,267
Total liabilities and equity	$	7,432,763	$	7,419,089

See accompanying notes to consolidated financial statements.

78

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31,
	2022		2021		2020
	(Dollars in thousands, except per share data)
Interest income:
Interest and fees on loans	$	200,280	$	193,778	$	186,129
Interest and dividends on investment securities:
Taxable investment securities	28,041		22,430		23,302
Tax-exempt investment securities	3,204		1,972		2,392
Dividend income on investment securities	21		75		69
Interest on deposits in other financial institutions	740		262		46
Dividend income on FHLB stock	370		245		480
Total interest income	232,656		218,762		212,418
Interest expense:
Interest on deposits:
Demand	806		384		510
Savings and money market	4,188		1,240		2,416
Time	6,114		1,992		7,489
Interest on short-term borrowings	1,055		2		718
Interest on long-term debt	4,930		4,097		3,602
Total interest expense	17,093		7,715		14,735
Net interest income	215,563		211,047		197,683
(Credit) provision for credit losses	(1,273)		(14,591)		42,111
Net interest income after provision for credit losses	216,836		225,638		155,572
Other operating income:
Mortgage banking income	3,810		7,732		13,682
Service charges on deposit accounts	8,197		6,358		6,234
Other service charges and fees	19,025		18,367		14,867
Income from fiduciary activities	4,565		5,075		4,829
Income from bank-owned life insurance	1,865		3,493		3,803
Net gains (losses) on sales of investment securities	8,506		150		(201)
Other	1,951		1,885		1,984
Total other operating income	47,919		43,060		45,198
Other operating expense:
Salaries and employee benefits	88,781		90,213		83,848
Net occupancy	16,963		16,133		15,162
Legal and professional services	10,792		10,452		9,035
Computer software expense	14,840		13,304		12,717
Communication expense	2,958		3,271		3,225
Equipment	4,238		4,344		4,531
Advertising expense	4,151		5,495		3,791
Other	23,263		19,834		19,428
Total other operating expense	165,986		163,046		151,737
Income before income taxes	98,769		105,652		49,033
Income tax expense	24,841		25,758		11,760
Net income	$	73,928	$	79,894	$	37,273
Per common share data:
Basic earnings per share	$	2.70	$	2.85	$	1.33
Diluted earnings per share	2.68		2.83		1.32
Cash dividends declared	1.04		0.96		0.92

See accompanying notes to consolidated financial statements.

79

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

	Year Ended December 31,
	2022		2021		2020
	(Dollars in thousands)
Net income	$	73,928	$	79,894	$	37,273
Other comprehensive (loss) income, net of tax:
Net change in unrealized (loss) gain on investment securities	(145,443)		(30,317)		11,826
Net change in unrealized gain on derivatives	4,645		—		—
Defined benefit plans	4,774		2,229		(107)
Total other comprehensive (loss) income, net of tax	(136,024)		(28,088)		11,719
Comprehensive (loss) income	$	(62,096)	$	51,806	$	48,992

See accompanying notes to consolidated financial statements.

80

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

	Common Shares Outstanding	Preferred Stock		Common Stock		Additional Paid-In Capital		(Accumulated Deficit) Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interest		Total
	(Dollars in thousands, except per share data)
Balance at December 31, 2019	28,289,257	$	—	$	447,602	$	91,611	$	(19,102)	$	8,409	$	—	$	528,520
Impact of the adoption of new accounting standards (1)	—	—		—		—		(3,156)		—		—		(3,156)
Adjusted balance at January 1, 2020	28,289,257	—		447,602		91,611		(22,258)		8,409		—		525,364
Net income	—	—		—		—		37,273		$	—	—		37,273
Other comprehensive income	—	—		—		—		—		11,719		—		11,719
Cash dividends declared ($0.92 per share)	—	—		—		—		(25,935)		—		—		(25,935)
14,600 net shares of common stock purchased by the directors' deferred compensation plan	—	—		(218)		—		—		—		—		(218)
206,802 shares of common stock repurchased and other related costs	(206,802)	—		(4,749)		—		—		—		—		(4,749)
Share-based compensation expense	100,885	—		—		3,231		—		—		—		3,231
Non-controlling interest	—	—		—		—		—		—		48		48
Balance at December 31, 2020	28,183,340	$	—	$	442,635	$	94,842	$	(10,920)	$	20,128	$	48	$	546,733
Net income	—	—		—		—		79,894		—		—		79,894
Other comprehensive loss	—	—		—		—		—		(28,088)		—		(28,088)
Cash dividends declared ($0.96 per share)	—	—		—		—		(26,959)		—		—		(26,959)
31,748 net shares of common stock sold by the directors' deferred compensation plan	—	—		889		—		—		—		—		889
696,894 shares of common stock repurchased and other related costs	(696,894)	—		(18,669)		—		—		—		—		(18,669)
Share-based compensation expense	227,625	—		1,236		3,231		—		—		—		4,467
Balance at December 31, 2021	27,714,071	$	—	$	426,091	$	98,073	$	42,015	$	(7,960)	$	48	$	558,267
Net income	—	—		—		—		73,928		—		—		73,928
Other comprehensive loss	—	—		—		—		—		(136,024)		—		(136,024)
Cash dividends declared ($1.04 per share)	—	—		—		—		(28,505)		—		—		(28,505)
78,670 net shares of common stock sold by directors' deferred compensation plan	—	—		2,041		—		—		—		—		2,041
868,613 shares of common stock repurchased and other related costs	(868,613)	—		(20,740)		—		—		—		—		(20,740)
Share-based compensation expense	179,612	—		679		3,273		—		—		—		3,952
Non-controlling interest	—	—		—		—		—		—		(48)		(48)
Balance at December 31, 2022	27,025,070	$	—	$	408,071	$	101,346	$	87,438	$	(143,984)	$	—	$	452,871
(1) Represents the impact of the adoption of Accounting Standards Update ("ASU") 2016-13.

See accompanying notes to consolidated financial statements.

81

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2022		2021		2020
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	73,928	$	79,894	$	37,273
Adjustments to reconcile net income to net cash provided by operating activities:
(Credit) provision for credit losses	(1,273)		(14,591)		42,111
Depreciation and amortization of premises and equipment	6,865		6,984		6,223
Loss on disposals of premises and equipment	295		101		839
Non-cash lease (income) expense	(401)		2,262		1,051
Cash flows for operating leases	(5,896)		(6,533)		(6,371)
Amortization of mortgage servicing rights	1,295		3,468		6,167
Write down of other real estate, net of loss on sale	—		—		79
Net amortization and accretion of premium/discount on investment securities	4,395		9,176		9,905
Share-based compensation expense	3,273		3,231		3,231
Net (gain) loss on sales of investment securities	(8,506)		(150)		201
Net gain on sales of residential mortgage loans	(1,778)		(6,376)		(16,043)
Proceeds from sales of loans held for sale	80,237		166,144		418,381
Origination of loans held for sale	(76,033)		(146,612)		(409,942)
Equity in earnings of unconsolidated entities	(184)		(365)		(415)
Distributions from unconsolidated entities	237		480		330
Net increase in cash surrender value of bank-owned life insurance	(10)		(5,043)		(5,845)
Deferred income tax expense (benefit)	25,810		10,828		(13,087)
Net tax benefit (expense) from share-based compensation	146		200		(258)
Net change in other assets and liabilities	11,721		7,390		2,962
Net cash provided by operating activities	114,121		110,488		76,792
Cash flows from investing activities:
Proceeds from maturities of and calls on available-for-sale investment securities	168,224		291,734		351,180
Proceeds from sales of available-for-sale and equity investment securities	—		281,191		180,103
Purchases of available-for-sale investment securities	(89,058)		(1,071,360)		(581,008)
Sale of Visa Class B common stock	8,506		—		—
Proceeds from maturities of and calls on held-to-maturity investment securities	33,469		—		—
Purchases of held-to-maturity investment securities	(20,041)		—		—
Loan (originations) payments, net	(133,501)		128,595		(479,619)
Purchases of loan portfolios	(323,402)		(266,712)		(53,158)
Proceeds from sales of loans originated for investment	—		—		10,691
Proceeds from sales of foreclosed loans and other real estate	—		—		213
Purchases of bank-owned life insurance	(1,300)		(3,550)		—
Proceeds from bank-owned life insurance death benefits	2,491		2,606		2,340
Purchases of premises and equipment	(18,440)		(22,161)		(25,997)
Contributions to unconsolidated entities	(10,249)		(2,912)		(8,437)
(Purchases of) proceeds from redemption of FHLB stock	(1,182)		273		6,746
Net cash used in investing activities	(384,483)		(662,296)		(596,946)
Cash flows from financing activities:
Net increase in deposits	97,065		843,040		676,095
Net increase (decrease) in FHLB advances and other short-term borrowings	5,000		(22,000)		(128,000)
Proceeds from long-term debt	—		—		119,782
Repayments of long-term debt	—		—		(115,944)
Cash dividends paid on common stock	(28,505)		(26,959)		(25,935)
Repurchases of common stock	(20,740)		(18,669)		(4,749)
Net proceeds from issuance of common stock and stock option exercises	679		1,236		—
Net cash provided by financing activities	53,499		776,648		521,249
Net (decrease) increase in cash and cash equivalents	(216,863)		224,840		1,095
Cash and cash equivalents at beginning of year	328,907		104,067		102,972
Cash and cash equivalents at end of year	$	112,044	$	328,907	$	104,067
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	13,476	$	8,320	$	17,296
Income taxes	5,581		22,672		20,044
Supplemental non-cash disclosures:
Net change in common stock held by directors' deferred compensation plan	$	(2,041)	$	(889)	$	218
Net reclassification of loans to foreclosed loans and other real estate	—		—		128
Net transfer of portfolio loans to loans held for sale	—		—		6,565
Net transfer of investment securities from available-for-sale to held-to-maturity at fair value	675,177		—		—
Amortization of unrealized losses on investment securities transferred to held-to-maturity at fair value	4,295		—		—
Other intangible assets and services provided in exchange for Swell common stock	1,500		—		—

See accompanying notes to consolidated financial statements.

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CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2022, 2021, and 2020

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Central Pacific Financial Corp. is a bank holding company. Our principal operating subsidiary, Central Pacific Bank, is a full-service commercial bank with 27 branches and 64 ATMs located throughout the state of Hawaii. The bank engages in a broad range of lending activities including originating commercial loans, commercial and residential mortgage loans, home equity loans and consumer loans. The bank also offers a variety of deposit products and services. These include personal and business checking and savings accounts, money market accounts and time certificates of deposit. Other products and services include debit cards, internet banking, mobile banking, cash management services, full-service ATMs, safe deposit boxes, international banking services, night depository facilities, foreign exchange and wire transfers. Wealth management products and services include non-deposit investment products, annuities, insurance, investment management, asset custody and general consultation and planning services.

When we refer to "the Company," "we," "us" or "our," we mean Central Pacific Financial Corp. and Subsidiaries (consolidated). When we refer to "Central Pacific Financial Corp." or to the holding company, we are referring to the parent company on a standalone basis. When we refer to "our bank" or "the bank," we mean "Central Pacific Bank."

The banking business depends on rate differentials, the difference between the interest rates paid on deposits and other borrowings and the interest rates received on loans extended to customers and investment securities held in our portfolio. These rates are highly sensitive to many factors that are beyond our control. Accordingly, the earnings and growth of the Company are subject to the influence of domestic and foreign economic conditions, including inflation, recession and unemployment.

Operating Segments

Operations, resource allocation and financial performance are managed by the Company's Executive Committee, or its chief operating decision maker ("CODM"), on a Company-wide basis. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable segment.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

In January 2020, the bank acquired a 50% ownership interest in a mortgage loan origination and brokerage company, Oahu HomeLoans, LLC. The bank concluded that the investment meets the consolidation requirements under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810, "Consolidation." The bank also concluded that the entity meets the definition of a variable interest entity and that we are the primary beneficiary of the variable interest entity. Accordingly, the investment has been consolidated into the Company's financial statements. In March 2022, Oahu HomeLoans, LLC was terminated.

The bank has 50% ownership interests in three other mortgage loan origination and brokerage companies which are accounted for using the equity method and are included in investment in unconsolidated entities in the Company's consolidated balance sheets: Gentry HomeLoans, LLC, Haseko HomeLoans, LLC and Island Pacific HomeLoans, LLC.

The bank has low income housing tax credit partnership investments that are accounted for under the proportional amortization method and are included in investment in unconsolidated entities in the Company's consolidated balance sheets.

During the first quarter of 2022, the Company invested $2.0 million in Swell Financial, Inc. ("Swell"), which included $1.5 million in other intangible assets and services provided in exchange for Swell non-voting common stock and $0.5 million in cash in exchange for Swell preferred stock. During the fourth quarter of 2022, Swell launched a consumer banking application that combines checking, credit and more into one integrated account, with Central Pacific Bank serving as the bank sponsor. Swell began with an alpha pilot, where members off its waitlist were invited to sign up for Swell Cash and Credit. During the fourth quarter of 2022, Elevate announced that it had entered into a definitive agreement to be acquired by Park Cities Asset Management, LLC, who is also the largest investor in Swell. The Company does not have the ability to exercise

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significant influence over Swell and the investment does not have a readily determinable fair value. As a result, the Company determined that the cost method of accounting for the investment was appropriate. The investment is included in investments in unconsolidated entities in the Company's consolidated balance sheets.

In 2021, the Company committed $2.0 million to the JAM FINTOP Banktech Fund, L.P., an investment fund designed to help develop and accelerate technology adoption at community banks across the United States. The Company does not have the ability to exercise significant influence over the JAM FINTOP Banktech Fund, L.P. and the investment does not have a readily determinable fair value. As a result, the Company determined that the cost method of accounting for the investment was appropriate. The investment is included in investment in unconsolidated entities in the Company's consolidated balance sheets.

The Company also has other non-controlling equity investments in affiliates that are accounted for under the cost method and are included in investment in unconsolidated entities in the Company's consolidated balance sheets.

Investments in unconsolidated entities accounted for under the equity, proportional amortization and cost methods were $0.1 million, $40.9 million and $5.6 million, respectively, at December 31, 2022 and $0.2 million, $25.9 million and $3.6 million, respectively, at December 31, 2021. Our policy for determining impairment of these investments includes an evaluation of whether a loss in value of an investment is other than temporary. Evidence of a loss in value includes absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain an earnings capacity which would justify the carrying amount of the investment. Impairment tests are performed whenever indicators of impairment are present. If the value of an investment declines and it is considered other than temporary, the investment is written down to its respective fair value in the period in which this determination is made.

The Company sponsors the Central Pacific Bank Foundation, which is not consolidated in the Company's financial statements.

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions that reflect the reported amounts of assets and liabilities and disclosures of contingent assets and contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance and provision for credit losses, reserve for credit losses on off-balance sheet credit exposures, deferred income tax assets and income tax expense, valuation of investment securities, mortgage servicing rights and the related amortization thereon, the liability related to the Supplemental Executive Retirement Plans, and the fair value of certain financial instruments.

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from financial institutions, interest-bearing deposits in other financial institutions, federal funds sold and all highly liquid investments with maturities of three months or less at the time of purchase. Net cash flows are reported for customer loan and deposit transactions, interest-bearing deposits in other financial institutions, and federal funds purchased and repurchase agreements.

Investment Securities

Investments in debt securities are designated as trading, available-for-sale ("AFS"), or held-to-maturity ("HTM"). Investments in debt securities are designated as HTM only if we have the positive intent and ability to hold these securities to maturity. HTM securities are reported at amortized cost in the consolidated balance sheets. Trading securities are reported at fair value, with changes in fair value included in net income. Debt securities not classified as HTM or trading are classified as AFS and are reported at fair value, with net unrealized gains and losses, net of applicable taxes, excluded from net income and included in accumulated other comprehensive income (loss) ("AOCI").

Transfers of investment securities from AFS to HTM are accounted for at fair value as of the date of the transfer. The difference between the fair value and the par value at the date of transfer is considered a premium or discount and is accounted for accordingly. Any unrealized gain or loss at the date of the transfer is reported in AOCI, and is amortized over the remaining life of the security as an adjustment of yield in a manner consistent with the amortization of any premium or discount, and will offset or mitigate the effect on interest income of the amortization of the premium or discount for that HTM security.

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Equity securities with readily determinable fair values are carried at fair value, with changes in fair value included in net income. Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.

The Company classifies its investment securities portfolio into the following major security types: mortgage-backed securities ("MBS"), other debt securities and equity securities. The Company’s MBS portfolio is comprised primarily of residential MBS issued by United States of America ("U.S.") government entities and agencies. These securities are either explicitly or implicitly guaranteed by an agency of the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The remainder of the MBS portfolio are commercial MBS issued by U.S government entities and agencies (for which there is no minimum credit rating), non-agency residential MBS (which shall meet a minimum credit rating of AAA) and non-agency commercial MBS (which shall meet a minimum credit rating of BBB and meet minimum internal credit guidelines).

The Company’s other debt securities portfolio is comprised of obligations issued by U.S. government entities and agencies, obligations issued by states and political subdivisions (which shall meet a minimum credit rating of BBB), and corporate bonds (which shall meet a minimum credit rating of BBB-).

Interest income on investment securities includes amortization of premiums and accretion of discounts. We amortize premiums to the earliest call date. We accrete discounts associated with investment securities using the effective interest method over the life of the respective security instrument. Gains and losses on the sale of investment securities are recorded on the trade date and determined using the specific identification method.

A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. Interest accrued but not received for a security placed on non-accrual status is reversed against current period interest income. There were no investment securities on nonaccrual status as of December 31, 2022 and the Company did not reverse any accrued interest against interest income during the year ended December 31, 2022.

Allowance for Credit Losses (“ACL”) for AFS Debt Securities

AFS debt securities in an unrealized loss position are evaluated for impairment at least quarterly. For AFS debt securities in an unrealized loss position, the Company first assesses whether or not it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the investment security’s amortized cost basis is written down to fair value through net income.

For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In conducting this assessment for debt securities in an unrealized loss position, management evaluates the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the investment security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any unrealized loss that has not been recorded through an ACL is recognized in AOCI.

Changes in the ACL are recorded as a provision (credit) for credit losses. Losses are charged against the ACL when management believes the uncollectibility of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

As of December 31, 2022, the declines in market values of our AFS debt securities were primarily attributable to changes in interest rates and volatility in the financial markets. Because we have no intent to sell securities in an unrealized loss position and it is not more likely than not that we will be required to sell such securities before recovery of its amortized cost basis, we do not believe a credit loss exists and an ACL was not recorded.

The Company has made a policy election to exclude accrued interest receivable from the amortized cost basis of debt securities and report accrued interest receivable together with accrued interest on loans in the consolidated balance sheets. Accrued interest receivable on AFS debt securities totaled $3.1 million and $4.6 million as of December 31, 2022 and 2021, respectively. Accrued interest receivable on AFS debt securities is excluded from the estimate of credit losses.

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ACL for HTM Debt Securities

Management measures expected credit losses on HTM debt securities on a collective basis by major security type. For pools of such securities with common risk characteristics, the historical lifetime probability of default and severity of loss in the event of default is derived or obtained from external sources. Expected credit losses for these securities are estimated using a loss rate methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

Expected credit loss on each security in the HTM portfolio that do not share common risk characteristics with any of the pools of debt securities is individually measured based on net realizable value, or the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the recorded amortized cost basis of the security.

Securities in the HTM portfolio are issued by or contain collateral issued by U.S. government sponsored enterprises ("GSEs") and carry implicit guarantees from the U.S. government. Due to the implicit guarantee and the long history of no credit losses, no allowance for credit losses was recorded for these securities.

Accrued interest on HTM debt securities is reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses.

Accrued interest receivable on HTM debt securities totaled $1.3 million as of December 31, 2022. The Company did not have any HTM debt securities or accrued interest receivable on HTM debt securities as of December 31, 2021.

Loans Held for Sale

Loans held for sale consists of the following two types: (1) Hawaii residential mortgage loans that are originated with the intent to sell them in the secondary market and (2) non-residential mortgage loans in both Hawaii and the U.S. Mainland that were originated with the intent to be held in our portfolio but were subsequently transferred to the held for sale category. Hawaii residential mortgage loans classified as held for sale are carried at the lower of cost or fair value on an aggregate basis, while the non-residential Hawaii and U.S. Mainland loans are recorded at the lower of cost or fair value on an individual basis. Net fees and costs associated with originating and acquiring the Hawaii residential mortgage loans held for sale are deferred and included in the basis for determining the gain or loss on sales of loans held for sale. We report the fair values of the non-residential mortgage loans classified as held for sale net of applicable selling costs on our consolidated balance sheets.

Loans originated with the intent to be held in our portfolio are subsequently transferred to held for sale when our intent to hold for the foreseeable future has changed. At the time of a loan's transfer to the held for sale account, the loan is recorded at the lower of cost or fair value. Any reduction in the loan's value is reflected as a write-down of the recorded investment resulting in a new cost basis, with a corresponding reduction in the allowance for credit losses.

In subsequent periods, if the fair value of a loan classified as held for sale is less than its cost basis, a valuation adjustment is recognized in our consolidated statement of income in other operating expense and the carrying value of the loan is adjusted accordingly. The valuation adjustment may be recovered in the event that the fair value increases, which is also recognized in our consolidated statement of income in other operating expense.

The fair value of loans classified as held for sale are generally based upon quoted prices for similar assets in active markets, acceptance of firm offer letters with agreed upon purchase prices, discounted cash flow models that take into account market observable assumptions, or independent appraisals of the underlying collateral securing the loans. Collateral values are determined based on appraisals received from qualified valuation professionals and are obtained periodically or when indicators that property values may be impaired are present.

We sell residential mortgage loans under industry standard contractual provisions that include various representations and warranties, which typically cover ownership of the loan, compliance with loan criteria set forth in the applicable agreement, validity of the lien securing the loan, and other similar matters. We may be required to repurchase certain loans sold with identified defects, indemnify the investor, or reimburse the investor for any credit losses incurred. Our repurchase risk generally relates to early payment defaults and borrower fraud. We establish residential mortgage repurchase reserves to reflect this risk based on our estimate of losses after considering a combination of factors, including our estimate of future repurchase activity and our projection of estimated credit losses resulting from repurchased loans.

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Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost, net of the ACL. Amortized cost is the unpaid principal amount outstanding, net of unamortized purchase premiums and discounts, unamortized deferred loan origination fees and costs and cumulative principal charge-offs. Purchase premiums and discounts are generally amortized into interest income over the contractual terms of the underlying loans using the effective interest method. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income over the life of the related loan as an adjustment to yield and are amortized using the interest method over the contractual term of the loan, adjusted for actual prepayments. Deferred loan fees and costs on loans paid in full are recognized as a component of interest income on loans.

Interest income on loans is accrued at the contractual rate of interest on the unpaid principal balance. Accrued interest receivable on loans totaled $16.0 million and $12.1 million at December 31, 2022 and 2021, respectively, and is reported together with accrued interest on AFS debt securities on the consolidated balance sheets. Upon adoption of Accounting Standards Update ("ASU") 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” the Company made the accounting policy election to not measure an estimate of credit losses on accrued interest receivable as the Company writes off any uncollectible accrued interest receivable in a timely manner.

Nonaccrual Loans

The Company determines delinquency status by considering the number of days full payments required by the contractual terms of the loan are past due. Commercial, scored small business, automobile and other consumer loans are generally placed on nonaccrual status when principal and/or interest payments are 90 days past due, or earlier should management determine that the borrowers will be unable to meet contractual principal and/or interest obligations, unless the loans are well-secured and in the process of collection. Residential mortgage and home equity loans, are generally placed on nonaccrual status when principal and/or interest payments are 120 days past due, or earlier should management determine that the borrowers will be unable to meet contractual principal and/or interest obligations, unless the loans are well-secured and in the process of collection. When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income should management determine that the collectability of such accrued interest is doubtful. All subsequent receipts are applied to principal outstanding and no interest income is recognized unless the financial condition and payment record of the borrowers warrant such recognition and the loan is restored to accrual status. A nonaccrual loan may be restored to an accrual basis when principal and interest payments are current for a predetermined period, normally at least six months, and full payment of principal and interest is reasonably assured.

Troubled Debt Restructuring (“TDR”)

A loan is accounted for and reported as a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) the Company grants a concession to the borrower experiencing financial difficulty that it would not otherwise consider for a borrower or transaction with similar credit risk characteristics. A restructuring that results in only an insignificant delay in payment is not considered a concession. A delay may be considered insignificant if the payments subject to the delay are insignificant relative to the unpaid principal or collateral value and the contractual amount due, or the delay in timing of the restructured payment period is insignificant relative to the frequency of payments, the debt’s original contractual maturity or original expected duration.

TDRs that are performing and on accrual status as of the date of the modification remain on accrual status. TDRs that are nonperforming as of the date of modification generally remain as nonaccrual until the prospect of future payments in accordance with the modified loan agreement is reasonably assured, generally demonstrated when the borrower maintains compliance with the restructured terms for a predetermined period, normally at least six months. TDRs with temporary below-market concessions remain designated as a TDR regardless of the accrual or performance status until the loan is paid off.

Expected credit losses are estimated on a collective (pool) basis when they share similar risk characteristics. If a TDR financial asset shares similar risk characteristics with other financial assets, it is evaluated with those other financial assets on a collective basis. If it does not share similar risk characteristics with other financial assets, it is evaluated individually. The Company’s ACL reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. The Company has determined that a TDR is reasonably expected no later than the point when the lender concludes that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession from the lender to avoid a default. Reasonably expected TDRs and executed TDRs are evaluated to determine the required ACL using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the ACL is determined by discounting the expected future cash flows at the original interest rate of the loan.

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Based on the underlying risk characteristics, TDRs performing in accordance with their modified contractual terms may be collectively evaluated.

ACL for Loans

Under the current expected credit loss methodology, the ACL for loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Our policy is to charge off a loan in the period in which the loan is deemed to be uncollectible and all interest previously accrued but not collected is reversed against current period interest income. We consider a loan to be uncollectible when it is probable that a loss has been incurred and the Company can make a reasonable estimate of the loss. In these instances, the likelihood of and/or timeframe for recovery of the amount due is uncertain, weak, or protracted. Subsequent receipts, if any, are credited first to the remaining principal, then to the ACL for loans as recoveries, and finally to unaccrued interest.

The ACL for loans represents management's estimate of all expected credit losses over the expected life of our existing loan portfolio. Management estimates the ACL balance using relevant available information about the collectability of cash flows, from internal and external sources, including historical information relating to past events, current conditions, and reasonable and supportable forecasts of future economic conditions. When the Company is unable to forecast future economic events, management may revert to historical information.

The Company's methodologies incorporate a reasonable and supportable forecast period of one year and revert to historical loss information on a straight-line basis over one year when its forecast is no longer deemed reasonable and supportable.

The Company maintains an ACL at an appropriate level as of a given balance sheet date to absorb management’s best estimate of expected life of loan credit losses.

Historical credit loss experience provides the basis for the Company’s expected credit loss estimate. Adjustments to historical loss information may be made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or when historical asset terms do not reflect the contractual terms of the financial assets being evaluated.

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

The Company uses the Moody’s Analytics Baseline forecast for its economic forecast consideration. The Moody’s Analytics Baseline forecast includes both National and Hawaii specific economic indicators. The Moody’s Analytics forecast service is widely used in the industry and is reasonable and supportable. It is updated at least monthly and includes a variety of upside and downside economic scenarios from the Baseline. Generally the Company will use the most recent Baseline forecast from Moody’s as of the balance sheet date. During times of economic and market volatility or instability, the Company may include a qualitative factor for forecast imprecision that factors in other potential economic scenarios available by Moody’s Analytics or may apply overrides to its statistical models to enhance the reasonableness of its loss estimates.

The ACL is measured on a collective or pool basis when similar risk characteristics exist. The Company segments its portfolio generally by Federal Financial Institutions Examination Council ("FFIEC") Call Report codes. Loan pools are further segmented by risk utilizing risk ratings or bands of payment delinquency (including TDR or non-accrual status), depending on what is most appropriate for each segment. Additional sub-segmentation may be utilized to identify groups of loans with unique risk characteristics relative to the rest of the portfolio.

The Company relies on a third-party platform which offers multiple methodologies to measure historical life-of-loan losses. The Company has also developed statistical models internally to incorporate future economic conditions and forecast expected credit losses based on various macro-economic indicators such as unemployment and income levels.

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The Company has identified the following portfolio segments to measure the allowance for credit losses. For all segments the economic forecast length is one year and reversion method is one year.

Loan Segment	Historical Lifetime Loss Method	Historical Lookback Period	Economic Forecast Length	Reversion Method
Construction	Probability of Default/Loss Given Default ("PD/LGD")	2008-Present	One Year	One Year (straight-line basis)
Commercial real estate	PD/LGD	2008-Present
Multi-family mortgage	PD/LGD	2008-Present
Commercial, financial and agricultural	PD/LGD	2008-Present
Home equity lines of credit	Loss-Rate Migration	2008-Present
Residential mortgage	Loss-Rate Migration	2008-Present
Consumer - other revolving	Loss-Rate Migration	2008-Present
Consumer - non-revolving	Loss-Rate Migration	2008-Present
Purchased Mainland portfolios (Dealer, Other consumer)	Weighted-Average Remaining Maturity ("WARM")	2008-Present

Below is a description and the risk characteristics of each segment:

Construction loans

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

Commercial real estate loans

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

Multi-family mortgage loans

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

Commercial, financial and agricultural loans

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

Paycheck Protection Program ("PPP") loans are also in this category and are considered lower risk as they are guaranteed by the Small Business Administration ("SBA") and may be forgivable in whole or in part in accordance with the requirements of the PPP.

Residential mortgage loans

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

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Home equity lines of credit

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

Consumer loans - other revolving

This segment consists of consumer unsecured lines of credit. Its predominant risk characteristics relate to current and projected economic conditions as well as employment and income levels attributed to the borrower.

Consumer loans - non-revolving

This segment consists of consumer non-revolving loans, including dealer loans. Its predominant risk characteristics relate to current and projected economic conditions as well as employment and income levels attributed to the borrower.

Purchased consumer portfolios

Credit risk for purchased consumer loans is managed on a pooled basis. The predominant risk characteristics of purchased consumer loans include current and projected economic conditions, employment and income levels, and the quality of purchased consumer loans.

Below is a description of the methodologies mentioned above:

Probability of Default ("PD")/Loss Given Default ("LGD")

The PD/LGD calculation is based on a cohort methodology whereby loans in the same cohort are tracked over time to identify defaults and corresponding losses. PD/LGD analysis requires a portfolio segmented into pools, and we elected to then further sub-segment by risk characteristics such as Risk Rating, TDR status and nonaccrual status to measure losses accurately. PD measures the count or dollar amount of loans that defaulted in a given cohort. LGD measures the losses related to the loans that defaulted. Total loss rate is calculated using the formula, "PD times LGD".

Loss-Rate Migration

Loss-rate migration analysis is a cohort-based approach that measures cumulative net charge-offs over a defined time-horizon to calculate a loss rate that will be applied to the loan pool. Loss-rate migration analysis requires the portfolio to be segmented into pools then further sub-segmented by risk characteristics such as days past due, delinquency counters, TDR status and nonaccrual status to measure loss rates accurately. The key inputs to run a loss-rate migration analysis are the length and frequency of the migration period, the dates for the migration periods to start and the number of migration periods used for the analysis. For each migration period, the analysis will determine the outstanding balance in each segment and/or sub-segment at the start of each period. These loans will then be followed for the length of the migration period to identify the amount of associated charge-offs and recoveries. A loss rate for each migration period is calculated using the formula, "net charge-offs over the period divided by beginning loan balance".

Weighted-Average Remaining Maturity ("WARM")

Under the WARM methodology, lifetime losses are calculated by determining the remaining life of the loan pool and then applying a loss rate which includes a forecast component over this remaining life. The methodology considers historical loss experience as well as a loss forecast expectation to estimate credit losses for the remaining balance of the loan pool. The calculated loss rate is applied to the contractual term (adjusted for prepayments) to determine the loan pool’s current expected credit losses.

Other

If a loan ceases to share similar risk characteristics with other loans in its segment, it will be moved to a different pool sharing similar risk characteristics. Loans that do not share risk characteristics are evaluated on an individual basis based on the fair value of the collateral or other approaches such as discounted cash flow (“DCF”) techniques. Loans evaluated individually are not included in the collective evaluation.

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Determining the Term

Expected credit losses represent life-of-loan loss estimates and are calculated based on the estimated remaining life of the loans which considers the contractual term of the loans, prepayments and other assumptions. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company. If such renewal options or extensions are present, these options are evaluated in determining the contractual term.

Reserve for Off-Balance Sheet Credit Exposures

The Company maintains a separate and distinct reserve for off-balance-sheet credit exposures which is included in other liabilities in the Company’s consolidated balance sheets. The Company estimates the amount of expected losses by calculating a commitment usage factor for letters of credit, non-revolving lines of credit, and revolving lines of credit over the remaining life during which the Company is exposed to credit risk via a contractual obligation to extend credit.

Letters of credit are generally unlikely to advance since they are typically in place only to ensure various forms of performance of the borrowers. Many of the letters of credit are cash secured. Non-revolving lines of credit are determined to be likely to advance as these are typically construction lines. Meanwhile, the likelihood of revolving lines of credit advancing varies with each individual borrower. Therefore, the future usage of each line was estimated based on the average line utilization of the revolving line of credit portfolio as a whole.

The estimate also applies the loss factors for each loan type used in the ACL for loans methodology, which is based on historical losses, economic conditions and reasonable and supportable forecasts. The reserve for off-balance sheet credit exposures is adjusted as a provision for off-balance sheet credit exposures. In 2021, the provision for off-balance sheet credit exposures was reclassified from other operating expense and is now included in the provision for credit losses in the consolidated statements of income. The consolidated statements of income in prior periods have been adjusted retrospectively to reflect this change.

Premises and Equipment

Premises and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are included in other operating expense and are computed using the straight-line method over the shorter of the estimated useful lives of the assets or the applicable leases. Useful lives generally range from five to thirty-nine years for premises and improvements, and one to seven years for equipment. Major improvements and betterments are capitalized, while recurring maintenance and repairs are charged to operating expense. Net gains or losses on dispositions of premises and equipment are included in other operating income and operating expense.

Other Real Estate

Other real estate is composed of properties acquired through deed-in-lieu or foreclosure proceedings and is initially recorded at fair value less estimated costs to sell the property, thereby establishing the new cost basis of other real estate. Losses arising at the time of acquisition of such properties are charged against the ACL. Subsequent to acquisition, such properties are carried at the lower of cost or fair value less estimated selling expenses, determined on an individual asset basis. Any deficiency resulting from the excess of cost over fair value less estimated selling expenses is recognized as a valuation allowance. Any subsequent increase in fair value up to its cost basis is recorded as a reduction of the valuation allowance. Increases or decreases in the valuation allowance are included in other operating expense. Net gains or losses recognized on the sale of these properties are included in other operating income.

Mortgage Servicing Rights

Mortgage servicing rights are recorded when loans are sold to third-parties with servicing of those loans retained and we classify and pool our mortgage servicing rights into buckets of homogeneous characteristics. We utilize the amortization method to measure our mortgage servicing rights. Under the amortization method, we amortize our mortgage servicing rights in proportion to and over the period of net servicing income. Income generated as the result of new mortgage servicing rights is reported as gains on sales of loans and is a component of mortgage banking income in the other operating income section of our consolidated statements of income. Amortization of the servicing rights is also reported as a component of mortgage banking income. Ancillary income is recorded in other income.

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Initial fair value of the servicing right is calculated by a discounted cash flow model prepared by a third-party service provider based on market value assumptions at the time of origination and we assess the servicing right for impairment using current market value assumptions at each reporting period. Critical assumptions used in the discounted cash flow model include mortgage prepayment speeds, discount rates, and servicing income and costs. Variations in our assumptions could materially affect the estimated fair values. Changes to our assumptions are made when current trends and market data indicate that new trends have developed. Current market value assumptions based on loan product types (fixed-rate, adjustable-rate and government FHA loans) include average discount rates, servicing cost and ancillary income. Many of these assumptions are subjective and require a high level of management judgment. Our mortgage servicing rights portfolio and valuation assumptions are periodically reviewed by management.

Prepayment speeds may be affected by economic factors such as home price appreciation, market interest rates, the availability of other credit products to our borrowers and customer payment patterns. Prepayment speeds include the impact of all borrower prepayments, including full payoffs, additional principal payments and the impact of loans paid off due to foreclosure liquidations.

We perform an impairment assessment of our mortgage servicing rights quarterly or whenever events or changes in circumstance indicate that the carrying value of those assets may not be recoverable. Our impairment assessments involve, among other valuation methods, the estimation of future cash flows and other methods of determining fair value. Estimating future cash flows and determining fair values are subject to judgments and often involve the use of significant estimates and assumptions. The variability of the factors we use to perform our impairment tests depend on a number of conditions, including the uncertainty about future events and cash flows. All such factors are interdependent and, therefore, do not change in isolation. Accordingly, our accounting estimates may materially change from period to period due to changing market factors.

Federal Home Loan Bank Stock

We are a member of the Federal Home Loan Bank of Des Moines (the "FHLB"). The bank is required to obtain and hold a specific number of shares of capital stock of the FHLB equal to the sum of a membership investment requirement and an activity-based investment requirement. The securities are reported at cost and are presented separately in the consolidated balance sheets. 

Non-Controlling Interest

Non-controlling interest is comprised of capital and undistributed profits of the member of Oahu HomeLoans, LLC, other than the bank. Non-controlling interest on our consolidated balance sheet totaled $48 thousand at December 31, 2021. In March 2022, Oahu HomeLoans, LLC was terminated. As a result, the Company did not hold any non-controlling interest on its consolidated balance sheet at December 31, 2022.

Share-Based Compensation

Share-based compensation cost is measured at the grant date, based on the estimated fair value of the award. We use the Black-Scholes option-pricing model to determine the fair-value of stock options, and the market price of the Company's common stock at the grant date for restricted stock awards. Share-based compensation is recognized as expense over the employee's requisite service period, generally defined as the vesting period. For awards with graded vesting, we recognize compensation expense on a straight-line basis over their respective vesting period. The Company's accounting policy is to recognize forfeitures as they occur. See Note 15 - Share-Based Compensation for further discussion of our stock-based compensation.

Income Taxes

Deferred tax assets and liabilities are recognized for the estimated future tax effects attributable to temporary differences and carryforwards. A valuation allowance may be required if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining whether a valuation allowance is necessary, we consider the level of taxable income in prior years, to the extent that carrybacks are permitted under current tax laws, as well as estimates of future taxable income and tax planning strategies that could be implemented to accelerate taxable income, if necessary. If our estimates of future taxable income were materially overstated or if our assumptions regarding the tax consequences of tax planning strategies were inaccurate, some or all of our deferred tax assets may not be realized, which would result in a charge to earnings. Net deferred tax assets (liabilities) are included in other assets (liabilities) in the Company's consolidated balance sheets. We recognize interest and penalties related to income tax matters in other expense.

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We establish income tax contingency reserves for potential tax liabilities related to uncertain tax positions. Tax benefits are recognized when we determine that it is more likely than not that such benefits will be realized. Where uncertainty exists due to the complexity of income tax statutes, and where the potential tax amounts are significant, we generally seek independent tax opinions to support our positions. If our evaluation of the likelihood of the realization of benefits is inaccurate, we could incur additional income tax and interest expense that would adversely impact earnings, or we could receive tax benefits greater than anticipated which would positively impact earnings.

Earnings per Share

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period, excluding unvested restricted stock awards. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period, increased by the dilutive effect of stock options and stock awards, less shares held in a Rabbi trust pursuant to a deferred compensation plan for directors. As of December 31, 2022, the Company no longer has any shares held in a Rabbi trust pursuant to a deferred compensation plan for directors.

Forward Foreign Exchange Contracts

We are periodically a party to a limited amount of forward foreign exchange contracts to satisfy customer needs for foreign currencies. These contracts are not utilized for trading purposes and are carried at market value, with realized gains and losses included in fees on foreign exchange.

Derivatives and Hedging Activities

We recognize all derivatives on the balance sheet at fair value. On the date that we enter into a derivative contract, we designate the derivative as (1) a hedge of the fair value of an identified asset or liability ("fair value hedge"), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to an identified asset or liability ("cash flow hedge") or (3) a transaction not qualifying for hedge accounting ("free standing derivative"). For a fair value hedge, changes in the fair value of the derivative and, to the extent that it is effective, changes in the fair value of the hedged asset or liability, attributable to the hedged risk, are recorded in current period net income in the same financial statement category as the hedged item. For a cash flow hedge, changes in the fair value of the derivative, to the extent that it is effective, is recorded in other comprehensive income (loss) ("OCI"). These changes in fair value are subsequently reclassified to net income in the same period(s) that the hedged transaction affects net income in the same financial statement category as the hedged item. For free standing derivatives, changes in fair values are reported in current period other operating income.

Accounting Standards Adopted in 2022

In May 2021, the FASB issued ASU No. 2021-04, "Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options". ASU 2021-04 addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2021-04 effective January 1, 2022 and it did not have an impact on our consolidated financial statements as the Company does not have any freestanding equity-classified written call options.

In July 2021, the FASB issued ASU No. 2021-05, "Leases (Topic 842), Lessors—Certain Leases with Variable Lease Payments". ASU 2021-05 updates guidance in Topic 842 to restore long-standing accounting practice for certain sales-type leases with variable payments. ASU 2021-05 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company adopted ASU 2021-05 effective January 1, 2022 and it did not have an impact on our consolidated financial statements as the Company does not have sale-type leases with variable payments.

Impact of Other Recently Issued Accounting Pronouncements on Future Filings

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)". This ASU provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. Entities can (1) elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also

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(2) elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. Finally, entities can (3) make a one-time election to sell and/or reclassify held-to-maturity (“HTM”) debt securities that reference an interest rate affected by reference rate reform. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848)", which clarifies that all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in Topic 848. ASU 2020-04 and 2021-01 are elective and can be adopted between March 12, 2020 and December 31, 2022. In December 2022, the FASB issued ASU 2022-06, "Deferral of the Sunset Date of Topic 848", which extends the temporary relief provision period and allows companies to defer the adoption to December 31, 2024. The Company will elect optional expedients above for applicable contract modifications and hedge accounting for hedging relationships that meet the stated criteria. The Company does not expect the adoption of this pronouncement to have a material impact on the consolidated financial statements.

In March 2022, the FASB issued ASU No. 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method". ASU 2022-01 updates guidance in Topic 815, to expand the current last-of-layer method, which will allow multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments on a prospective basis. ASU 2022-01 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is in the process of evaluating the provisions of this ASU and its effects on our consolidated financial statements. However, we currently do not use the last-of-layer hedge accounting method.

In March 2022, the FASB issued ASU No. 2022-02, "Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures". ASU 2022-02 updates guidance in Topic 326, to eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, "Receivables—Troubled Debt Restructurings by Creditors", while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty and to require entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company is in the process of evaluating the provisions of this ASU and its effects on our consolidated financial statements and plans on making the adoption for the upcoming effective interim period.

In June 2022, the FASB issued ASU 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions". ASU 2022-03, (1) clarifies the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) amends a related illustrative example, and (3) introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company is in the process of evaluating the impact of this pronouncement on the consolidated financial statements.

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2. INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, fair value and related allowance for credit losses on held-to-maturity ("HTM") and available-for-sale ("AFS") investment securities as of December 31, 2022 and 2021 are as follows:

(Dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value		ACL
December 31, 2022
Held-to-Maturity:
Debt securities:
States and political subdivisions	$	41,840	$	—	$	(4,727)	$	37,113	$	—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	623,043		—		(63,376)		559,667		—
Total held-to-maturity investment securities	$	664,883	$	—	$	(68,103)	$	596,780	$	—
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		ACL
Available-for-Sale:
Debt securities:
States and political subdivisions	$	172,427	$	6	$	(36,681)	$	135,752	$	—
Corporate securities	36,206		—		(5,995)		30,211		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	28,032		—		(2,317)		25,715		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	498,989		—		(75,186)		423,803		—
Residential - Non-government sponsored entities ("Non-GSEs")	9,829		—		(1,167)		8,662		—
Commercial - U.S. GSEs and agencies	54,346		—		(8,202)		46,144		—
Commercial - Non-GSEs	1,541		—		(34)		1,507		—
Total available-for-sale investment securities	$	801,370	$	6	$	(129,582)	$	671,794	$	—

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		ACL
Available-for-Sale:
Debt securities:
States and political subdivisions	$	235,521	$	3,156	$	(1,849)	$	236,828	$	—
Corporate securities	41,687		24		(1,065)		40,646		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	35,833		69		(568)		35,334		—
Mortgage-backed securities:
Residential - U.S. GSEs	1,213,910		4,899		(19,993)		1,198,816		—
Residential - Non-GSEs	11,942		335		(64)		12,213		—
Commercial - U.S. GSEs and agencies	66,287		756		(1,194)		65,849		—
Commercial - Non-GSEs	41,328		685		—		42,013		—
Total available-for-sale investment securities	$	1,646,508	$	9,924	$	(24,733)	$	1,631,699	$	—

In March 2022, the Company transferred 41 investment securities that were classified as AFS to HTM. The investment securities had an amortized cost basis of $361.8 million and a fair market value of $329.5 million. On the date of transfer, these securities had a total net unrealized loss of $32.3 million. There was no impact to net income as a result of the reclassification.

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In May 2022, the Company transferred 40 investment securities that were classified as AFS to HTM. The investment securities had an amortized cost basis of $400.9 million and a fair market value of $343.7 million. On the date of transfer, these securities had a total net unrealized loss of $57.2 million. There was no impact to net income as a result of the reclassification.

These transfers were executed to mitigate the potential future impact to capital through accumulated other comprehensive loss in consideration of a rising interest rate environment and the impact of rising rates on the market value of the investment securities. The Company believes that it maintains sufficient liquidity for future business needs and it has the positive intent and ability to hold these securities to maturity.

The amortized cost and estimated fair value of our investment securities at December 31, 2022 by contractual maturity are shown below. Actual maturities may differ from contractual maturities as issuers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

	December 31, 2022
(Dollars in thousands)	Amortized Cost		Fair Value		Weighted Average Yield (1)
Held-to-Maturity:
Due in one year or less	$	—	$	—	—	%
Due after one year through five years	—		—		—
Due after five years through ten years	—		—		—
Due after ten years	41,840		37,113		2.26
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	623,043		559,667		1.93
Total held-to-maturity investment securities	$	664,883	$	596,780	1.95	%
Available-for-Sale:
Due in one year or less	$	5,774	$	5,751	2.91	%
Due after one year through five years	15,816		15,458		3.75
Due after five years through ten years	79,803		70,558		2.60
Due after ten years	135,272		99,911		2.43
Mortgage-backed securities
Residential - U.S. GSEs	498,989		423,803		2.03
Residential - Non-GSEs	9,829		8,662		3.33
Commercial - U.S. GSEs and agencies	54,346		46,144		2.35
Commercial - Non-GSEs	1,541		1,507		4.10
Total available-for-sale investment securities	$	801,370	$	671,794	2.24	%
Total investment securities	$	1,466,253	$	1,268,574	2.10	%

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

In 2022, the Company did not sell any investment securities except for its Class B common stock of Visa which is discussed later in this footnote.

In 2021, proceeds from the sale of available-for-sale investment securities were $279.5 million and resulted in a net realized gain of $0.2 million. Gross realized gains and losses on the sale of available-for-sale investment securities totaled $3.4 million and $3.2 million, respectively. In 2021, proceeds from the sale of equity investment securities were $1.7 million.

In 2020, proceeds from the sale of available-for-sale investment securities were $180.1 million and resulted in a net realized loss of $0.2 million. Gross realized losses and gains on the sale of available-for-sale investment securities totaled $0.9 million and $0.7 million, respectively.

Investment securities of $607.7 million and $455.8 million at December 31, 2022 and 2021, respectively, were pledged to secure public funds on deposit and other long-term and short-term borrowings.

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There were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity as of December 31, 2022 and 2021.

There were a total of 83 HTM securities in an unrecognized loss position at December 31, 2022. There were no HTM securities in an unrecognized loss position at December 31, 2021. There were a total of 243 and 153 AFS securities in an unrealized loss position at December 31, 2022 and 2021, respectively.

The following table summarizes HTM and AFS securities which were in an unrealized or unrecognized loss position at December 31, 2022 and 2021, aggregated by major security type and length of time in a continuous unrealized or unrecognized loss position:

	Less Than 12 Months				12 Months or Longer				Total
Description of Securities	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses
	(Dollars in thousands)
December 31, 2022
Held-to-Maturity:
Debt securities:
States and political subdivisions	$	37,113	$	(4,727)	$	—	$	—	$	37,113	$	(4,727)
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	559,667		(63,376)		—		—		559,667		(63,376)
Total temporarily impaired HTM investment securities	$	596,780	$	(68,103)	$	—	$	—	$	596,780	$	(68,103)

	Less Than 12 Months				12 Months or Longer				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
December 31, 2022
Available-for-Sale:
Debt securities:
States and political subdivisions	$	52,244	$	(4,807)	$	78,389	$	(31,874)	$	130,633	$	(36,681)
Corporate securities	—		—		30,211		(5,995)		30,211		(5,995)
U.S. Treasury obligations and direct obligations of U.S Government agencies	9,651		(245)		15,541		(2,072)		25,192		(2,317)
Mortgage-backed securities:
Residential - U.S. GSEs	149,624		(13,990)		274,179		(61,196)		423,803		(75,186)
Residential - Non-GSEs	2,890		(334)		5,772		(833)		8,662		(1,167)
Commercial - U.S. GSEs and agencies	25,034		(1,724)		21,110		(6,478)		46,144		(8,202)
Commercial - Non-GSEs	1,506		(34)		—		—		1,506		(34)
Total temporarily impaired AFS investment securities	$	240,949	$	(21,134)	$	425,202	$	(108,448)	$	666,151	$	(129,582)

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	Less Than 12 Months				12 Months or Longer				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
December 31, 2021
Available-for-Sale:
Debt securities:
States and political subdivisions	$	79,360	$	(1,252)	$	10,864	$	(597)	$	90,224	$	(1,849)
Corporate securities	8,633		(235)		21,960		(830)		30,593		(1,065)
U.S. Treasury obligations and direct obligations of U.S Government agencies	16,103		(415)		10,891		(153)		26,994		(568)
Mortgage-backed securities:
Residential - U.S. GSEs	926,570		(15,883)		114,747		(4,110)		1,041,317		(19,993)
Residential - Non-GSEs	—		—		938		(64)		938		(64)
Commercial - U.S. GSEs and agencies	6,313		(205)		16,281		(989)		22,594		(1,194)
Total temporarily impaired AFS investment securities	$	1,036,979	$	(17,990)	$	175,681	$	(6,743)	$	1,212,660	$	(24,733)

Investment securities in an unrealized loss position are evaluated on at least a quarterly basis, and include evaluating the changes in the investment securities' ratings issued by rating agencies and changes in the financial condition of the issuer. For mortgage-related securities, delinquency and loss information with respect to the underlying collateral, changes in levels of subordination for the Company's particular position within the repayment structure, and remaining credit enhancement as compared to projected credit losses of the security are also evaluated.

The Company has evaluated its AFS investment securities that are in an unrealized loss position and has determined that the unrealized losses on the Company's investment securities are unrelated to credit quality and are primarily attributable to changes in interest rates and volatility in the financial markets since purchase. All of the investment securities in an unrealized loss position continue to be rated investment grade by one or more major rating agencies. Because we have no intent to sell securities in an unrealized loss position and it is not more likely than not that we will be required to sell such securities before recovery of its amortized cost basis, the Company has not recorded an ACL and does not consider these securities to be other-than-temporarily impaired as of December 31, 2022, which would result in unrealized losses on these securities being recognized into income.

Visa and MasterCard Class B Common Stock

In 2022, the Company sold its 34,631 shares of Class B common stock of Visa, Inc. ("Visa") and received net proceeds of $8.5 million. As of December 31, 2022, the Company no longer holds any shares of Class B common stock of Visa.

The Company received these shares in 2008 as part of Visa's initial public offering ("IPO"). These shares were transferable only under limited circumstances until they can be converted into shares of the publicly traded Class A common stock. This conversion will not occur until the resolution of certain litigation, which is indemnified by Visa members. Since its IPO, Visa has funded a litigation reserve to settle these litigation claims. At its discretion, Visa may continue to increase the litigation reserve based upon a change in the conversion ratio of each member bank’s restricted Class B common stock to unrestricted Class A common stock.

Due to the existing transfer restriction and the uncertainty of the outcome of the Visa litigation, the Company determined that the Visa Class B common stock did not have a readily determinable fair value and chose to carry the shares on the Company's consolidated balance sheets at zero cost basis. As a result, the entire net proceeds of $8.5 million were recognized as a pre-tax gain and included in net gain on sales of investment securities in the Company's consolidated statements of income.

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3. LOANS

Loans, excluding loans held for sale, net of ACL as of December 31, 2022 and 2021 consisted of the following:

	December 31,
(Dollars in thousands)	2022		2021
Commercial, financial and agricultural:
Small Business Administration Paycheck Protection Program ("SBA PPP")	$	2,654	$	94,850
Other	544,495		530,383
Real estate:
Construction	167,366		123,351
Residential mortgage	1,940,456		1,875,200
Home equity	737,386		635,721
Commercial mortgage	1,364,998		1,222,138
Consumer	798,957		624,115
Gross loans	5,556,312		5,105,758
Net deferred fees	(846)		(4,109)
Total loans, net of deferred fees and costs	$	5,555,466	$	5,101,649
Allowance for credit losses	(63,738)		(68,097)
Total loans, net of allowance for credit losses	$	5,491,728	$	5,033,552

There are different types of risk characteristics for the loans in each portfolio segment. The construction and real estate segment's predominant risk characteristics are the collateral and the geographic location of the property collateralizing the loan, as well as the operating cash flow for the commercial real estate properties. The commercial, financial and agricultural segment's predominant risk characteristics are the cash flows of the business we lend to, the global cash flows and liquidity of the guarantors of such losses, as well as economic and market conditions. The consumer segment's predominant risk characteristics are employment and income levels as they relate to the consumer.

The bank is a Small Business Administration ("SBA") approved lender and actively participated in assisting customers with loan applications for the SBA’s Paycheck Protection Program, or PPP, which was part of the CARES Act. PPP loans have a two or five-year term and earn interest at 1%. The SBA paid the originating bank a processing fee ranging from 1% to 5%, based on the size of the loan, which the Company is recognizing over the life of the loan as an adjustment of yield.

The SBA began accepting submissions for the initial round of PPP loans on April 3, 2020. In April 2020, the Paycheck Protection Program and Health Care Enhancement Act added an additional round of funding for the PPP. In June 2020, the Paycheck Protection Program Flexibility Act of 2020 was enacted, which among other things, gave borrowers additional time and flexibility to use PPP loan proceeds. Through the end of the second round in August 2020, the Company funded over 7,200 PPP loans totaling $558.9 million and received gross processing fees of $21.2 million. In December 2020, the Consolidated Appropriations Act, 2021 was passed which among other things, included a third round of funding and a new simplified forgiveness procedure for PPP loans of $150,000 or less. During 2021, the Company funded over 4,600 loans totaling $320.9 million in the third round, which ended on May 31, 2021, and received additional gross processing fees of $18.4 million.

The Company received forgiveness payments from the SBA and repayments from borrowers totaling $877.1 million as of December 31, 2022. A total outstanding balance of $2.7 million and net deferred fees of $0.1 million remains as of December 31, 2022.

The Company did not transfer any loans to the held-for-sale category during the years ended December 31, 2022 and 2021.

The Company has purchased loan portfolios, none of which were credit deteriorated at the time of purchase.

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The following table presents loan purchases by class for the periods presented:

(Dollars in thousands)	Consumer - Unsecured		Consumer - Automobile		Total
Year Ended December 31, 2022
Purchases:
Outstanding balance	$	229,283	$	101,500	$	330,783
Purchase (discount) premium	(12,119)		4,738		(7,381)
Purchase price	$	217,164	$	106,238	$	323,402
Year Ended December 31, 2021
Purchases:
Outstanding balance	$	199,813	$	71,432	$	271,245
Purchase (discount) premium	(9,613)		5,080		(4,533)
Purchase price	$	190,200	$	76,512	$	266,712

In the normal course of business, the bank makes loans to certain directors, executive officers and their affiliates. These loans are made in the ordinary course of business at normal credit terms. Related party loan balances were $37.4 million and $36.4 million as of December 31, 2022 and 2021, respectively.

Collateral-Dependent Loans

In accordance with ASC 326, a loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table presents the amortized cost basis of collateral-dependent loans by class, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans as of December 31, 2022 and 2021:

	December 31, 2022
(Dollars in thousands)	Secured by 1-4 Family Residential Properties		Secured by Nonfarm Nonresidential Properties		Secured by Real Estate and Business  Assets		Total		Allocated ACL
Real estate:
Residential mortgage	$	5,653	$	—	$	—	$	5,653	$	—
Home equity	570		—		—		570		—
Total	$	6,223	$	—	$	—	$	6,223	$	—

	December 31, 2021
(Dollars in thousands)	Secured by 1-4 Family Residential Properties		Secured by Nonfarm Nonresidential Properties		Secured by Real Estate and Business  Assets		Total		Allocated ACL
Real estate:
Residential mortgage	$	8,391	$	—	$	—	$	8,391	$	—
Home equity	786		—		—		786		—
Total	$	9,177	$	—	$	—	$	9,177	$	—

Foreclosure Proceedings

Residential mortgage loans collateralized by residential real estate property that were in the process of foreclosure totaled $0.1 million and $0.7 million as of December 31, 2022 and 2021, respectively.

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We did not foreclose on any loans during the years ended December 31, 2022 and 2021. We did not sell any foreclosed properties during the years ended December 31, 2022 and 2021.

Nonaccrual and Past Due Loans

For all loan types, the Company determines delinquency status by considering the number of days full payments required by the contractual terms of the loan are past due. The following tables present by class, the aging of the recorded investment in past due loans as of December 31, 2022 and 2021:

	December 31, 2022
(Dollars in thousands)	Accruing Loans 30 - 59 Days Past Due		Accruing Loans 60 - 89 Days Past Due		Accruing Loans 90+  Days Past Due		Nonaccrual Loans		Total Past Due and Nonaccrual		Loans and Leases Not Past Due		Total		Nonaccrual Loans with No ACL
Commercial, financial and agricultural:
SBA PPP	$	471	$	37	$	13	$	—	$	521	$	2,034	$	2,555	$	—
Other	546		131		26		297		1,000		542,947		543,947		—
Real estate:
Construction	—		—		—		—		—		166,723		166,723		—
Residential mortgage	303		—		559		3,808		4,670		1,936,329		1,940,999		3,808
Home equity	1,540		—		—		570		2,110		737,270		739,380		570
Commercial mortgage	160		—		—		—		160		1,362,915		1,363,075		—
Consumer	5,173		1,921		1,240		576		8,910		789,877		798,787		—
Total	$	8,193	$	2,089	$	1,838	$	5,251	$	17,371	$	5,538,095	$	5,555,466	$	4,378

	December 31, 2021
(Dollars in thousands)	Accruing Loans 30 - 59 Days Past Due		Accruing Loans 60 - 89 Days Past Due		Accruing Loans 90+  Days Past Due		Nonaccrual Loans		Total Past Due and Nonaccrual		Loans and Leases Not Past Due		Total		Nonaccrual Loans with No ACL
Commercial, financial and agricultural:
SBA PPP	$	—	$	—	$	—	$	—	$	—	$	91,327	$	91,327	$	—
Other	970		604		945		183		2,702		527,419		530,121		—
Real estate:
Construction	638		—		—		—		638		122,229		122,867		—
Residential mortgage	5,315		—		—		4,623		9,938		1,866,042		1,875,980		4,623
Home equity	234		—		44		786		1,064		636,185		637,249		786
Commercial mortgage	—		—		—		—		—		1,220,204		1,220,204		—
Consumer	2,444		712		374		289		3,819		620,082		623,901		—
Total	$	9,601	$	1,316	$	1,363	$	5,881	$	18,161	$	5,083,488	$	5,101,649	$	5,409

Interest income totaling $1.6 million, $0.8 million, and $0.4 million was recognized on nonaccrual loans, including loans held for sale, in 2022, 2021 and 2020, respectively. Additional interest income of $0.2 million, $0.3 million, and $0.2 million would have been recognized in 2022, 2021 and 2020, respectively, had these loans been accruing interest throughout those periods. Additionally, interest income of $0.3 million, $0.3 million, and $0.2 million was collected and recognized on charged-off loans in 2022, 2021 and 2020, respectively.

Troubled Debt Restructurings

Troubled debt restructurings ("TDRs") included in nonperforming assets at December 31, 2022 consisted of five Hawaii residential mortgage loans with a combined principal balance of $1.1 million. At December 31, 2021, TDRs included in nonperforming assets consisted of four loans with a principal balance of $0.4 million. There were $2.8 million of TDRs still accruing interest at December 31, 2022, none of which were more than 90 days delinquent. At December 31, 2021, there were $4.9 million of TDRs still accruing interest, none of which were more than 90 days delinquent.

The Company offers various types of concessions when modifying a loan. Concessions made to the original contractual terms of the loan typically consist of the deferral of interest and/or principal payments due to deterioration in the borrowers' financial

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condition. In these cases, the principal balance on the TDR had matured and/or was in default at the time of restructure, and there were no commitments to lend additional funds to the borrower during the year ended December 31, 2022 and 2021. The loans modified in a TDR did not have a material effect on the Company's Provision and ACL during the years ended December 31, 2022 and 2021.

No loans were modified in a TDR during the year ended December 31, 2022. The following table presents by class, information related to loans modified in a TDR during the years ended December 31, 2021 and 2020:

	Year Ended December 31, 2021
(Dollars in thousands)	Number of Loans	Recorded Investment (as of period end)		Increase in the ACL
Real estate: Residential mortgage	1	$	48	$	—
Total	1	$	48	$	—
	Year Ended December 31, 2020
(Dollars in thousands)	Number of Loans	Recorded Investment (as of period end)		Increase in the ACL
Real estate: Residential mortgage	1	$	677	$	—
Real estate: Commercial mortgage	1	$	276	$	—
Consumer	11	$	207	$	—
Total	13	$	1,160	$	—

No loans were modified as a TDR within the previous twelve months that subsequently defaulted during the years ended December 31, 2022, 2021 and 2020.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans by credit risk. This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk rating of loans:

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

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

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

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

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Loans not meeting the criteria above are considered to be pass-rated loans.

The following table presents the amortized cost basis, net of deferred (fees) costs of the Company's loans by class, credit quality indicator and origination year as of December 31, 2022. Revolving loans converted to term as of and during the year ended December 31, 2022 were not material to the total loan portfolio.

	Amortized Cost of Term Loans by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Amortized Cost of Revolving Loans		Total
December 31, 2022
Commercial, financial and agricultural - SBA PPP:
Risk Rating
Pass	$	—	$	2,546	$	9	$	—	$	—	$	—	$	—	$	2,555
Subtotal	—		2,546		9		—		—		—		—		2,555
Commercial, financial and agricultural - Other:
Risk Rating
Pass	77,550		101,595		41,358		53,241		39,106		141,950		76,466		531,266
Special Mention	2,206		350		172		1,011		29		—		99		3,867
Substandard	188		176		833		256		116		7,215		30		8,814
Subtotal	79,944		102,121		42,363		54,508		39,251		149,165		76,595		543,947
Construction:
Risk Rating
Pass	25,663		61,027		23,384		2,387		14,309		18,048		15,044		159,862
Special Mention	—		417		—		—		898		—		—		1,315
Substandard	—		4,850		—		696		—		—		—		5,546
Subtotal	25,663		66,294		23,384		3,083		15,207		18,048		15,044		166,723
Residential mortgage:
Risk Rating
Pass	279,146		636,756		434,928		154,906		58,431		371,517		—		1,935,684
Substandard	—		—		948		—		503		3,864		—		5,315
Subtotal	279,146		636,756		435,876		154,906		58,934		375,381		—		1,940,999
Home equity:
Risk Rating
Pass	34,973		23,772		10,520		7,463		6,880		11,727		643,277		738,612
Special Mention	—		—		—		—		—		—		198		198
Substandard	—		—		—		—		78		453		39		570
Subtotal	34,973		23,772		10,520		7,463		6,958		12,180		643,514		739,380
Commercial mortgage:
Risk Rating
Pass	226,137		208,230		119,531		129,950		145,932		472,267		11,473		1,313,520
Special Mention	—		—		—		11,388		—		16,082		—		27,470
Substandard	—		10,149		—		1,700		2,133		8,103		—		22,085
Subtotal	226,137		218,379		119,531		143,038		148,065		496,452		11,473		1,363,075
Consumer:
Risk Rating
Pass	358,609		242,942		59,352		50,899		20,065		10,958		54,038		796,863
Special Mention	—		—		—		113		—		—		—		113
Substandard	1		261		91		126		42		790		—		1,311
Loss	—		—		—		—		—		500		—		500
Subtotal	358,610		243,203		59,443		51,138		20,107		12,248		54,038		798,787
Total loans, net of deferred fees and costs	$	1,004,473	$	1,293,071	$	691,126	$	414,136	$	288,522	$	1,063,474	$	800,664	$	5,555,466

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	Amortized Cost of Term Loans by Origination Year
(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Amortized Cost of Revolving Loans		Total
December 31, 2021
Commercial, financial and agricultural - SBA PPP:
Risk Rating
Pass	$	84,254	$	7,073	$	—	$	—	$	—	$	—	$	—	$	91,327
Subtotal	84,254		7,073		—		—		—		—		—		91,327
Commercial, financial and agricultural - Other:
Risk Rating
Pass	122,729		68,021		56,531		52,375		31,817		93,957		79,131		504,561
Special Mention	1,441		1,278		2,443		96		8,671		354		—		14,283
Substandard	—		982		393		682		6,623		1,847		750		11,277
Subtotal	124,170		70,281		59,367		53,153		47,111		96,158		79,881		530,121
Construction:
Risk Rating
Pass	35,236		25,430		3,196		28,333		288		20,090		9,376		121,949
Substandard	—		—		—		918		—		—		—		918
Subtotal	35,236		25,430		3,196		29,251		288		20,090		9,376		122,867
Residential mortgage:
Risk Rating
Pass	670,011		478,891		180,687		75,820		92,394		372,539		42		1,870,384
Special Mention	—		973		—		—		—		—		—		973
Substandard	—		—		—		577		881		3,165		—		4,623
Subtotal	670,011		479,864		180,687		76,397		93,275		375,704		42		1,875,980
Home equity:
Risk Rating
Pass	26,479		13,008		10,329		10,593		480		7,743		567,600		636,232
Special Mention	—		—		—		—		—		—		187		187
Substandard	—		176		—		79		—		575		—		830
Subtotal	26,479		13,184		10,329		10,672		480		8,318		567,787		637,249
Commercial mortgage:
Risk Rating
Pass	229,108		126,169		146,584		126,014		153,041		387,751		9,472		1,178,139
Special Mention	—		—		3,106		3,219		283		9,455		—		16,063
Substandard	—		—		1,760		8,050		1,784		14,408		—		26,002
Subtotal	229,108		126,169		151,450		137,283		155,108		411,614		9,472		1,220,204
Consumer:
Risk Rating
Pass	308,326		96,066		91,194		41,995		20,719		9,446		55,311		623,057
Special Mention	—		—		181		—		10		7		—		198
Substandard	10		35		128		80		19		221		—		493
Loss	—		—		—		—		—		153		—		153
Subtotal	308,336		96,101		91,503		42,075		20,748		9,827		55,311		623,901
Total loans, net of deferred fees and costs	$	1,477,594	$	818,102	$	496,532	$	348,831	$	317,010	$	921,711	$	721,869	$	5,101,649

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The following tables present the recorded investment in the Company's loans by class and credit indicator as of December 31, 2022 and 2021:

(Dollars in thousands)	Pass		Special Mention		Substandard		Loss		Gross Loans		Net Deferred (Fees) Costs		Total Loans
December 31, 2022
Commercial, financial and agricultural:
SBA PPP	$	2,654	$	—	$	—	$	—	$	2,654	$	(99)	$	2,555
Other	531,814		3,867		8,814		—		544,495		(548)		543,947
Real estate:
Construction	160,505		1,315		5,546		—		167,366		(643)		166,723
Residential mortgage	1,935,141		—		5,315		—		1,940,456		543		1,940,999
Home equity	736,618		198		570		—		737,386		1,994		739,380
Commercial mortgage	1,315,443		27,470		22,085		—		1,364,998		(1,923)		1,363,075
Consumer	797,029		113		1,315		500		798,957		(170)		798,787
Total	$	5,479,204	$	32,963	$	43,645	$	500	$	5,556,312	$	(846)	$	5,555,466

(Dollars in thousands)	Pass		Special Mention		Substandard		Loss		Gross Loans		Net Deferred (Fees) Costs		Total Loans
December 31, 2021
Commercial, financial and agricultural:
SBA PPP	$	94,850	$	—	$	—	$	—	$	94,850	$	(3,523)	$	91,327
Other	504,823		14,283		11,277		—		530,383		(262)		530,121
Real estate:
Construction	122,433		—		918		—		123,351		(484)		122,867
Residential mortgage	1,869,604		973		4,623		—		1,875,200		780		1,875,980
Home equity	634,704		187		830		—		635,721		1,528		637,249
Commercial mortgage	1,180,074		16,062		26,002		—		1,222,138		(1,934)		1,220,204
Consumer	623,271		181		510		153		624,115		(214)		623,901
Total	$	5,029,759	$	31,686	$	44,160	$	153	$	5,105,758	$	(4,109)	$	5,101,649

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

The following tables present the activity in the ACL for loans by class for the years ended December 31, 2022, 2021 and 2020:

	Commercial, Financial and Agricultural				Real Estate
(Dollars in thousands)	SBA PPP		Other		Construction		Residential Mortgage		Home Equity		Commercial Mortgage		Consumer		Total
Year ended December 31, 2022
Beginning balance	$	77	$	10,314	$	3,908	$	12,463	$	4,509	$	18,411	$	18,415	$	68,097
Provision (credit) for credit losses on loans	(75)		(2,518)		(1,117)		(954)		(431)		(509)		5,892		288
Subtotal	2		7,796		2,791		11,509		4,078		17,902		24,307		68,385
Charge-offs	—		1,969		—		—		—		—		6,399		8,368
Recoveries	—		995		76		295		36		—		2,319		3,721
Net charge-offs (recoveries)	—		974		(76)		(295)		(36)		—		4,080		4,647
Ending balance	$	2	$	6,822	$	2,867	$	11,804	$	4,114	$	17,902	$	20,227	$	63,738

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	Commercial, Financial and Agricultural				Real Estate
(Dollars in thousands)	SBA PPP		Other		Construction		Residential Mortgage		Home Equity		Commercial Mortgage		Consumer		Total
Year ended December 31, 2021
Beginning balance	$	304	$	18,717	$	4,277	$	16,484	$	5,449	$	22,163	$	15,875	$	83,269
Provision (credit) for credit losses on loans [1]	(227)		(7,684)		(1,528)		(4,379)		(949)		(3,825)		4,269		(14,323)
Subtotal	77		11,033		2,749		12,105		4,500		18,338		20,144		68,946
Charge-offs	—		1,723		—		—		—		—		4,402		6,125
Recoveries	—		1,004		1,159		358		9		73		2,673		5,276
Net charge-offs (recoveries)	—		719		(1,159)		(358)		(9)		(73)		1,729		849
Ending balance	$	77	$	10,314	$	3,908	$	12,463	$	4,509	$	18,411	$	18,415	$	68,097

	Commercial, Financial and Agricultural				Real Estate
(Dollars in thousands)	SBA PPP		Other		Construction		Residential Mortgage		Home Equity		Commercial Mortgage		Consumer		Total
Year ended December 31, 2020
Beginning balance	$	—	$	8,136	$	1,792	$	13,327	$	4,206	$	11,113	$	9,397	$	47,971
Impact of adoption of ASC 326	—		(627)		479		608		(1,614)		2,624		2,096		3,566
Balance after adoption of ASC 326	—		7,509		2,271		13,935		2,592		13,737		11,493		51,537
Provision for credit losses on loans [1]	304		13,077		1,875		2,383		2,824		8,485		9,982		38,930
Subtotal	304		20,586		4,146		16,318		5,416		22,222		21,475		90,467
Charge-offs	—		3,026		—		63		—		75		8,191		11,355
Recoveries	—		1,157		131		229		33		16		2,591		4,157
Net charge-offs	—		1,869		(131)		(166)		(33)		59		5,600		7,198
Ending balance	$	304	$	18,717	$	4,277	$	16,484	$	5,449	$	22,163	$	15,875	$	83,269
[1] In 2020, the Company recorded a reserve on accrued interest receivable for loans on active payment forbearance or deferral, which were granted to borrowers impacted by the COVID-19 pandemic. This reserve was recorded as a contra-asset against accrued interest receivable with the offset to provision for credit losses. Due to the significant decline in loans on active forbearance or deferral, the Company reversed the $0.2 million reserve during the second quarter of 2021 and no longer has a reserve on accrued interest receivable as of December 31, 2022 and 2021. The provision for credit losses presented in this table excludes the provision (credit) for credit losses on accrued interest receivable of $0.2 million.

The following table presents the activity in the reserve for off-balance sheet credit exposures, included in other liabilities, under ASC 326 during the years ended December 31, 2022, 2021 and 2020.

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Balance, beginning of year	$	4,804	$	4,884	$	1,272
Impact of adoption of ASC 326	—		—		740
Balance after adoption of ASC 326	4,804		4,884		2,012
(Credit) provision for off-balance sheet credit exposures	(1,561)		(80)		2,872
Balance, end of year	$	3,243	$	4,804	$	4,884

In accordance with GAAP, loans held for sale and other real estate assets are not included in our assessment of the ACL.

In determining the amount of our ACL, the Company relies on an analysis of its loan portfolio, experience and evaluation of general economic conditions, as well as regulatory requirements and input. If assumptions prove to be incorrect, the current ACL may not be sufficient to cover future credit losses and the Company may experience significant increases to the provision.

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5. PREMISES AND EQUIPMENT

Premises and equipment consisted of the following as of December 31, 2022 and 2021:

	December 31,
(Dollars in thousands)	2022		2021
Land	$	23,150	$	14,184
Office buildings and improvements	145,793		141,628
Furniture, fixtures and equipment	37,194		35,515
Gross premises and equipment	206,137		191,327
Accumulated depreciation and amortization	(114,503)		(110,973)
Net premises and equipment	$	91,634	$	80,354

Depreciation and amortization of premises and equipment were charged to the following operating expenses:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Net occupancy	$	4,720	$	4,570	$	3,616
Equipment	2,145		2,414		2,607
Total	$	6,865	$	6,984	$	6,223

6. INVESTMENTS IN UNCONSOLIDATED ENTITIES

Investments in unconsolidated entities as of December 31, 2022 and 2021 consisted of the following components:

	December 31,
(Dollars in thousands)	2022		2021
Investments in low income housing tax credit partnerships	$	40,939	$	25,916
Investments in common securities of statutory trusts	1,547		1,547
Investments in affiliates	110		162
Other	4,045		2,054
Total	$	46,641	$	29,679

During the first quarter of 2022, the Company invested $2.0 million in Swell Financial, Inc. ("Swell"), which included $1.5 million in other intangible assets and services provided in exchange for Swell non-voting common stock and $0.5 million in cash in exchange for Swell preferred stock. During the fourth quarter of 2022, Swell launched a consumer banking application that combines checking, credit and more into one integrated account, with Central Pacific Bank serving as the bank sponsor. The Company does not have the ability to exercise significant influence over Swell and the investment does not have a readily determinable fair value. As a result, the Company determined that the cost method of accounting for the investment was appropriate. The investment is included in investments in unconsolidated entities in the Company's consolidated balance sheets.

In 2021, the Company committed $2.0 million in the JAM FINTOP Banktech Fund, L.P., an investment fund designed to help develop and accelerate technology adoption at community banks across the United States. The Company does not have the ability to exercise significant influence over the JAM FINTOP Banktech Fund, L.P. and the investment does not have a readily determinable fair value. As a result, the Company determined that the cost method of accounting for the investment was appropriate. The investment is included in investment in unconsolidated entities in the Company's consolidated balance sheets. As of December 31, 2022, the Company had an unfunded commitment of $1.3 million related to the investment, which is expected to be paid in 2023. The unfunded commitment is included in other liabilities in the Company's consolidated balance sheets.

The Company invests in low income housing tax credit ("LIHTC") partnerships. As of December 31, 2022 and 2021, the Company had $23.6 million and $14.3 million, respectively, in unfunded commitments related to the LIHTC partnerships, which is included in other liabilities in the Company's consolidated balance sheets.

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The expected payments for the unfunded commitments related to the Company's investments in unconsolidated entities as of December 31, 2022 are as follows:

(Dollars in thousands)	LIHTC		Other
Year Ending December 31:	Partnerships		Partnerships		Total
2023	$	9,693	$	1,303	$	10,996
2024	9,280		—		9,280
2025	4,248		—		4,248
2026	26		—		26
2027	26		—		26
Thereafter	333		—		333
Total commitments	$	23,606	$	1,303	$	24,909

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

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Proportional amortization method:
Amortization expense recognized in income tax expense	$	2,566	$	2,174	$	1,391
Federal and state tax credits recognized in income tax expense	2,938		2,373		1,599

7. MORTGAGE SERVICING RIGHTS

The following table presents changes in our mortgage servicing rights for the periods presented:

(Dollars in thousands)	Mortgage Servicing Rights
Balance as of December 31, 2020	$	11,865
Additions	1,341
Amortization	(3,468)
Balance as of December 31, 2021	9,738
Additions	631
Amortization	(1,295)
Balance as of December 31, 2022	$	9,074

The gross carrying value, accumulated amortization, and net carrying value related to our mortgage servicing rights as of December 31, 2022 and 2021 are presented below:

	December 31, 2022						December 31, 2021
(Dollars in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Mortgage servicing rights	$	69,413	$	(60,339)	$	9,074	$	72,250	$	(62,512)	$	9,738
Total	$	69,413	$	(60,339)	$	9,074	$	72,250	$	(62,512)	$	9,738

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Based on our mortgage servicing rights held as of December 31, 2022, estimated amortization expense for the next five succeeding fiscal years and all years thereafter are as follows:

(Dollars in thousands)
Year Ending December 31:
2023	$	994
2024	950
2025	844
2026	749
2027	656
Thereafter	4,881
Total	$	9,074

The Company utilizes the amortization method to measure our mortgage servicing rights. Under the amortization method, mortgage servicing rights are amortized in proportion to and over the period of net servicing income. Income generated as the result of new mortgage servicing rights is reported as a component of mortgage banking income and totaled $0.6 million, $1.3 million, and $3.3 million in 2022, 2021 and 2020, respectively. Amortization of the servicing rights is reported as a component of mortgage banking income in the Company's consolidated statements of income. Ancillary income is recorded in other income. Mortgage servicing rights are recorded when loans are sold to third-parties with servicing of those loans retained, and are classified and pooled into buckets of homogeneous characteristics.

Initial fair value of the servicing right is calculated by a discounted cash flow model prepared by a third-party service provider based on market value assumptions at the time of origination. The servicing right is assessed for impairment using current market value assumptions at each reporting period. Critical assumptions used in the discounted cash flow model include mortgage prepayment speeds, discount rates, and servicing income and costs. Variations in our assumptions could materially affect the estimated fair values. Changes to our assumptions are made when current trends and market data indicate that new trends have developed. Current market value assumptions based on loan product types (fixed-rate, adjustable-rate and government FHA loans) include average discount rates, servicing costs and ancillary income. Many of these assumptions are subjective and require a high level of management judgment. The Company's mortgage servicing rights portfolio and valuation assumptions are periodically reviewed by management.

Prepayment speeds may be affected by economic factors such as home price appreciation, market interest rates, availability of other credit products to our borrowers and customer payment patterns. Prepayment speeds include the impact of all borrower prepayments, including full payoffs, additional principal payments and the impact of loans paid off due to foreclosure liquidations. As market interest rates decline, prepayment speeds will generally increase as customers refinance existing mortgages under more favorable interest rate terms. As prepayment speeds increase, anticipated cash flows will generally decline resulting in a potential reduction, or impairment, to the fair value of the capitalized mortgage servicing rights. Alternatively, an increase in market interest rates may cause a decrease in prepayment speeds and therefore an increase in fair value of mortgage servicing rights.

The following table presents the fair market value and key assumptions used in determining the fair market value of our mortgage servicing rights:

	Year Ended December 31,
(Dollars in thousands)	2022			2021
Fair market value, beginning of period	$	10,504		$	12,003
Fair market value, end of period	12,061			10,504
Weighted-average discount rate	9.5		%	9.5		%
Weighted-average prepayment speed assumption	10.4		%	19.0		%

Loans serviced for others as of December 31, 2022 and 2021 totaled $1.28 billion and $1.40 billion, respectively. Loans serviced for others are not reported as assets on the Company's consolidated balance sheets.

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8. DERIVATIVES

The Company utilizes various designated and undesignated derivative financial instruments to reduce our exposure to movements in interest rates. All derivatives are measured at fair value on the Company's consolidated balance sheet. In each reporting period, we record the derivative instruments in other assets or other liabilities depending on whether the derivatives are in an asset or liability position. For derivative instruments that are designated as hedging instruments, the effective portion of the changes in the fair value of the derivative in AOCI, net of tax, is recorded until earnings are affected by the variability of cash flows of the hedged transaction. The portion of the gain or loss in the fair value of the derivative that represents hedge ineffectiveness is immediately recognized in current period earnings. For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivative are included in current period earnings. In 2022, the Company entered into a forward starting interest rate swap designated as a fair value hedge of certain municipal securities. The Company had no derivative instruments designated as hedging instruments as of December 31, 2021.

Interest Rate Lock and Forward Sale Commitments

The Company enters into interest rate lock commitments on certain mortgage loans that are intended to be sold. To manage interest rate risk on interest rate lock commitments, the Company also enters into forward loan sale commitments. The interest rate lock and forward loan sale commitments are accounted for as undesignated derivatives and are recorded at their respective fair values in other assets or other liabilities, with changes in fair value recorded in current period earnings. These instruments serve to reduce our exposure to movements in interest rates. At December 31, 2022 and 2021, the Company was party to forward sale commitments on $1.1 million and $3.5 million of mortgage loans, respectively. As of December 31, 2022 and 2021, the Company did not have any outstanding interest rate lock commitments on mortgage loans.

Risk Participation Agreements

In the first and fourth quarters of 2020, the Company entered into credit risk participation agreements ("RPA") with financial institution counterparties for interest rate swaps related to loans in which the Company participates. The risk participation agreements entered into by us as a participant bank provide credit protection to the financial institution counterparties should the borrowers fail to perform on their interest rate derivative contracts with the financial institutions.

Back-to-Back Swap Agreements

The Company established a program whereby it originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer. The Company also enters into an equal and offsetting swap with a highly rated third-party financial institution. These "back-to-back swap agreements" are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. These back-to-back swap agreements are free-standing derivatives and are recorded at fair value in other assets or other liabilities on the Company's consolidated balance sheet, with changes recorded in current period earnings. The Company did not enter into any swap agreements with its borrowers and third party financial institutions during the year ended December 31, 2022. During the year ended December 31, 2021, the Company entered into swap agreements with its borrowers with a total notional amount of $33.1 million, offset by swap agreements with third party financial institutions with a total notional amount of $33.1 million. As of December 31, 2022, the Company pledged $10.0 million in cash as collateral for the back-to-back swap agreements.

Interest Rate Swaps

During the first quarter of 2022, we entered into a forward starting interest rate swap, with an effective date of March 31, 2024. This transaction had a notional amount totaling $115.5 million as of December 31, 2022, and was designated as a fair value hedge of certain municipal debt securities. The Company will pay the counterparty a fixed rate of 2.095% and will receive a floating rate based on the Federal Funds effective rate. The fair value hedge has a maturity date of March 31, 2029. The interest rate swap is carried on the Company’s consolidated balance sheet at its fair value in other assets (when the fair value is positive) or in other liabilities (when the fair value is negative). The changes in the fair value of the interest rate swap are recorded in interest income. The unrealized gains or losses due to changes in fair value of the hedged debt securities due to changes in benchmark interest rates are recorded as an adjustment to the hedged debt securities and offset in the same interest income line item.

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The following table presents the location of all assets and liabilities associated with our derivative instruments within the Company's consolidated balance sheet: 

		Asset Derivatives				Liability Derivatives
Derivatives Not Designated as	Balance Sheet	Fair Value at		Fair Value at		Fair Value at		Fair Value at
Hedging Instruments	Location	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
		(Dollars in thousands)
Interest rate lock and forward sale commitments	Other assets / other liabilities	$	10	$	5	$	2	$	20
Risk participation agreements	Other assets / other liabilities	—		—		—		16
Back-to-back swap agreements	Other assets / other liabilities	4,611		435		4,611		435

		Asset Derivatives				Liability Derivatives
Derivatives Designated as	Balance Sheet	Fair Value at		Fair Value at		Fair Value at		Fair Value at
Hedging Instruments	Location	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
		(Dollars in thousands)
Interest rate swap	Other assets / other liabilities	$	5,986	$	—	$	—	$	—

The following table presents the impact of derivative instruments and their location within the Company's consolidated statements of income for the periods presented: 

Derivatives Not in Cash Flow Hedging Relationship	Location of Gain (Loss) Recognized in Earnings on Derivatives	Amount of Gain (Loss) Recognized in Earnings on Derivatives
	(Dollars in thousands)
Year ended December 31, 2022
Interest rate lock and forward sale commitments	Mortgage banking income	$	8
Loans held for sale	Other income	(3)
Risk participation agreements	Other service charges and fees	16
Year ended December 31, 2021
Interest rate lock and forward sale commitments	Mortgage banking income	98
Risk participation agreements	Other service charges and fees	32
Back-to-back swap agreements	Other service charges and fees	600
Year ended December 31, 2020
Interest rate lock and forward sale commitments	Mortgage banking income	(76)
Risk participation agreements	Other service charges and fees	1,323

Derivatives in Cash Flow Hedging Relationship	Location of Gain (Loss) Recognized in Earnings on Derivatives	Amount of Gain (Loss) Recognized in Earnings on Derivatives
	(Dollars in thousands)
Year ended December 31, 2022
Interest rate swap	Interest income	$	(340)

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9. DEPOSITS

The Company had $991.2 million and $706.7 million of total time deposits as of December 31, 2022 and 2021, respectively. Contractual maturities of total time deposits as of December 31, 2022 were as follows:

(Dollars in thousands)
Year Ending December 31:
2023	$	912,198
2024	52,870
2025	12,048
2026	6,527
2027	7,186
Thereafter	376
Total	$	991,205

Time deposits that meet or exceed the FDIC insurance limit of $250,000 totaled $678.6 million and $488.8 million at December 31, 2022 and 2021, respectively. This includes $290.1 million and $215.0 million in government time deposits at December 31, 2022 and 2021, respectively, which are collateralized.

Contractual maturities of time deposits of $250,000 or more as of December 31, 2022 were as follows:

(Dollars in thousands)
Three months or less	$	370,239
Over three months through six months	97,913
Over six months through twelve months	188,943
2024	15,185
2025	2,326
2026	1,540
2027	2,411
Thereafter	—
Total	$	678,557

Overdrawn deposit accounts totaling $0.7 million and $0.5 million have been reclassified as loans on the Company's consolidated balance sheets as of December 31, 2022 and 2021, respectively.

10. SHORT-TERM BORROWINGS

The bank is a member of the FHLB and maintained a $2.23 billion line of credit, of which $2.19 billion remained available as of December 31, 2022. At December 31, 2022, there were $5.0 million in short-term borrowings outstanding under this arrangement. At December 31, 2021, there were no short-term borrowings outstanding under this arrangement.

The FHLB provides standby letters of credit on behalf of the bank to secure certain public deposits. If the FHLB is required to make a payment on a standby letter of credit, the payment amount is converted to an advance at the FHLB.  The standby letters of credit issued on our behalf by the FHLB totaled $36.0 million and $32.2 million as of December 31, 2022 and 2021, respectively.

The bank had additional unused borrowings available at the Federal Reserve discount window of $75.9 million and $55.4 million as of December 31, 2022 and 2021, respectively. Certain commercial real estate and commercial loans with carrying values totaling $125.0 million and $131.0 million were pledged as collateral on our line of credit with the Federal Reserve discount window as of December 31, 2022 and 2021, respectively. The Federal Reserve does not have the right to sell or repledge these loans.

Interest expense on short-term borrowings totaled $1.1 million, $2 thousand and $0.7 million in 2022, 2021 and 2020, respectively.

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A summary of the bank's short-term borrowings as of December 31, 2022, 2021 and 2020 is as follows:

	Year Ended December 31,
(Dollars in thousands)	2022			2021			2020
Amount outstanding at December 31	$	5,000		$	—		$	22,000
Average amount outstanding during year	37,210			607			89,904
Highest month-end balance during year	140,000			6,500			222,000
Weighted-average interest rate on balances outstanding at December 31	4.60		%	—		%	0.29		%
Weighted-average interest rate during year	2.84		%	0.30		%	0.80		%

11. LONG-TERM DEBT

Long-term debt, which is based on original maturity, consisted of subordinated notes and debentures totaling $105.9 million and $105.6 million at December 31, 2022 and 2021, respectively. There were no long-term FHLB advances outstanding at December 31, 2022 and 2021.

	December 31,
(Dollars in thousands)	2022		2021
Subordinated debentures	$	51,547	$	51,547
Subordinated notes, net of issuance costs	54,312		54,069
Total	$	105,859	$	105,616

At December 31, 2022, future principal payments on long-term debt based on redemption date or final maturity are as follows (dollars in thousands):

(Dollars in thousands)
Year Ending December 31:
2023	$	—
2024	—
2025	—
2026	—
2027	—
Thereafter	106,547
Total	$	106,547

FHLB Advances

The bank had no FHLB long-term advances outstanding as of December 31, 2022 and 2021. At December 31, 2022, the bank had FHLB advances available of approximately $2.19 billion, which was secured by certain real estate loans with a carrying value of $3.28 billion in accordance with the collateral provisions of the Advances, Pledge and Security Agreement with the FHLB. The bank did not incur any interest expense on FHLB long-term advances in 2022 and 2021. Interest expense on FHLB long-term advances was $1.5 million in 2020.

Subordinated Debentures

As of December 31, 2022 and 2021, the Company had the following junior subordinated debentures outstanding:

(Dollars in thousands)	December 31, 2022 and 2021
Name of Trust	Amount of Subordinated Debentures		Interest Rate
Trust IV	$	30,928	Three month LIBOR + 2.45%
Trust V	20,619		Three month LIBOR + 1.87%
Total	$	51,547

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

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

The Company is not considered the primary beneficiary of Trusts IV and V, therefore the trusts are not considered a variable interest entity and are not consolidated in the Company's financial statements. Rather the subordinated debentures are shown as a liability on the Company's consolidated balance sheets. The Company's investment in the common securities of the trusts are included in investment in unconsolidated entities in the Company's consolidated balance sheets.

The floating rate trust preferred securities, the junior subordinated debentures that are the assets of Trusts IV and V and the common securities issued by Trusts IV and V are redeemable in whole or in part on any interest payment date on or after December 15, 2009 for Trust IV and V, or at any time in whole but not in part within 90 days following the occurrence of certain events. Our obligations with respect to the issuance of the trust preferred securities constitute a full and unconditional guarantee by the Company of each trust's obligations with respect to its trust preferred securities. Subject to certain exceptions and limitations, we may elect from time to time to defer interest payments on the subordinated debentures, which would result in a deferral of distribution payments on the related trust preferred securities, for up to 20 consecutive quarterly periods without default or penalty.

The subordinated debentures may be included in Tier 1 capital, with certain limitations applicable, under current regulatory guidelines and interpretations.

Subordinated Notes

As of December 31, 2022 and 2021, the Company had the following subordinated notes outstanding:

(Dollars in thousands)	December 31, 2022 and 2021
Name	Amount of Subordinated Notes		Interest Rate
October 2020 Private Placement	$	55,000	4.75% for the first five years. Resets quarterly thereafter to the then current three-month SOFR.
Total	$	55,000

On October 20, 2020, the Company completed a $55.0 million private placement of ten-year fixed-to-floating rate subordinated notes, which will be used to support regulatory capital ratios and for general corporate purposes. The Company exchanged the privately placed notes for registered notes with the same terms and in the same aggregate principal amount at the end of the fourth quarter of 2020. The Notes bear a fixed interest rate of 4.75% for the first five years through November 1, 2025 and will reset quarterly thereafter for the remaining five years to the then current three-month Secured Overnight Financing Rate ("SOFR"), as published by the Federal Reserve Bank of New York, plus 456 basis points.

The subordinated notes may be included in Tier 2 capital, with certain limitations applicable, under current regulatory guidelines and interpretations. The subordinated notes had a carrying value of $54.3 million, net of unamortized debt issuance costs of $0.7 million, at December 31, 2022.

12. EQUITY

As a Hawaii state-chartered bank, Central Pacific Bank may only pay dividends to the extent it has retained earnings as defined under Hawaii banking law ("Statutory Retained Earnings"), which differs from GAAP retained earnings. As of December 31, 2022 and 2021, the bank had Statutory Retained Earnings of $145.7 million and $114.0 million, respectively.

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Dividends are payable at the discretion of the Board of Directors and there can be no assurance that the Board of Directors will continue to pay dividends at the same rate, or at all, in the future. Our ability to pay cash dividends to our shareholders is subject to restrictions under federal and Hawaii law, including restrictions imposed by the FRB and covenants set forth in various agreements we are a party to, including covenants set forth in our subordinated debentures.

We repurchase shares of our common stock when we believe such repurchases are in the best interests of the Company.

In January 2021, the Company’s Board of Directors authorized the repurchase of up to $25.0 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the "2021 Repurchase Plan"). The 2021 Repurchase Plan replaced and superseded in its entirety the share repurchase program previously approved by the Company's Board of Directors, which had $26.6 million in remaining repurchase authority due to the Company temporarily suspending the share repurchase program in March 2020 due to uncertainty in the wake of the COVID-19 pandemic.

In January 2022, the Company’s Board of Directors authorized the repurchase of up to $30.0 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the "2022 Repurchase Plan"). The 2022 Repurchase Plan replaced and superseded in its entirety the 2021 Repurchase Plan, which had $5.3 million in remaining repurchase authority. The Company's 2022 Repurchase Plan is subject to a one year expiration.

In the year ended December 31, 2022, a total of 868,613 shares of common stock, at a cost of $20.7 million, were repurchased under the Company's share purchase programs. A total of $10.3 million remained available for repurchase under the Company's 2022 Repurchase Plan at December 31, 2022.

In the year ended December 31, 2021, 696,894 shares of common stock, at a cost of $18.7 million, were repurchased under the Company's share repurchase programs.

13. REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue Recognition

Accounting Standards Codification ("ASC") 606, "Revenue from Contracts with Customers", establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts to provide goods or services to its customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services. Revenue is recognized as performance obligations are satisfied.

The Company recognizes revenues as they are earned based on contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured. Our principal source of revenue is derived from interest income on financial instruments, such as our loan and investment securities portfolios, as well as revenue related to our mortgage banking activities. These revenue-generating transactions are out of scope of ASC 606, but are subject to other GAAP and discussed elsewhere within our disclosures.

The Company also generates other revenue in connection with our broad range of banking products and financial services. Descriptions of our other revenue-generating activities that are within the scope of ASC 606, which are presented in the Company's consolidated statements of income as components of other operating income are as follows:

Mortgage banking income

Loan placement fees, included in mortgage banking income, primarily represent revenues earned by the Company for loan placement and underwriting. Revenues for these services are recorded at a point-in-time, upon completion of a contractually identified transaction, or when an advisory opinion is provided.

Service charges on deposit accounts

Revenue from service charges on deposit accounts includes general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when our performance obligation is completed, which is

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generally monthly for account maintenance services or when a transaction has been completed (such as stop payment fees). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

Other Service Charges and Fees

Revenue from other service charges and fees includes fees on foreign exchange, cards and payments income, safe deposit rental income and other service charges, commissions and fees.

The Company provides foreign currency exchange services to customers, whereby cash can be converted to different foreign currencies, and vice versa. As a result of the services, a gain or loss is recognized on foreign currency transactions, as well as income related to commissions and fees earned on each transaction. Revenue from the commissions and fees earned on the transactions fall within the scope of ASC 606, and is recorded in a manner that reflects the timing of when transactions occur, and as services are provided. Realized and unrealized gains or losses related to foreign currency are out of scope of ASC 606.

Cards and payments income includes interchange fees from debit cards processed through card association networks, merchant services, and other card related services. Interchange rates are generally set by the credit card associations and based on purchase volumes and other factors. Interchange fees are recognized as transactions occur. Interchange expenses related to cards and payments income are presented gross in other operating expense. Merchant services income represents account management fees and transaction fees charged to merchants for the processing of card association network transactions. Merchant services revenue is recognized as transactions occur, or as services are performed.

Other service charges, commissions and fees include automated teller machines ("ATM") surcharge and interchange fees, bill payment fees, cashier’s check and money order fees, wire transfer fees, loan brokerage fees, and commissions on sales of insurance, broker-dealer products, and letters of credit. Revenue from these fees and commissions is recorded in a manner that reflects the timing of when transactions occur, and as services are provided.

Based on the nature of the commission agreement with the broker-dealer and each insurance provider, we may recognize revenue from broker-dealer and insurance commissions over time or at a point-in-time as our performance obligation is satisfied.

Income from Fiduciary Activities

Income from fiduciary activities includes fees from wealth management, trust, custodial and escrow services provided to individual and institutional customers. Revenue is generally recognized monthly based on a minimum annual fee and/or the market value of assets in custody. Additional fees are recognized for transactional activity.

Revenue from trade execution and brokerage services is earned through commissions from trade execution on behalf of clients. Revenue from these transactions is recognized at the trade date. Any ongoing service fees are recognized on a monthly basis as services are performed.

Net Gain (Loss) on Sales of Foreclosed Assets

The Company records a gain or loss on the sale of a foreclosed property when control of the property transfers to the Company, which typically occurs at the time the deed is executed. The Company does not finance the sale of the foreclosed property.

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

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Other operating income:
In-scope of ASC 606
Mortgage banking income	$	1,060	$	1,993	$	1,128
Service charges on deposit accounts	8,197		6,358		$	6,234
Other service charges and fees	16,581		15,281		11,621
Income on fiduciary activities	4,565		5,075		4,829
In-scope other operating income	30,403		28,707		23,812
Out-of-scope other operating income	17,516		14,353		21,386
Total other operating income	$	47,919	$	43,060	$	45,198

14. MORTGAGE BANKING INCOME

Noninterest income from the Company's mortgage banking activities includes the following components for the periods presented:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Mortgage banking income:
Net loan servicing fees	$	2,259	$	2,733	$	2,754
Amortization of mortgage servicing rights	(1,295)		(3,468)		(6,167)
Net gain on sale of residential mortgage loans	1,778		6,376		16,043
Unrealized gain (loss) on interest rate locks	8		98		(76)
Loan placement fees	1,060		1,993		1,128
Total mortgage banking income	$	3,810	$	7,732	$	13,682

15. SHARE-BASED COMPENSATION

In accordance with ASC 718, compensation expense is recognized only for those shares expected to vest, based on the Company's historical experience and future expectations. The following table summarizes the effects of share-based compensation for options and awards granted under the Company's equity incentive plans for each of the periods presented:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Salaries and employee benefits	$	4,567	$	4,580	$	3,822
Directors stock awards	350		91		165
Income tax benefit	(1,461)		(1,449)		(809)
Net share-based compensation effect	$	3,456	$	3,222	$	3,178

Upon exercise or vesting of a share-based award, if the tax deduction exceeds the compensation cost that was previously recorded for financial statement purposes, this will result in an excess tax benefit. Effective January 1, 2017, ASU 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" requires the Company to recognize all excess tax benefits or tax deficiencies through the income statement as income tax expense/benefit. Under previous GAAP, any excess tax benefits were recognized in additional-paid-in-capital to offset current-period and subsequent-period tax deficiencies. The Company recorded income tax benefit of $0.1 million in 2022, income tax benefit of $0.2 million in 2021, and income tax expense of $0.3 million in 2020, as a result of restricted stock units vesting during the year.

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The Company's share-based compensation arrangements are described below:

Equity Incentive Plans

The Company has adopted equity incentive plans for the purpose of granting options, restricted stock and other equity based awards for the Company's common stock to directors, officers and other key individuals. Option awards are generally granted with an exercise price equal to the market price of the Company's common stock at the date of grant; those option awards generally vest based on three or five years of continuous service and have 10-year contractual terms. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined in the stock option plans below). The Company has historically issued new shares of common stock upon exercises of stock options and purchases of restricted awards.

In April 2013, the Company adopted and shareholders approved the 2013 Stock Compensation Plan ("2013 Plan") making available 2,200,000 shares for grants to employees and directors. Upon adoption of the 2013 Plan, all unissued shares from the previous plan were frozen and no new grants were granted under the previous plan. Shares may continue to be settled under the previous plan pursuant to previously outstanding awards. New shares are issued from the 2013 Plan.

A total of 747,332, 843,469 and 996,850 shares were available for future grants under our 2013 Plan as of December 31, 2022, 2021 and 2020, respectively.

Stock Options 

The fair value of each option award is estimated on the date of grant based on the following:

Valuation and amortization method— The fair value of stock options granted is estimated using the Black-Scholes option pricing formula and a single option award approach. Historical data is used to estimate option exercise and employee termination activity within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

Expected life —The expected life of options represents the period of time that options granted are expected to be outstanding.

Expected volatility —Expected volatility is based on the historical volatility of the Company's common stock.

Risk-free interest rate —The risk-free interest rate for periods within the contractual life of the option is based on the Treasury yield curve in effect at the time of grant.

Expected dividend —The expected dividend assumption is based on our current expectations about our anticipated dividend policy.

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The following is a summary of option activity for our stock option plans for the year ended December 31, 2022:

	Number of Units	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Stock options outstanding as of January 1, 2022	47,440	$	14.32
Changes during the year:
Granted	—	—
Exercised	(47,440)	14.32			$	706
Expired	—	—
Forfeited	—	—
Stock options outstanding as of December 31, 2022	—	—		0.0	—
Vested and exercisable as of December 31, 2022	—			0.0	—

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying option awards and the quoted price of the Company's common stock for the options that were in-the-money as of December 31, 2022.

There were 47,440 and 86,373 options exercised during the years ended December 31, 2022 and 2021, respectively. The aggregate intrinsic value of options exercised in 2022 and 2021 under our stock option plan determined as of the date of exercise was $0.7 million and $0.9 million, respectively. There were no options exercised in 2020.

As of December 31, 2022, all compensation costs related to stock options granted to employees under our stock option plans have been recognized.

There were no shares that vested in 2022, 2021 and 2020. As of December 31, 2022, all shares have been vested and exercised.

No stock options were granted during the years ended December 31, 2022, 2021 and 2020.

Restricted Stock and and Performance Stock Units

Under the 2013 Plan, the Company awarded restricted stock units ("RSUs") and performance stock units ("PSUs") to non-officer directors and certain senior management personnel. The awards typically vest over a two, three or five year period from the date of grant and are subject to forfeiture until performance and employment targets are achieved. Compensation expense is measured as the market price of the stock awards on the grant date, and is recognized over the specified vesting periods.

As of December 31, 2022, there was $3.5 million of total unrecognized compensation cost related to RSUs and PSUs that is expected to be recognized over a weighted-average period of 1.7 years.

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The table below presents the activity of RSUs and PSUs for each of the periods presented:

	Number of Units	Weighted Average Grant Date Fair Value		Fair Value of RSUs and PSUs That Vested During The Year (in thousands)
Unvested as of December 31, 2019	366,467	$	28.89
Changes during the year:
Granted	322,180	18.11
Forfeited	(28,058)	23.79
Vested	(128,215)	29.48		$	3,780
Unvested as of December 31, 2020	532,374	22.49
Changes during the year:
Granted	221,774	21.93
Forfeited	(75,850)	21.95
Vested	(192,959)	23.42		5,077
Unvested as of December 31, 2021	485,339	21.95
Changes during the year:
Granted	99,887	28.99
Forfeited	(53,980)	25.66
Vested	(178,781)	21.91		4,787
Unvested as of December 31, 2022	352,465	23.40

16. PENSION PLANS

Defined Benefit Retirement Plan

The bank had a defined benefit retirement plan that covered substantially all of its employees who were employed during the period that the plan was in effect. The plan was initially curtailed in 1986, and accordingly, plan benefits were fixed as of that date. Effective January 1, 1991, the bank reactivated its defined benefit retirement plan. As a result of the reactivation, employees for whom benefits were fixed in 1986 began to accrue additional benefits under a new formula that became effective January 1, 1991. Employees who were not participants at curtailment, but were subsequently eligible to join, became participants effective January 1, 1991. Under the reactivated plan, benefits are based upon the employees' years of service and their highest average annual salaries in a 60-consecutive-month period of service, reduced by benefits provided from the bank's terminated money purchase pension plan. The reactivation of the defined benefit retirement plan resulted in an increase of $5.9 million in the unrecognized prior service cost, which was amortized over a period of 13 years. Effective December 31, 2002, the bank curtailed its defined benefit retirement plan, and accordingly, plan benefits were fixed as of that date.

In January 2021, the Board of Directors approved termination of, and authorized Company management to commence taking action to terminate, the defined benefit retirement plan. The Company received a favorable determination letter from the IRS and no objection from the Pension Benefit Guaranty Corporation on the Form 500 standard termination notice in January 2022. The Company completed the termination and settlement of the plan in the second quarter of 2022. Upon final plan termination and settlement, the Company recognized a one-time noncash settlement expense of $4.9 million, which was recorded in other operating expense. As of December 31, 2022, the Company has no further defined benefit retirement plan liability or ongoing pension expense recognition.

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The following tables set forth information pertaining to the defined benefit retirement plan:

	Year Ended December 31,
(Dollars in thousands)	2022		2021
Change in benefit obligation:
Benefit obligation at beginning of year	$	20,420	$	21,919
Interest cost	212		485
Actuarial gains	(1,766)		(427)
Benefits paid	(5,398)		(1,557)
Annuity purchase	(13,468)		—
Benefit obligation at end of the year	—		20,420
Change in plan assets, at fair value:
Fair value of plan assets at beginning of year	20,785		21,153
Actual return on plan assets	(1,969)		1,189
Employer contributions	50		—
Benefits paid	(5,398)		(1,557)
Annuity purchase	(13,468)		—
Fair value of plan assets at end of year	—		20,785
Funded status at end of year	$	—	$	365
Amounts recognized in AOCI:
Net actuarial losses	$	—	$	(4,699)
Benefit obligation actuarial assumptions:
Weighted-average discount rate	N/A		2.4		%

	Year Ended December 31,
(Dollars in thousands)	2022			2021			2020
Components of net periodic benefit cost:
Interest cost	$	212		$	485		$	641
Expected return on plan assets	(207)			(549)			(920)
Amortization of net actuarial losses	225			701			909
Settlement	4,884			—			—
Net periodic benefit cost	$	5,114		$	637		$	630
Net periodic cost actuarial assumptions:
Weighted-average discount rate	2.4		%	2.3		%	3.1		%
Expected long-term rate of return on plan assets	2.3		%	2.7		%	4.5		%

The long-term rate of return on plan assets reflects the weighted-average long-term rates of return for the various categories of investments held in the plan. The expected long-term rate of return is adjusted when there are fundamental changes in expected returns on the plan investments.

There were no plan assets remaining as of December 31, 2022. The defined benefit retirement plan assets as of December 31, 2021 consisted of debt securities and money market funds. The asset allocations by asset category were as follows:

	December 31, 2021
Debt securities	85.9	%
Money market funds	14.1
Total	100.0	%

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In preparation of the defined benefit retirement plan termination, the plan asset allocations were adjusted to minimize market risk, which included eliminating all equity securities and adjusting the portfolio duration in 2021. There were no equity securities and no shares of the Company's common stock included in plan assets as of December 31, 2022 and 2021.

The fair values of the defined benefit retirement plan as of December 31, 2021 by asset category were as follows: 

(Dollars in thousands)	Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
December 31, 2021
Money market funds	$	2,938	$	—	$	—	$	2,938
Exchange traded funds	10,712		—		—		10,712
Government obligations	—		1,899		—		1,899
Corporate bonds and debentures	—		5,236		—		5,236
Total	$	13,650	$	7,135	$	—	$	20,785

With the termination of the defined benefit retirement plan in the second quarter of 2022, the Company no longer has any estimated future payments due and is no longer required by funding regulations or laws to make any contributions to our defined benefit retirement plan.

Supplemental Executive Retirement Plans

In 1995, 2001, 2004 and 2006, our bank established Supplemental Executive Retirement Plans ("SERP") that provide certain officers of the Company with supplemental retirement benefits. On December 31, 2002, the 1995 and 2001 SERP were curtailed. In conjunction with the merger with CB Bancshares, Inc. ("CBBI"), we assumed CBBI's SERP obligation.

122

The following tables set forth information pertaining to the SERP:

	Year Ended December 31,
(Dollars in thousands)	2022			2021
Change in benefit obligation
Benefit obligation at beginning of year	$	12,297		$	12,740
Interest cost	301			264
Actuarial gains	(2,960)			(398)
Benefits paid	(418)			(309)
Benefit obligation at end of year	9,220			12,297
Change in plan assets
Fair value of plan assets at beginning of year	—			—
Employer contributions	418			309
Benefits paid	(418)			(309)
Fair value of plan assets at end of year	—			—
Funded status at end of year	$	(9,220)		$	(12,297)
Amounts recognized in AOCI
Net transition obligation	$	(7)		$	(26)
Net actuarial losses	701			(2,337)
Total amounts recognized in AOCI	$	694		$	(2,363)
Benefit obligation actuarial assumptions
Weighted-average discount rate	5.0		%	2.5		%

	Year Ended December 31,
(Dollars in thousands)	2022			2021			2020
Components of net periodic benefit cost
Interest cost	$	301		$	264		$	341
Amortization of net actuarial (gains) losses	79			335			251
Amortization of net transition obligation	18			18			18
Amortization of prior service cost	—			—			14
Net periodic benefit cost	$	398		$	617		$	624
Net periodic cost actuarial assumptions
Weighted-average discount rate	2.7		%	2.1		%	3.1		%

The SERP holds no plan assets other than employer contributions that are paid as benefits during the year. The Company expects to contribute $0.6 million to the SERP in 2023.

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Estimated future benefit payments reflecting expected future service for the SERP in each of the next five years, in the aggregate for the five years and thereafter are as follows:

(Dollars in thousands)
Year Ending December 31:
2023	$	573
2024	570
2025	566
2026	561
2027	556
2028-2032	4,817
Thereafter	1,577
Total	$	9,220

17. 401(K) RETIREMENT SAVINGS PLAN

The Company maintains a 401(k) Retirement Savings Plan ("Retirement Savings Plan") that covers substantially all employees of the Company. The Retirement Savings Plan allows employees to direct their own investments among a selection of investment alternatives and is funded by employee elective deferrals, employer matching contributions and employer discretionary contributions.

The Company has the option of making regular matching contributions on employee's elective deferrals. The Company has sole discretion in determining the percentage to be matched, subject to limitations of the Internal Revenue Code. From January 1, 2020 to June 30, 2020, the Company matched 100% of an employee's elective deferrals, up to 4% of the employee's pay each pay period. Effective July 1, 2020, matching contributions were temporarily suspended due to economic uncertainty in the wake of the COVID-19 pandemic. In lieu of matching contributions, an equity grant of the Company's common stock was granted to all 401(k)-eligible employees as of June 30, 2020 that will vest ratably over three years. The equity grants were made outside of the Retirement Savings Plan.

From January 1, 2021 through June 30, 2021, matching contributions remained suspended. Effective July 1, 2021 through December 31, 2021, we matched 100% of an employees effective deferrals, up to 2% of the employee's pay each pay period. Effective January 1, 2022 through December 31, 2022, we matched 100% of an employees effective deferrals, up to 4% of the employee's pay each pay period.

The Company also has the option of making discretionary contributions into the Retirement Savings Plan and has sole discretion in determining the discretionary contribution, subject to limitations of the Internal Revenue Code. On December 31, 2020, the Company made a discretionary contribution to all 401(k)-eligible employees, excluding Executive Committee and Managing Committee members, of 2% of the employee's eligible compensation, up to $1,250 per employee. The Company did not make any discretionary contributions in 2022 and 2021.

Total contributions to the Retirement Savings Plan totaled $2.4 million, $0.5 million and $2.1 million in 2022, 2021 and 2020, respectively. 

18. OPERATING LEASES

The Company leases certain property and equipment with lease terms expiring through 2045. In some instances, a lease may contain renewal options for periods ranging from five to 15 years. All renewal options are likely to be exercised and therefore have been recognized as part of our right-of-use assets and lease liabilities in accordance with ASC 842, "Leases". Certain leases also contain variable payments that are primarily determined based on common area maintenance costs and Hawaii state tax rates. All leases are operating leases and any short-term leases are not included in the calculation of the right-of-use assets and lease liabilities. The most significant assumption related to the Company’s application of ASC 842 was the discount rate assumption. As most of the Company’s lease agreements do not provide for an implicit interest rate, the Company uses the collateralized interest rate that the Company would have to pay to borrow over a similar term to estimate the Company’s lease liability.

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Total lease cost, cash flow information, weighted-average remaining lease term and weighted-average discount rate is summarized below for the periods indicated:

	Year Ended December 31,
(Dollars in thousands)	2022			2021
Lease cost:
Operating lease cost	$	5,495		$	6,397
Variable lease cost	3,278			2,476
Less: sublease income	(48)			(78)
Total lease cost	$	8,725		8,795
Other information:
Operating cash flows from operating leases	$	(5,896)		$	(6,533)
Weighted-average remaining lease term - operating leases	11.22 years			11.91 years
Weighted-average discount rate - operating leases	3.95		%	3.93		%

The following is a schedule of annual undiscounted cash flows for our operating leases and a reconciliation of those cash flows to the operating lease liabilities for the next five succeeding fiscal years and all years thereafter:

(Dollars in thousands)
Year Ending December 31,	Undiscounted Cash Flows		Lease Liability Expense		Lease Liability Reduction
2023	$	5,100	$	1,328	$	3,772
2024	4,438		1,202		3,236
2025	4,152		1,078		3,074
2026	4,089		958		3,131
2027	4,080		835		3,245
Thereafter	23,049		3,618		19,431
Total	$	44,908	$	9,019	$	35,889

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

	Year Ended December 31,
(Dollars in thousands)	2022		2021
Total rental income recognized	$	2,228	2,094

Based on the Company's leases as lessor as of December 31, 2022, estimated lease payments for the next five succeeding fiscal years and all years thereafter are as follows:

(Dollars in thousands)
Year Ending December 31,
2023	$	1,001
2024	835
2025	675
2026	555
2027	533
Thereafter	2,300
Total	$	5,899

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19. INCOME TAXES

Components of income tax expense (benefit) for the years ended December 31, 2022, 2021 and 2020 were as follows:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Current expense:
Federal	$	996	$	11,304	$	22,014
State	(1,965)		3,626		2,833
Total current	(969)		14,930		24,847
Deferred expense:
Federal	18,854		8,654		(12,952)
State	6,956		2,174		(135)
Total deferred	25,810		10,828		(13,087)
Provision for income taxes	$	24,841	$	25,758	$	11,760

Income tax expense (benefit) for the periods presented differed from the "expected" tax expense (computed by applying the U.S. federal corporate tax rate of 21% for the years ended December 31, 2022, 2021 and 2020, to income (loss) before income taxes) for the following reasons:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Computed "expected" tax expense (benefit)	$	20,741	$	22,187	$	10,297
Increase (decrease) in taxes resulting from:
Tax-exempt interest income	(692)		(526)		(528)
Other tax-exempt income	(392)		(734)		(799)
Low-income housing tax credits	(530)		(365)		(332)
State income taxes, net of Federal income tax effect, excluding impact of deferred tax valuation allowance	4,982		5,377		2,590
Change in the beginning-of-the-year balance of the valuation allowance for deferred tax assets allocated to income tax expense	39		(39)		(22)
Other, net	693		(142)		554
Total	$	24,841	$	25,758	$	11,760

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The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:

	December 31,
(Dollars in thousands)	2022		2021
Deferred tax assets
Lease liability	$	9,598	$	10,891
Allowance for credit losses	13,534		14,382
Accrued expenses	3,737		3,616
Employee retirement benefits	1,941		2,547
Federal net operating loss carryforwards	16,363		—
State net operating loss carryforwards	7,583		3,091
Restricted stock and non-qualified stock options	388		611
Premises and equipment	4,717		4,678
Other	9,504		6,333
Total deferred tax assets	67,365		46,149
Deferred tax liabilities
Right-of-use lease asset	9,356		10,546
Intangible assets	2,427		2,604
Other	3,647		3,808
Total deferred tax liabilities	15,430		16,958
Less: Deferred tax valuation allowance	3,398		3,359
Net deferred tax assets	$	48,537	$	25,832

In assessing the realizability of our net DTA, management considers whether it is more likely than not that some portion or all of the DTA will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income and tax-planning strategies in making this assessment.

As of December 31, 2022, the valuation allowance on our net DTA totaled $3.4 million, which related to our DTA from net apportioned net operating loss ("NOL") carryforwards for California state income tax purposes as the Company does not expect to generate sufficient income in California to utilize the DTA. The net change in the valuation allowance was an increase of $39 thousand in 2022, compared to a decrease of $39 thousand in 2021.

Net of this valuation allowance, the Company's net DTA totaled $48.5 million as of December 31, 2022, compared to a net DTA of $25.8 million as of December 31, 2021, and is included in other assets in the Company's consolidated balance sheets.

At December 31, 2022, the Company had NOL carryforwards for U.S. Federal income tax purposes of $77.9 million and state income tax purposes of $132.0 million, which are available to offset future taxable income. The U.S. Federal NOL carryforwards can be carried forward indefinitely to offset future federal taxable income. The Hawaii NOL carryforwards can also be carried forward indefinitely, while the other state NOL carryforwards will begin to expire if not utilized beginning in 2028.

Utilization of the NOL carryforwards and credits may be subject to annual limitations due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before they are able to be utilized. The Company does not expect any previous ownership changes, as defined under Sections 382 and 383 of the Internal Revenue Code, to result in an ultimate limitation that will materially reduce the total amount of net operating loss carryforwards that can be utilized.

127

At December 31, 2022, the Company did not have any material unrecognized tax benefits that, if recognized would favorably affect the effective income tax rate in future periods. The Company does not expect our unrecognized tax benefits to change significantly over the next 12 months.

The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. As of December 31, 2022, the Company’s federal tax returns for 2016 and earlier, and the state tax returns for 2018 and earlier were no longer subject to examination by the taxing authorities. However, tax periods closed in a prior period may be subject to audit and re-examination by tax authorities for which tax carryforwards are utilized in subsequent years.

20. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the components of other comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020, by component:

(Dollars in thousands)	Before Tax		Tax Effect		Net of Tax
Year ended December 31, 2022
Net change in fair value of investment securities:
Net unrealized losses on investment securities arising during the period	$	(204,250)	$	(54,109)	$	(150,141)
Less: Amortization of unrealized losses on investment securities transferred to HTM	6,218		1,520		4,698
Net change in fair value of investment securities	(198,032)		(52,589)		(145,443)
Net change in fair value of derivative:
Net unrealized gains arising during the period	6,326		1,681		4,645
Net change in fair value of derivative	6,326		1,681		4,645
Defined benefit retirement plan and SERPs:
Net actuarial gains arising during the period	2,007		537		1,470
Amortization of net actuarial losses	304		81		223
Amortization of net transition obligation	18		4		14
Settlement	4,884		1,817		3,067
Defined benefit retirement plan and SERPs	7,213		2,439		4,774
Other comprehensive loss	$	(184,493)	$	(48,469)	$	(136,024)

(Dollars in thousands)	Before Tax		Tax Effect		Net of Tax
Year ended December 31, 2021
Net change in fair value of investment securities:
Net unrealized losses on investment securities arising during the period	$	(41,237)	$	(11,030)	$	(30,207)
Less: Reclassification adjustment for gains realized in net income	(150)		(40)		(110)
Net change in fair value of investment securities	(41,387)		(11,070)		(30,317)
Defined benefit retirement plan and SERPs:
Net actuarial gains arising during the period	2,014		544		1,470
Amortization of net actuarial losses	1,036		291		745
Amortization of net transition obligation	18		4		14
Defined benefit retirement plan and SERPs	3,068		839		2,229
Other comprehensive loss	$	(38,319)	$	(10,231)	$	(28,088)

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(Dollars in thousands)	Before Tax		Tax Effect		Net of Tax
Year ended December 31, 2020
Net change in fair value of investment securities:
Net unrealized gains on investment securities arising during the period	$	15,939	$	4,260	$	11,679
Less: Reclassification adjustment for losses realized in net income	201		54		147
Net change in fair value of investment securities	16,140		4,314		11,826
Defined benefit retirement plan and SERPs:
Net actuarial losses arising during the period	(1,488)		(508)		(980)
Amortization of net actuarial losses	1,160		310		850
Amortization of net transition obligation	18		5		13
Amortization of prior service cost	14		4		10
Defined benefit retirement plan and SERPs	(296)		(189)		(107)
Other comprehensive income	$	15,844	$	4,125	$	11,719

The following table presents the changes in each component of AOCI, net of tax, for the years ended December 31, 2022, 2021 and 2020:

(Dollars in thousands)	Investment Securities		Derivatives		Defined Benefit Plans		AOCI
Year ended December 31, 2022
Balance at beginning of period	$	(3,666)	$	—	$	(4,294)	$	(7,960)
Other comprehensive (loss) income before reclassifications	(150,141)		4,645		1,470		(144,026)
Amounts reclassified from AOCI	4,698		—		3,304		8,002
Net other comprehensive income (loss)	(145,443)		4,645		4,774		(136,024)
Balance at end of period	$	(149,109)	$	4,645	$	480	$	(143,984)

(Dollars in thousands)	Investment Securities		Defined Benefit Plans		AOCI
Year ended December 31, 2021
Balance at beginning of period	$	26,651	$	(6,523)	$	20,128
Other comprehensive (loss) income before reclassifications	(30,207)		1,470		(28,737)
Amounts reclassified from AOCI	(110)		759		649
Net other comprehensive income (loss)	(30,317)		2,229		(28,088)
Balance at end of period	$	(3,666)	$	(4,294)	$	(7,960)

(Dollars in thousands)	Investment Securities		Defined Benefit Plans		AOCI
Year ended December 31, 2020
Balance at beginning of period	$	14,825	$	(6,416)	$	8,409
Other comprehensive income (loss) before reclassifications	11,679		(980)		10,699
Amounts reclassified from AOCI	147		873		1,020
Total other comprehensive income (loss)	11,826		(107)		11,719
Balance at end of period	$	26,651	$	(6,523)	$	20,128

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The following table presents the amounts reclassified out of each component of AOCI for the years ended December 31, 2022, 2021 and 2020:

	Amount Reclassified from AOCI						Affected Line Item in the
	Year ended December 31,						Statement Where Net
Details about AOCI Components	2022		2021		2020		Income is Presented
	(Dollars in thousands)
Sale of available-for-sale investment securities:
Realized gains (losses) on available-for-sale investment securities	$	—	$	150	$	(201)	Net gains (losses) on sales of investment securities
Tax effect	—		(40)		54		Income tax benefit (expense)
Net of tax	$	—	$	110	$	(147)
Amortization of unrealized losses on investment securities transferred to HTM	$	(6,218)	$	—	$	—	Interest and dividends on investment securities
Tax effect	1,520		—		—		Income tax expense
Net of tax	$	(4,698)	$	—	$	—
Defined benefit plan items:
Amortization of net actuarial losses	$	(304)	$	(1,036)	$	(1,160)	Other operating expense - other (1)
Amortization of net transition obligation	(18)		(18)		(18)		Other operating expense - other (1)
Amortization of prior service cost	—		—		(14)		Other operating expense - other (1)
Settlement	(4,884)		—		—		Other operating expense - other (1)
Total before tax	(5,206)		(1,054)		(1,192)
Tax effect	1,902		295		319		Income tax expense
Net of tax	$	(3,304)	$	(759)	$	(873)
Total reclassifications, net of tax	$	(8,002)	$	(649)	$	(1,020)

(1)These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 16 - Pension Plans for additional details).

21. EARNINGS PER SHARE

The table below presents the information used to compute basic and diluted earnings per share for the years ended December 31, 2022, 2021 and 2020:

	Year Ended December 31,
(In thousands, except per share data)	2022		2021		2020
Net income	$	73,928	$	79,894	$	37,273
Weighted-average shares outstanding for basic earnings per share	27,398,445		28,003,744		28,074,543
Add: Dilutive effect of employee stock options and awards	169,335		253,579		106,033
Weighted-average shares outstanding for diluted earnings per share	27,567,780		28,257,323		28,180,576
Basic earnings per share	$	2.70	$	2.85	$	1.33
Diluted earnings per share	$	2.68	$	2.83	$	1.32

There were no potentially anti-dilutive securities that have been excluded from the dilutive share calculation for the years ended December 31, 2022, 2021, and 2020.

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22. CONTINGENT LIABILITIES AND OTHER COMMITMENTS

The Company and its subsidiaries are involved in legal actions arising in the ordinary course of business. Management, after consultation with legal counsel, believes the ultimate disposition of those matters will not have a material adverse effect on our consolidated financial statements.

In the normal course of business there are outstanding contingent liabilities and other commitments such as unused letters of credit and items held for collections, which are not reflected in the accompanying consolidated financial statements. Management does not anticipate any material losses as a result of these transactions.

23. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees written, forward foreign exchange contracts, interest rate contracts, risk participation agreements, and back-to-back swap agreements. Those instruments involve, to varying degrees, elements of credit, interest rate and foreign exchange risk in excess of the amounts recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

Exposure to credit loss in the event of nonperformance by the counter-party to the financial instrument for commitments to extend credit and standby letters of credit and financial guarantees written is represented by the contractual amount of those instruments. For forward foreign exchange contracts and interest rate contracts, the contract amounts do not represent exposure to credit loss. The Company controls the credit risk of these contracts through credit approvals, limits and monitoring procedures. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation of the counter-party. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Standby letters of credit and financial guarantees written are conditional commitments issued by us to guarantee the performance of a customer to a third-party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company holds collateral for those commitments in which collateral is deemed necessary.

Interest rate options issued on residential mortgage loans expose us to interest rate risk, which is economically hedged with forward interest rate contracts. These derivatives are carried at fair value with changes in fair value recorded as a component of mortgage banking income in other operating income in the consolidated statements of income. The amount of interest rate options fluctuates based on residential mortgage volume.

Forward interest rate contracts represent commitments to purchase or sell loans at a future date at a specified price. The Company enters into forward interest rate contracts on our residential mortgage held for sale loans. These derivatives are carried at fair value with changes in fair value recorded as a component of mortgage banking income in other operating income in the consolidated statements of income. Risks arise from the possible inability of counter-parties to meet the terms of their contracts and from movements in market rates. Management reviews and approves the creditworthiness of the counter-parties to its forward interest rate contracts.

Risk participation agreements represent agreements with a financial institution counterparty for interest rate swaps related to loans in which we participate. These derivatives are carried at fair value with changes in fair value recorded as a component of other service charges and fees. The risk participation agreements entered into by us as a participant bank provide credit protection to the financial institution counterparty should the borrowers fail to perform on their interest rate derivative contracts with that financial institution.

The Company established a program whereby it originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer. The Company also enters into an equal and offsetting swap with a highly rated third-party financial

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institution. These "back-to-back swap agreements" are intended to offset each other and allows the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. These back-to-back swap agreements are free-standing derivatives and are recorded at fair value on the Company's consolidated balance sheet in other assets or other liabilities, and changes to the fair value recorded in other service charges and fees on the consolidated statement of income.

Forward foreign exchange contracts represent commitments to purchase or sell foreign currencies at a future date at a specified price. These derivatives are carried at fair value with changes in fair value recorded as a component of other operating income in the consolidated statements of income. Risks arise from the possible inability of counter-parties to meet the terms of their contracts and from movements in foreign currency exchange rates. Management reviews and approves the creditworthiness of its forward foreign exchange counter-parties. At December 31, 2022 and 2021, the Company did not have any forward foreign exchange contracts.

During the first quarter of 2022, the Company entered into a forward starting interest rate swap, with an effective date of March 31, 2024. This transaction had a notional amount totaling $115.5 million as of December 31, 2022, and was designated as a fair value hedge of certain municipal debt securities. The Company will pay the counterparty a fixed rate of 2.095% and will receive a floating rate based on the Federal Funds effective rate. The fair value hedge has a maturity date of March 31, 2029. The interest rate swap is carried on the Company’s consolidated balance sheet at its fair value in other assets (when the fair value is positive) or in other liabilities (when the fair value is negative). The changes in the fair value of the interest rate swap are recorded in interest income. The unrealized gains or losses due to changes in fair value of the hedged debt securities due to changes in benchmark interest rates are recorded as an adjustment to the hedged debt securities and offset in the same interest income line item.

At December 31, 2022 and 2021, financial instruments with off-balance sheet risk were as follows:

	December 31,
(Dollars in thousands)	2022		2021
Notional amount of:
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	1,328,791	$	1,266,596
Standby letters of credit and financial guarantees written	5,367		6,634
Notional amount of:
Financial instruments whose contract amounts exceed the amount of credit risk:
Back-to-back swap agreements:
Assets	32,335		33,112
Liabilities	32,335		33,112
Forward interest rate contracts	1,110		3,525
Risk participation agreements	36,835		37,531
Interest rate swap agreements	115,545		—

24. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Disclosures about Fair Value of Financial Instruments

Fair value estimates, methods and assumptions are set forth below for our financial instruments.

Short-Term Financial Instruments

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

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Investment Securities

The fair value of investment securities is based on market price quotations received from third-party pricing services. The third-party pricing services utilize pricing models supported with timely market data information. Where quoted market prices are not available, fair values are based on quoted market prices of comparable securities.

Loans

Fair values of loans are estimated based on discounted cash flows of portfolios of loans with similar financial characteristics including the type of loan, interest terms and repayment history. Fair values are calculated by discounting scheduled cash flows through estimated maturities using estimated market discount rates. Estimated market discount rates are reflective of credit and interest rate risks inherent in the Company’s various loan types and are derived from available market information, as well as specific borrower information. The weighted-average discount rate used in the valuation of loans was 7.44% as of December 31, 2022. In accordance with ASU 2016-01, the fair value of loans are based on the notion of exit price as of December 31, 2022 and 2021.

Loans Held for Sale

The fair value of loans classified as held for sale are generally based upon quoted prices for similar assets in active markets, acceptance of firm offer letters with agreed upon purchase prices, discounted cash flow models that take into account market observable assumptions, or independent appraisals of the underlying collateral securing the loans. The fair values of Hawaii and U.S. Mainland construction and commercial real estate loans, if any, are reported net of applicable selling costs on the Company's consolidated balance sheets.

Deposit Liabilities

The fair values of deposits with no stated maturity, such as noninterest-bearing demand deposits and interest-bearing demand and savings accounts, are equal to the amount payable on demand. The fair value of time deposits is estimated using discounted cash flow analyses. The fair value of time deposits is estimated by discounting future cash flows using rates currently offered for FHLB advances of similar remaining maturities. The weighted-average discount rate used in the valuation of time deposits was 4.96% as of December 31, 2022.

Long-Term Debt

The fair value of our long-term debt is estimated by discounting scheduled cash flows over the contractual borrowing period at the estimated market rate for similar borrowing arrangements. The weighted-average discount rate used in the valuation of long-term debt was 7.28% as of December 31, 2022.

Derivatives

The fair values of derivative financial instruments are based upon current market values, if available. If there are no relevant comparables, fair values are based on pricing models using current assumptions for interest rate swaps and options.

Off-Balance Sheet Financial Instruments

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

Limitations

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

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Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of future business and the value of assets and liabilities that are not considered financial instruments. For example, significant assets and liabilities that are not considered financial assets or liabilities include deferred tax assets and liabilities and premises and equipment.

					Fair Value Measurement Using
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022
Financial assets:
Cash and due from financial institutions	$	97,150	$	97,150	$	97,150	$	—	$	—
Interest-bearing deposits in other financial institutions	14,894		14,894		14,894		—		—
Investment securities	1,336,677		1,268,574		—		1,261,306		7,268
Loans held for sale	1,105		1,105		—		1,105		—
Loans, net of ACL	5,491,728		5,043,436		—		—		5,043,436
Accrued interest receivable	20,345		20,345		20,345		—		—
Financial liabilities:
Deposits:
Noninterest-bearing deposits	2,092,823		2,092,823		2,092,823		—		—
Interest-bearing demand and savings deposits	3,652,195		3,652,195		3,652,195		—		—
Time deposits	991,205		975,086		—		—		975,086
FHLB advances and other short-term borrowings	5,000		5,000		—		5,000		—
Long-term debt	105,859		93,729		—		—		93,729
Accrued interest payable (included in other liabilities)	4,739		4,739		4,739		—		—

							Fair Value Measurement Using
(Dollars in thousands)	Notional Amount		Carrying Amount		Estimated Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022
Off-balance sheet financial instruments:
Commitments to extend credit	$	1,328,791	$	—	$	1,270	$	—	$	1,270	$	—
Standby letters of credit and financial guarantees written	5,367		—		80		—		80		—
Derivatives:
Back-to-back swap agreements:
Assets	32,335		4,611		4,611		—		—		4,611
Liabilities	(32,335)		(4,611)		(4,611)		—		—		(4,611)
Forward sale commitments	1,110		8		8		—		8		—
Risk participation agreements	36,835		—		—		—		—		—
Interest rate swap agreements	115,545		5,986		5,986		—		—		5,986

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					Fair Value Measurement Using
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2021
Financial assets:
Cash and due from financial institutions	$	81,506	$	81,506	$	81,506	$	—	$	—
Interest-bearing deposits in other financial institutions	247,401		247,401		247,401		—		—
Investment securities	1,631,699		1,631,699		—		1,623,080		8,619
Loans held for sale	3,531		3,531		—		3,531		—
Loans, net of ACL	5,033,552		4,741,379		—		—		4,741,379
Accrued interest receivable	16,709		16,709		16,709		—		—
Financial liabilities:
Deposits:
Noninterest-bearing deposits	2,291,246		2,291,246		2,291,246		—		—
Interest-bearing demand and savings deposits	3,641,180		3,641,180		3,641,180		—		—
Time deposits	706,732		704,645		—		—		704,645
Long-term debt	105,616		94,558		—		—		94,558
Accrued interest payable (included in other liabilities)	1,122		1,122		1,122		—		—

							Fair Value Measurement Using
(Dollars in thousands)	Notional Amount		Carrying Amount		Estimated Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2021
Off-balance sheet financial instruments:
Commitments to extend credit	$	1,266,596	$	—	$	1,347	$	—	$	1,347	$	—
Standby letters of credit and financial guarantees written	6,634		—		100		—		100		—
Derivatives:
Back-to-back swap agreements:
Assets	33,112		435		435		—		—		435
Liabilities	33,112		(435)		(435)		—		—		(435)
Forward sale commitments	3,525		1		1		—		1		—
Risk participation agreements	37,531		(16)		(16)		—		—		(16)

Fair Value Measurements

Financial assets and liabilities are grouped at fair value into three levels based on the markets in which the financial assets and liabilities are traded and the reliability of the assumptions used to determine fair value as follows:

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

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

•Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use

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in pricing the asset or liability. Valuation techniques include use of discounted cash flow models and similar techniques that require the use of significant judgment or estimation.

Fair values are based on the price that the Company would expect to receive if an asset were sold or pay to transfer a liability in an orderly transaction between market participants at the measurement date. When developing fair value measurements, the use of observable inputs are maximized and the use of unobservable inputs are minimized.

Fair value measurements are used to record adjustments to certain financial assets and liabilities and to determine fair value disclosures. Available-for-sale investment securities and derivatives are recorded at fair value on a recurring basis. From time to time, the Company may be required to record other financial assets at fair value on a nonrecurring basis such as loans held for sale, impaired loans and mortgage servicing rights. These nonrecurring fair value adjustments typically involve application of the lower of cost or fair value accounting or write-downs of individual assets.

There were no transfers of financials assets and liabilities into and out of Level 3 of the fair value hierarchy during the year ended December 31, 2022.

The following table below presents the fair value of assets and liabilities measured on a recurring basis:

			Fair Value at Reporting Date Using
(Dollars in thousands)	Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022
Available-for-sale investment securities:
Debt securities:
States and political subdivisions	$	135,752	$	—	$	129,168	$	6,584
Corporate securities	30,211		—		30,211		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	25,715		—		25,715		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	423,803		—		423,803		—
Residential - Non-government sponsored entities ("Non-GSEs")	8,662		—		7,978		684
Commercial - U.S. GSEs and agencies	46,144		—		46,144		—
Commercial - Non-GSEs	1,507		—		1,507		—
Total investment securities	671,794		—		664,526		7,268
Derivatives:
Forward sale commitments	8		—		8		—
Interest rate swap agreements	5,986		—		—		5,986
Total derivatives	5,994		—		8		5,986
Total	$	677,788	$	—	$	664,534	$	13,254

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			Fair Value at Reporting Date Using
(Dollars in thousands)	Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2021
Available-for-sale investment securities:
Debt securities:
States and political subdivisions	$	236,828	$	—	$	229,147	$	7,681
Corporate securities	40,646		—		40,646		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	35,334		—		35,334		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	1,198,816		—		1,198,816		—
Residential - Non-government sponsored entities ("Non-GSEs")	12,213		—		11,275		938
Commercial - U.S. GSEs and agencies	65,849		—		65,849		—
Commercial - Non-GSEs	42,013		—		42,013		—
Total investment securities	1,631,699		—		1,623,080		8,619
Derivatives:
Interest rate lock commitments	1		—		1		—
Forward sale commitments	(16)		—		—		(16)
Total derivatives	(15)		—		1		(16)
Total	$	1,631,684	$	—	$	1,623,081	$	8,603

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:

	Available-For-Sale Debt Securities:
(Dollars in thousands)	States and Political Subdivisions		Residential - Non-Government Agencies		Total
Balance as of December 31, 2020	$	11,337	$	989	$	12,326
Principal payments received	(2,841)		(22)		(2,863)
Unrealized net loss included in other comprehensive loss	(815)		(29)		(844)
Balance as of December 31, 2021	7,681		938		8,619
Principal payments received	(212)		(23)		(235)
Unrealized net loss included in other comprehensive loss	(885)		(231)		(1,116)
Balance as of December 31, 2022	$	6,584	$	684	$	7,268

Within the state and political subdivisions debt securities category, the Company holds two mortgage revenue bonds issued by the City and County of Honolulu with an aggregate fair value of $6.6 million and $7.7 million at December 31, 2022 and 2021, respectively. Within the residential non-government agency available-for-sale debt securities category, the Company holds two mortgage backed bonds issued by Habitat for Humanity with an aggregate fair value of $0.7 million and $0.9 million at December 31, 2022 and 2021, respectively. The Company estimates the aggregate fair value of $7.3 million by using a discounted cash flow model to calculate the present value of estimated future principal and interest payments.

The significant unobservable input used in the fair value measurement of the Company’s mortgage revenue bonds and Habitat for Humanity mortgage backed bonds is the weighted-average discount rate. As of December 31, 2022, the weighted-average discount rate utilized was 6.41%, which was derived by incorporating a credit spread over the FHLB Fixed-Rate Advance curve. Significant increases (decreases) in the weighted-average discount rate could result in a significantly lower (higher) fair value measurement.

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25. PARENT COMPANY AND REGULATORY RESTRICTIONS

The retained earnings of the parent company, Central Pacific Financial Corp., included $339.4 million of equity in undistributed losses of Central Pacific Bank as of December 31, 2022.

Central Pacific Bank, as a Hawaii state-chartered bank, may only pay dividends to the extent it has retained earnings as defined under Hawaii banking law ("Statutory Retained Earnings"), which differs from GAAP retained earnings. The bank had Statutory Retained Earnings of $145.7 million and $114.0 million as of December 31, 2022 and 2021, respectively. For further information, see Note 12 - Equity.

The Company and the bank are subject to various regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks ("Basel III rules") became effective for the Company on January 1, 2015, and were fully phased in on January 1, 2019. Under the Basel III rules, the Company must hold a "capital conservation buffer" above the adequately capitalized risk-based capital ratios. The capital conservation buffer was phased in at the rate of 0.625% per year from 0.625% in 2016 to 2.50% on January 1, 2019. The capital conservation buffer for 2019, 2018 and 2017 was 2.50%, 1.875% and 1.25%, respectively. The net unrealized gain or loss on investment securities is not included in computing regulatory capital. Management believes the Company and bank met all capital adequacy requirements to which they are subject as of December 31, 2022.

Prompt corrective action regulations provide five classifications: well-capitalized, adequately capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If under-capitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. The bank was categorized as "well-capitalized" and maintained the required capital conservation buffer under the regulatory framework for prompt corrective action as of December 31, 2022 and 2021. There are no conditions or events since then that management believes have changed the institution’s category.

138

The following table sets forth actual and required capital and capital ratios for the Company and the bank, as well as the minimum capital adequacy requirements applicable generally to all financial institutions as of the dates indicated.

	Actual				Minimum required for capital adequacy purposes				Minimum required to be well-capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio (1)		Amount		Ratio
Company
As of December 31, 2022
Tier 1 capital to avg. assets (leverage ratio)	$	642,302	8.5	%	$	301,053	4.0	%			N/A
Tier 1 capital to risk-weighted assets	642,302		11.3		340,151		6.0				N/A
Total capital to risk-weighted assets	764,283		13.5		453,535		8.0				N/A
Common equity tier 1 ("CET1") capital to risk-weighted assets	592,302		10.5		255,113		4.5				N/A
As of December 31, 2021
Tier 1 capital to avg. assets (leverage ratio)	622,130		8.5		293,382		4.0				N/A
Tier 1 capital to risk-weighted assets	622,130		12.2		307,215		6.0				N/A
Total capital to risk-weighted assets	741,291		14.5		409,620		8.0				N/A
CET1 capital to risk-weighted assets	572,130		11.2		230,411		4.5				N/A
Central Pacific Bank
As of December 31, 2022
Tier 1 capital to avg. assets (leverage ratio)	$	675,331	9.0	%	$	300,584	4.0	%	$	375,730	5.0	%
Tier 1 capital to risk-weighted assets	675,331		11.9		339,422		6.0		452,563		8.0
Total capital to risk-weighted assets	742,312		13.1		452,563		8.0		565,704		10.0
CET1 capital to risk-weighted assets	675,331		11.9		254,567		4.5		367,708		6.5
As of December 31, 2021
Tier 1 capital to avg. assets (leverage ratio)	652,987		8.9		292,877		4.0		366,096		5.0
Tier 1 capital to risk-weighted assets	652,987		12.8		306,497		6.0		408,663		8.0
Total capital to risk-weighted assets	717,000		14.0		408,663		8.0		510,828		10.0
CET1 capital to risk-weighted assets	652,987		12.8		229,873		4.5		332,038		6.5
(1) Under the Basel III Capital Rules, the Company and the bank must also maintain the required Capital Conservation Buffer ("CCB") to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. The CCB is calculated as a ratio of CET1 capital to risk-weighted assets, and effectively increases the required minimum risk-based capital ratios. The CCB requirement was phased in over a three-year period that began on January 1, 2016. The phase-in period ended on January 1, 2019, and the CCB is now at its fully phased-in level of 2.5%.

139

Condensed financial statements of the parent company are as follows:

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED BALANCE SHEETS

	December 31,
(Dollars in thousands)	2022		2021
Assets
Cash and cash equivalents	$	16,915	$	20,090
Investment in subsidiary bank	534,817		639,050
Other assets	14,442		12,029
Total assets	$	566,174	$	671,169
Liabilities and Equity
Long-term debt	$	105,859	$	105,616
Other liabilities	7,444		7,334
Total liabilities	113,303		112,950
Shareholders’ equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding none at December 31, 2022 and 2021	—		—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding 27,025,070 and 27,714,071 shares at December 31, 2022 and 2021, respectively	408,071		433,263
Additional paid-in capital	101,346		98,073
Retained earnings	87,438		34,843
Accumulated other comprehensive loss	(143,984)		(7,960)
Total shareholders’ equity	452,871		558,219
Total equity	452,871		558,219
Total liabilities and equity	$	566,174	$	671,169

140

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED STATEMENTS OF INCOME

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Income:
Dividends from subsidiary bank	$	47,427	$	54,016	$	24,015
Interest income:
Interest income from subsidiary bank	3		3		4
Other income	64		43		52
Total income	47,494		54,062		24,071
Expense:
Interest expense on long-term debt	4,930		4,097		2,095
Other expenses	2,317		3,504		1,293
Total expenses	7,247		7,601		3,388
Income before income taxes and equity in undistributed income of subsidiaries	40,247		46,461		20,683
Income tax expense (benefit)	(1,917)		(1,968)		(690)
Income before equity in undistributed income of subsidiaries	42,164		48,429		21,373
Equity in undistributed income of subsidiary bank	31,764		31,465		15,900
Net income	$	73,928	$	79,894	$	37,273

141

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Cash flows from operating activities:
Net income	$	73,928	$	79,894	$	37,273
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax expense (benefit)	(26)		70		2,552
Equity in undistributed income of subsidiary bank	(31,764)		(31,465)		(15,900)
Share-based compensation expense	3,273		3,231		3,231
Net change in other assets and liabilities	(20)		(85)		(3,010)
Net cash provided by operating activities	45,391		51,645		24,146
Cash flows from investing activities:
Contributions to subsidiary bank	—		—		(46,750)
Proceeds from sale of investment securities	—		1,653		—
Net cash provided by (used in) investing activities	—		1,653		(46,750)
Cash flows from financing activities:
Net proceeds from issuance of common stock and stock option exercises	679		1,236		—
Net proceeds from subordinated debt	—		—		53,838
Repurchases of common stock	(20,740)		(18,669)		(4,749)
Cash dividends paid on common stock	(28,505)		(26,959)		(25,935)
Net cash (used in) provided by financing activities	(48,566)		(44,392)		23,154
Net (decrease) increase in cash and cash equivalents	(3,175)		8,906		550
Cash and cash equivalents at beginning of year	20,090		11,184		10,634
Cash and cash equivalents at end of year	$	16,915	$	20,090	$	11,184

142

26. SUBSEQUENT EVENTS

In January 2023, the Board of Directors authorized the repurchase of up to $25.0 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program. The share repurchase program replaced and superseded in its entirety the 2022 Repurchase Plan. The 2022 Repurchase Plan had $10.3 million in remaining repurchase authority as of December 31, 2022.

In accordance with the Inflation Reduction Act of 2022, beginning January 1, 2023, an excise tax of 1% on the aggregate fair value of stock repurchased less the fair value of stock issued will be imposed if repurchases of stock exceed $1 million over the course of the year.

143

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.    CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures    

Under the supervision and with the participation of the Company’s management, including our principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) as of December 31, 2022. Based on that evaluation, the principal executive officer and principal financial officer concluded that, as of December 31, 2022, the Company’s disclosure controls and procedures are effective.

(b) Management’s Report on Internal Control Over Financial Reporting    

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act). The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s principal executive and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of December 31, 2022, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2022 is effective.

The Company’s internal control over financial reporting as of December 31, 2022 has been audited by Crowe LLP, an independent registered public accounting firm, as stated in their report appearing herein under the heading “Report of Independent Registered Public Accounting Firm.”

(c) Changes in Internal Control Over Financial Reporting    

There have not been any changes in the Company’s internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act during the Company’s fiscal year ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

None.

ITEM 9C.    DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

144

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item 10 is incorporated herein by reference from the information contained in our Proxy Statement to be filed with the U.S. Securities and Exchange Commission within 120 days of December 31, 2022 in connection with the solicitation of proxies for our 2023 Annual Meeting of Stockholders ("2023 Proxy Statement").

ITEM 11.    EXECUTIVE COMPENSATION

The information required by this Item 11 is incorporated herein by reference from the information to be contained in our 2023 Proxy Statement.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Except as set forth below, the information required by this Item 12 is incorporated herein by reference from the information to be contained in our 2023 Proxy Statement.

The following table provides information as of December 31, 2022 regarding securities issued under our equity compensation plans that were in effect during fiscal year 2022.

Plan Category	(a) Number of  securities to be issued upon exercise of outstanding  options, warrants and rights (2) (3)	(b) Weighted- average exercise price of outstanding  options, warrants and rights (4)		(c) Number of securities remaining available for future issuance under equity  compensation plans (excluding securities reflected in column (a)) (3)
Equity compensation plan(s) approved by security holders (1)	352,495	$	—	747,332
Equity compensation plan(s) not approved by security holders	—	—		—
Total	352,495	—		747,332
(1) This plan is the Company’s 2013 Stock Compensation Plan ("2013 Plan").
(2) Represents an aggregate of 352,495 restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs").
(3) Assumes shares issued upon vesting of PSUs vest at 100% of target number of units. Actual number of shares issued on vesting of PSUs could be zero to 200% of the target number of units.
(4) Weighted average exercise price of outstanding stock options; excludes RSUs and PSUs. No stock options were outstanding at December 31, 2022.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item 13 is incorporated herein by reference from the information to be contained in our 2023 Proxy Statement.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 is incorporated herein by reference from the information to be contained in our 2023 Proxy Statement.

145

PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) 1.    Financial Statements

The following consolidated financial statements are included in Item 8 of this report:

Central Pacific Financial Corp. and Subsidiaries:

Consolidated Balance Sheets at December 31, 2022 and 2021

Consolidated Statements of Comprehensive (Loss) Income for the Years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Changes in Equity for the Years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Cash Flows for the Years ended December 31, 2022, 2021 and 2020

(a) 2.     All schedules required by this Item 15(a) 2 are omitted because they are not applicable, not material or because the information is included in the consolidated financial statements or the notes thereto.

146

(b)                    Exhibits

Exhibit Number	Description
3.1	Restated Articles of Incorporation of the Registrant (1)
3.2	Bylaws of the Registrant, as amended through January 25, 2012 (2)
4.1	Description of Securities of the Registrant Registered Pursuant to Section 12 of the Exchange Act (*)
4.2	Form of Registrant's Common Stock Certificate (4)
4.3	Other long‑term borrowing instruments are omitted pursuant to Item 601(b)(4)(iii) of Regulation S‑K. The Company undertakes to furnish copies of such instruments to the Commission upon request.
10.1	The Registrant's 2023 Annual Executive Incentive Plan (†) (4)
10.2	The Registrant’s Directors’ Deferred Compensation Plan (*) (†)
10.3	Supplemental Executive Retirement Agreement for Blenn A. Fujimoto, effective July 1, 2005 (†) (5)
10.4	Amendment No. 1 to the Supplemental Executive Retirement Plan between the Registrant and Blenn A. Fujimoto, effective December 31, 2008 (†) (6)
10.5	The Registrant’s 2013 Stock Compensation Plan (†) (7)
10.6	Form of Stock Option Grant Agreement for the Registrant's 2013 Stock Compensation Plan (†) (8)
10.7	Form of Restricted Stock Grant Agreement for the Registrant's 2013 Stock Compensation Plan (†) (8)
10.8	Form of Restricted Stock Unit Agreement for the Registrant's 2013 Stock Compensation Plan (†) (8)
10.9	Form of Stock Appreciation Rights Grant Agreement for the Registrant's 2013 Stock Compensation Plan (†) (8)
10.10	Form of Key Employee Restricted Stock Unit Grant Agreement for the Registrant's 2013 Stock Compensation Plan (†) (8)
10.11	Employment Agreement with Paul Yonamine, dated September 25, 2018 (†) (9)
14.1	The Registrant's Code of Conduct & Ethics (10)
14.2	The Registrant's Code of Conduct & Ethics for Senior Financial Officers (10)
21	Subsidiaries of the Registrant (*)
23	Consent of Independent Registered Public Accounting Firm (Crowe) (*)
31.1	Rule 13a-14(a) Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (*)
31.2	Rule 13a-14(a) Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (*)
32.1	Section 1350 Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 (**)
32.2	Section 1350 Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 (**)
101.INS	XBRL Instance Document (*)
101.SCH	Inline XBRL Taxonomy Extension Schema Document (*)
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document (*)
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document (*)
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document (*)
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document (*)
104	Cover Page Interactive Data File (formatted as Inline XBRL and included within the Exhibit 101 attachments)

147

(*)	Filed herewith.
(**)	Furnished herewith.
(†)	Denotes management contract or compensation plan or arrangement.
	All of the references to Form 8-K, Form 10-K, Form 10-Q, Form DEF 14A and Form S-1/A identified in the exhibit index have Securities and Exchange Commission file number 001-31567.
	Upon request of the Securities and Exchange Commission, we will furnish any agreements relating to our long-term debt not otherwise contained herein.

(1)	Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the Securities and Exchange Commission on February 27, 2015.
(2)	Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 27, 2012.
(3)	Incorporated herein by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the Securities and Exchange Commission on February 25, 2020.
(4)	Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 15, 2023.
(5)	Incorporated herein by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2006.
(6)	Incorporated herein by reference to Exhibits 10.15, 10.19 and 10.21, respectively, to the Registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2008, filed with the Securities and Exchange Commission on March 2, 2009.
(7)	Incorporated herein by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the Securities and Exchange Commission on February 27, 2019.
(8)	Incorporated herein by reference to Exhibits 10.2, 10.3, 10.4, 10.5 and 10.6, respectively, to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 1, 2013.
(9)	Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 26, 2018.
(10)	Incorporated herein by reference to Exhibits 14.1 and 14.2, respectively, of the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2022.

(c)    Financial Statement Schedules

All financial statement schedules have been omitted as the information is not required under the related instructions or is inapplicable.

148

ITEM 16.    FORM 10-K SUMMARY

Not applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:	February 24, 2023
		CENTRAL PACIFIC FINANCIAL CORP.
		(Registrant)
		/s/ Arnold D. Martines
		Arnold D. Martines
		President and Chief Executive Officer, Director

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

149

Signature	Title	Date
/s/ Arnold D. Martines	President and Chief Executive Officer, Director	February 24, 2023
Arnold D. Martines	(Principal Executive Officer)
/s/ David S. Morimoto	Senior Executive Vice President and Chief Financial Officer	February 24, 2023
David S. Morimoto	(Principal Financial and Accounting Officer)
/s/ Paul K. Yonamine	Chairman Emeritus	February 24, 2023
Paul K. Yonamine
/s/ A. Catherine Ngo	Chair	February 24, 2023
A. Catherine Ngo
/s/ Christine H. H. Camp	Director	February 24, 2023
Christine H. H. Camp
/s/ Earl E. Fry	Director	February 24, 2023
Earl E. Fry
/s/ Jason R. Fujimoto	Director	February 24, 2023
Jason R. Fujimoto
/s/ Jonathan B. Kindred	Director	February 24, 2023
Jonathan B. Kindred
/s/ Paul J. Kosasa	Director	February 24, 2023
Paul J. Kosasa
/s/ Duane K. Kurisu	Director	February 24, 2023
Duane K. Kurisu
/s/ Christopher T. Lutes	Director	February 24, 2023
Christopher T. Lutes
/s/ Colbert M. Matsumoto	Director	February 24, 2023
Colbert M. Matsumoto
/s/ Saedene K. Ota	Director	February 24, 2023
Saedene K. Ota
/s/ Crystal K. Rose	Director	February 24, 2023
Crystal K. Rose

150

EX-4.1

Exhibit 4.1

Description of Central Pacific Financial Corp.’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

The following is a summary description of Central Pacific Financial Corp’s Common Stock. This description is not complete and is qualified in its entirety by reference to the provisions of our Restated Articles of Incorporation and Amended Bylaws, each of which is incorporated herein by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit 4.1 is a part, and the applicable provisions of the Hawaii Business Corporation Act (the "HBCA").

Common Stock

Our authorized Common Stock consists of 185,000,000 shares of Common Stock, no par value per share. Our issued Common Stock represent non-withdrawable capital and are not federally insured.

Dividend Rights

Holders of our Common Stock are entitled to receive dividends if, as and when declared by the Board of Directors out of any funds legally available for dividends. The ability to pay dividends depends on the amount of dividends paid to the Company by Central Pacific Bank (the “Bank”), a wholly-owned subsidiary of the Company. As further described in Part I, Item 1 of the Form 10-K of which this Exhibit 4.1 is a part, the Company’s payment of dividends, and the Bank’s payment of dividends to the Company, are subject to extensive government regulation, in that regulatory authorities may invoke their authority to prohibit banks and their holding companies from paying dividends for a number of reasons, including, for example, a determination that such payments would constitute an unsafe or unsound banking practice or a determination that such payments would reduce the amount of either entity’s capital below that necessary to meet minimum applicable regulatory capital requirements. Our ability to pay dividends is also subject to restrictions set forth under Hawaii law and restrictions and covenants set forth in various agreements we are a party to, including covenants set forth in our subordinated debentures. The Bank, in addition to obtaining approval from the Federal Deposit Insurance Corporation and Hawaii Division of Financial Institutions, if required, is not permitted under Hawaii law to pay dividends except out of retained earnings as defined under Hawaii banking law.

Liquidation and Dissolution

In the event of our liquidation or dissolution, the holders of Common Stock are entitled to receive proportionately all assets available for distribution to shareholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of Common Stock are not entitled to a liquidation preference in respect of those shares.

No Preemptive or Conversion Rights

Holders of Common Stock generally do not have preemptive rights to purchase additional Common Stock or conversion or redemption rights under our Restated Articles of Incorporation or the HBCA.

Voting Rights

Holders of our Common Stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders and do not have cumulative voting rights. An election of directors by our shareholders shall be determined by a plurality of the votes cast by the shareholders entitled to vote on the election.

Restrictions on Ownership-Bank Regulatory Restrictions

Federal law prohibits a person or group of persons “acting in concert” from acquiring “control” of a bank holding company unless the Federal Reserve Board has been given prior written notice of such proposed acquisition and within

that time period the Federal Reserve has not issued a notice disapproving the proposed acquisition or extending for up to another statutory period during which such a disapproval may be issued. An acquisition may be made prior to the expiration of the disapproval period if the Federal Reserve issues written notice of its intent not to disapprove the action. Whether or not a party is presumed to have acquired control or have a controlling influence over a bank holding company depends on, among other things, its percentage of voting ownership, the number of director representatives such party has and overall business relationships with the bank holding company. Similarly, the Hawaii Commissioner of Financial Institutions is required to approve any acquisition of control of the Bank or Central Pacific Financial Corp.

Anti-Takeover Effects of Hawaii Law

The Hawaii Control Share Acquisitions Act (the "CSA Act") is applicable to the Company and is designed to inhibit hostile acquisitions by restricting Control Share Acquisitions. A Control Share Acquisition is the acquisition of shares of an issuer resulting in beneficial ownership of a new range of voting power (with thresholds for the ranges starting at 10% and set at 10% intervals up to a majority) for the election of directors. Certain acquisitions are exempt from the CSA Act, including acquisitions from the issuer or where the issuer's prior approval has been obtained. The CSA Act prohibits the consummation of a Control Share Acquisition unless each such acquisition is separately approved by a majority of the corporation's outstanding shares (excluding shares beneficially owned by the acquiring person) and imposes certain state law disclosure and timing requirements. If a Control Share Acquisition is made without the requisite shareholder approval, then, for a period of one year after the acquisition, the shares acquired by the acquiring person will (i) be denied voting rights, (ii) be non-transferable, and (iii) be subject to redemption at the option of the corporation either at the price at which the shares were acquired or at book value per share as of the last day of the fiscal quarter ended prior to the date of the call for redemption.

Thus, under certain circumstances, the CSA Act may make it more difficult for an acquiring person to exercise control over the Company due to the limitations placed on that person's ability to vote the shares so acquired and the right of the Company to acquire the subject shares.

In addition, the HBCA requires mergers and share exchanges to be approved by the affirmative vote of the holders of three-quarters (3/4) of all the issued and outstanding shares of the Company having voting power.

Finally, Hawaii Revised Statutes Chapter 417E requires registration of take-over offers with the Hawaii Commissioner of Securities and places certain limit on offerors.

Anti-Takeover Provisions in our Restated Articles and Amended Bylaws

The following discussion is a general summary of certain provisions of the Restated Articles of Incorporation, and Amended Bylaws of the Company which may be deemed to have an "anti-takeover" effect.

Advance Notice Requirement for Director Nominations and Shareholder Proposals. Our Amended Bylaws provide that shareholder nominations for the election of directors and shareholder proposals may not be brought before a meeting of shareholders unless the shareholder has given timely written notice in proper form of such nomination or proposal to the Secretary of the Company at the principal executive office. Such proposals or nominations may be made only by persons who are shareholders of record on the date on which such notice is given and on the record date for determination of shareholders entitled to vote at that meeting. To be timely, a shareholder's notice shall be delivered to or mailed and received at the executive office of the corporation not less than 90 calendar days nor more than 120 calendar days prior to the first anniversary date of the annual meeting for the preceding year; provided, however, if and only if the annual meeting is not scheduled to be held within a period that commences 30 days before such anniversary date and ends 30 days after such anniversary date, the shareholder's notice shall be given in the manner provided herein by the later of (i) the close of business on the date 90 days prior to the meeting date or (ii) the tenth day following the date the meeting is first publicly announced or disclosed, and (iii) in the case of a special meeting of shareholders called for the purpose of electing directors, not later than the close of business on the tenth day following the day on which the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting is publicly announced or disclosed.

No person nominated by a shareholder is eligible for election to the Board of Directors unless nominated in accordance with the foregoing procedures, and thus such procedures could make it more difficult for dissident shareholders to nominate and elect their candidates.

Supermajority Shareholder Vote to Call a Special Shareholders Meeting to Amend Bylaws. Subject to repeal or change at any regular meeting of the shareholders, or at any special meeting called for that purpose by the vote of the holders of eighty percent (80%) of the outstanding shares entitled to vote at such meeting, the power to alter, amend or repeal our Amended Bylaws or adopt new bylaws is vested in the Board of Directors. The supermajority vote required to call a special meeting of shareholders to amend the bylaws could have the effect of discouraging a tender offer or other takeover attempt where the ability to make fundamental changes through bylaw amendments adopted by the shareholders at a special meeting is an important element of the takeover strategy.

Fair Price Provisions Involving Business Combinations. Our Restated Articles of Incorporation contain a "fair price" provision that applies to certain business combination transactions involving any interested shareholder, which is (i) any person that beneficially owns more than 10% of our voting stock or (ii) any affiliate of the Company that within the past five years beneficially owned more than 10% of our voting stock. This provision requires the affirmative vote of the holders of at least 75% of our voting stock to approve specified transactions between an interested shareholder or its affiliate and us or our subsidiaries, including:

•any merger or consolidation;

•any sale, lease, license, exchange, pledge, transfer or other disposition of assets (in one transaction or a series of transactions) having a fair market value of $2 million or more;

•the issuance or transfer of any of our securities or any of our subsidiaries' securities by us or any of our subsidiaries to an interested shareholder or its affiliates having a fair market value of $2 million or more;

•the adoption of a plan or proposal for our liquidation or dissolution proposed by or on behalf of an interested shareholder or its affiliate; and

•any reclassification of securities (including any reverse stock split), recapitalization, merger or consolidation of our company with any of our subsidiaries or other transaction (whether or not involving an interested shareholder) that has the effect of increasing the proportionate share of the outstanding shares of any class of our equity or convertible securities or those of our subsidiaries owned by an interested shareholder or its affiliate.

This voting requirement will not apply to any particular transaction approved by a majority vote of the directors who are unaffiliated with the interested shareholder and who were members of the Board of Directors before the latter of the first public announcement of the terms of the proposed business combination and the day the interested shareholder became a shareholder and any successor to such directors who were unaffiliated with the interested shareholder and recommended to the Board of Directors by a majority of such directors. This voting requirement will also not apply to any transaction involving the payment of consideration to holders of our outstanding Common Stock in which certain minimum "fair price" and procedural requirements are met.

This "fair price" provision could have the effect of delaying or preventing a change in control of our company in a transaction of series of transactions that does not satisfy the stated criteria.

Preferred Stock. Our Restated Articles of Incorporation allow the Board of Directors to issue up to 1,000,000 shares of preferred stock, no par value per share. The Board of Directors also has the authority to designate the rights, preferences, privileges and restrictions of such preferred stock, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series. The issuance of preferred stock may have the effect of delaying, deterring or preventing a change of control of our company without further action by the shareholders. The issuance of preferred stock with voting and conversion rights may also adversely affect the voting power of the holders of Common Stock. In certain circumstances, an issuance of preferred stock could have the effect of decreasing the market price of our Common Stock.

EX-10.2

EX-21.1

Exhibit 21

Subsidiaries of the Registrant

The Company or one of its wholly-owned subsidiaries owned the following percent of the outstanding common stock, voting securities and interests of each of the corporations listed below as of December 31, 2022:

Name	State or Other Jurisdiction of Incorporation	Percent Owned
Central Pacific Bank	Hawaii	100%
CPB Capital Trust IV	Delaware	100%
CPB Statutory Trust V	Delaware	100%
Gentry HomeLoans, LLC	Hawaii	50%
Haseko HomeLoans, LLC	Hawaii	50%
Island Pacific HomeLoans, LLC	Hawaii	50%

EX-23.1

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-141232, 333-188445, 333-196873, and 333-211155 on Form S-8 of Central Pacific Financial Corp. of our report dated February 24, 2023 relating to the financial statements and effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K.

/s/ Crowe LLP

Sacramento, California

February 24, 2023

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a)

I, Arnold D. Martines, President and Chief Executive Officer of Central Pacific Financial Corp. (the “Company”), certify that:

1.I have reviewed this Annual Report on Form 10-K of the Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	February 24, 2023	By:	/s/ Arnold D. Martines
			Arnold D. Martines
			President and Chief Executive Officer, Director

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a)

I, David S. Morimoto, Senior Executive Vice President and Chief Financial Officer of Central Pacific Financial Corp. (the “Company”), certify that:

1.I have reviewed this Annual Report on Form 10-K of the Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	February 24, 2023	By:	/s/ David S. Morimoto
			David S. Morimoto
			Senior Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Arnold D. Martines, President and Chief Executive Officer of Central Pacific Financial Corp. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	February 24, 2023	By:	/s/ Arnold D. Martines
			Arnold D. Martines
			President and Chief Executive Officer, Director

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, David S. Morimoto, Senior Executive Vice President and Chief Financial Officer of Central Pacific Financial Corp. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	February 24, 2023	By:	/s/ David S. Morimoto
			David S. Morimoto
			Senior Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

XML

Cover Page - USD ($)	12 Months Ended
	Dec. 31, 2022	Jan. 31, 2023	Jun. 30, 2022
Cover [Abstract]
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2022
Current Fiscal Year End Date	--12-31
Document Transition Report	false
Entity File Number	001-31567
Entity Registrant Name	Central Pacific Financial Corp.
Entity Incorporation, State or Country Code	HI
Entity Tax Identification Number	99-0212597
Entity Address, Address Line One	220 South King Street
Entity Address, City or Town	Honolulu
Entity Address, State or Province	HI
Entity Address, Postal Zip Code	96813
City Area Code	808
Local Phone Number	544-0500
Title of 12(b) Security	Common Stock, No Par Value
Trading Symbol	CPF
Security Exchange Name	NYSE
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
ICFR Auditor Attestation Flag	true
Entity Shell Company	false
Entity Public Float			$ 574,351,000
Entity Common Stock, Shares Outstanding		26,969,310
Documents Incorporated by Reference	Portions of the registrant’s proxy statement for the 2023 annual meeting of shareholders are incorporated by reference into Part III of this annual report on Form 10-K to the extent stated herein. The proxy statement will be filed within 120 days after the end of the fiscal year covered by this annual report on Form 10-K.
Entity Central Index Key	0000701347
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	FY
Amendment Flag	false

XML

Audit Information	12 Months Ended
	Dec. 31, 2022
Auditor Information [Abstract]
Auditor Firm ID	173
Auditor Name	Crowe LLP
Auditor Location	Sacramento, California

XML

CONSOLIDATED BALANCE SHEETS - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Assets
Cash and due from financial institutions	$ 97,150,000	$ 81,506,000
Interest-bearing deposits in other financial institutions	14,894,000	247,401,000
Investment securities:
Available-for-sale debt securities, at fair value	671,794,000	1,631,699,000
Held-to-maturity debt securities, fair value of: $596,780 at December 31, 2022 and none at December 31, 2021	664,883,000	0
Total investment securities	1,336,677,000	1,631,699,000
Loans held for sale	1,105,000	3,531,000
Loans	5,555,466,000	5,101,649,000
Allowance for credit losses	(63,738,000)	(68,097,000)
Loans, net of allowance for credit losses	5,491,728,000	5,033,552,000
Premises and equipment, net	91,634,000	80,354,000
Accrued interest receivable	20,345,000	16,709,000
Investment in unconsolidated entities	46,641,000	29,679,000
Mortgage servicing rights, net	9,074,000	9,738,000
Bank-owned life insurance	167,967,000	169,148,000
Federal Home Loan Bank ("FHLB") stock	9,146,000	7,964,000
Right-of-use lease asset	34,985,000	39,441,000
Other assets	111,417,000	68,367,000
Total assets	7,432,763,000	7,419,089,000
Deposits:
Noninterest-bearing demand	2,092,823,000	2,291,246,000
Interest-bearing demand	1,453,167,000	1,415,277,000
Savings and money market	2,199,028,000	2,225,903,000
Time	991,205,000	706,732,000
Total deposits	6,736,223,000	6,639,158,000
FHLB advances and other short-term borrowings	5,000,000	0
Long-term debt	105,859,000	105,616,000
Lease liability	35,889,000	40,731,000
Other liabilities	96,921,000	75,317,000
Total liabilities	6,979,892,000	6,860,822,000
Equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding none at: December 31, 2022, and December 31, 2021	0	0
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding: 27,025,070 at December 31, 2022 and 27,714,071 at December 31, 2021	408,071,000	426,091,000
Additional paid-in capital	101,346,000	98,073,000
Retained earnings	87,438,000	42,015,000
Accumulated other comprehensive loss	(143,984,000)	(7,960,000)
Total shareholders' equity	452,871,000	558,219,000
Non-controlling interest	0	48,000
Total equity	452,871,000	558,267,000
Total liabilities and equity	$ 7,432,763,000	$ 7,419,089,000

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Dec. 31, 2022	May 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Held to maturity, fair value	$ 596,780,000	$ 343,700,000	$ 329,500,000	$ 0
Preferred stock, par value (in dollars per share)	$ 0			$ 0
Preferred stock, authorized (in shares)	1,000,000			1,000,000
Preferred stock, issued (in shares)	0			0
Preferred stock, outstanding (in shares)	0			0
Common stock, par value (in dollars per share)	$ 0			$ 0
Common stock, authorized (in shares)	185,000,000			185,000,000
Common stock, issued (in shares)	27,025,070			27,714,071
Common stock, outstanding (in shares)	27,025,070			27,714,071

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Interest income:
Interest and fees on loans	$ 200,280	$ 193,778	$ 186,129
Interest and dividends on investment securities:
Taxable investment securities	28,041	22,430	23,302
Tax-exempt investment securities	3,204	1,972	2,392
Dividend income on investment securities	21	75	69
Interest on deposits in other financial institutions	740	262	46
Dividend income on FHLB stock	370	245	480
Total interest income	232,656	218,762	212,418
Interest on deposits:
Demand	806	384	510
Savings and money market	4,188	1,240	2,416
Time	6,114	1,992	7,489
Interest on short-term borrowings	1,055	2	718
Interest on long-term debt	4,930	4,097	3,602
Total interest expense	17,093	7,715	14,735
Net interest income	215,563	211,047	197,683
Provision for credit losses	(1,273)	(14,591)	42,111
Net interest income after provision for credit losses	216,836	225,638	155,572
Other operating income:
Mortgage banking income	3,810	7,732	13,682
Service charges on deposit accounts	8,197	6,358	6,234
Other service charges and fees	19,025	18,367	14,867
Income from fiduciary activities	4,565	5,075	4,829
Income from bank-owned life insurance	1,865	3,493	3,803
Net gains (losses) on sales of investment securities	8,506	150	(201)
Other	1,951	1,885	1,984
Total other operating income	47,919	43,060	45,198
Other operating expense:
Salaries and employee benefits	88,781	90,213	83,848
Net occupancy	16,963	16,133	15,162
Legal and professional services	10,792	10,452	9,035
Computer software expense	14,840	13,304	12,717
Communication expense	2,958	3,271	3,225
Equipment	4,238	4,344	4,531
Advertising expense	4,151	5,495	3,791
Other	23,263	19,834	19,428
Total other operating expense	165,986	163,046	151,737
Income before income taxes	98,769	105,652	49,033
Income tax expense	24,841	25,758	11,760
Net income	$ 73,928	$ 79,894	$ 37,273
Per common share data:
Basic earnings per share (in dollars per share)	$ 2.70	$ 2.85	$ 1.33
Diluted earnings per share (in dollars per share)	2.68	2.83	1.32
Cash dividends declared (in dollars per share)	$ 1.04	$ 0.96	$ 0.92

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Statement of Comprehensive Income [Abstract]
Net income	$ 73,928	$ 79,894	$ 37,273
Other comprehensive (loss) income, net of tax:
Net change in unrealized (loss) gain on investment securities	(145,443)	(30,317)	11,826
Net change in unrealized gain on derivatives	4,645	0	0
Defined benefit plans	4,774	2,229	(107)
Total other comprehensive (loss) income, net of tax	(136,024)	(28,088)	11,719
Comprehensive (loss) income	$ (62,096)	$ 51,806	$ 48,992

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Thousands	Total	Impact of adoption of new accounting standards	[1]	Adjusted balance at beginning of period	Common shares outstanding	Common shares outstanding Adjusted balance at beginning of period	Common Stock	Common Stock Adjusted balance at beginning of period	Surplus	Surplus Adjusted balance at beginning of period	Accumulated Deficit	Accumulated Deficit Impact of adoption of new accounting standards	Accumulated Deficit Adjusted balance at beginning of period	Accumulated Other Comprehensive Income (Loss)	Accumulated Other Comprehensive Income (Loss) Adjusted balance at beginning of period	Non-Controlling Interests	Non-Controlling Interests Adjusted balance at beginning of period
Balance at Dec. 31, 2019	$ 528,520	$ (3,156)		$ 525,364			$ 447,602	$ 447,602	$ 91,611	$ 91,611	$ (19,102)	$ (3,156)	$ (22,258)	$ 8,409	$ 8,409	$ 0	$ 0
Balance (in shares) at Dec. 31, 2019					28,289,257	28,289,257
Increase (Decrease) in Shareholders' Equity
Net income	37,273										37,273
Other comprehensive income (loss)	11,719													11,719
Cash dividends	(25,935)										(25,935)
Common stock purchased by directors' deferred compensation plan	(218)						(218)
Common stock repurchased and other related costs (in shares)					(206,802)
Common stock repurchased and other related costs	(4,749)						(4,749)
Share-based compensation (in shares)					100,885
Share-based compensation expense	3,231								3,231
Non-controlling interest	(48)															(48)
Balance at Dec. 31, 2020	546,733						442,635		94,842		(10,920)			20,128		48
Balance (in shares) at Dec. 31, 2020					28,183,340
Increase (Decrease) in Shareholders' Equity
Net income	79,894										79,894
Other comprehensive income (loss)	(28,088)													(28,088)
Cash dividends	(26,959)										(26,959)
Common stock purchased by directors' deferred compensation plan	889						889
Common stock repurchased and other related costs (in shares)					(696,894)
Common stock repurchased and other related costs	(18,669)						(18,669)
Share-based compensation (in shares)					227,625
Share-based compensation expense	4,467						1,236		3,231
Balance at Dec. 31, 2021	$ 558,267						426,091		98,073		42,015			(7,960)		48
Balance (in shares) at Dec. 31, 2021	27,714,071				27,714,071
Increase (Decrease) in Shareholders' Equity
Net income	$ 73,928										73,928
Other comprehensive income (loss)	(136,024)													(136,024)
Cash dividends	(28,505)										(28,505)
Common stock purchased by directors' deferred compensation plan	2,041						2,041
Common stock repurchased and other related costs (in shares)					(868,613)
Common stock repurchased and other related costs	(20,740)						(20,740)
Share-based compensation (in shares)					179,612
Share-based compensation expense	3,952						679		3,273
Non-controlling interest	48															48
Balance at Dec. 31, 2022	$ 452,871						$ 408,071		$ 101,346		$ 87,438			$ (143,984)		$ 0
Balance (in shares) at Dec. 31, 2022	27,025,070				27,025,070

[1] Represents the impact of the adoption of Accounting Standards Update ("ASU") ASU 2016-01.

XML

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Statement of Stockholders' Equity [Abstract]
Cash dividends (in dollars per share)	$ 1.04	$ 0.96	$ 0.92
Common stock purchased by directors' deferred compensation plan (in shares)	(78,670)	(31,748)	14,600

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Cash flows from operating activities:
Net income	$ 73,928	$ 79,894	$ 37,273
Adjustments to reconcile net income to net cash provided by operating activities:
(Credit) provision for credit losses	(1,273)	(14,591)	42,111
Depreciation and amortization of premises and equipment	6,865	6,984	6,223
Loss on disposals of premises and equipment	295	101	839
Non-cash lease (income) expense	(401)	2,262	1,051
Cash flows for operating leases	(5,896)	(6,533)	(6,371)
Amortization of mortgage servicing rights	1,295	3,468	6,167
Write down of other real estate, net of loss on sale	0	0	79
Net amortization and accretion of premium/discount on investment securities	4,395	9,176	9,905
Share-based compensation expense	3,273	3,231	3,231
Net (gain) loss on sales of investment securities	(8,506)	(150)	201
Net gain on sales of residential mortgage loans	(1,778)	(6,376)	(16,043)
Proceeds from sales of loans held for sale	80,237	166,144	418,381
Origination of loans held for sale	(76,033)	(146,612)	(409,942)
Equity in earnings of unconsolidated entities	(184)	(365)	(415)
Distributions from unconsolidated entities	237	480	330
Net increase in cash surrender value of bank-owned life insurance	(10)	(5,043)	(5,845)
Deferred income tax expense (benefit)	25,810	10,828	(13,087)
Net tax benefit (expense) from share-based compensation	146	200	(258)
Net change in other assets and liabilities	11,721	7,390	2,962
Net cash provided by operating activities	114,121	110,488	76,792
Cash flows from investing activities:
Proceeds from maturities of and calls on available-for-sale investment securities	168,224	291,734	351,180
Proceeds from sales of available-for-sale and equity investment securities	0	281,191	180,103
Purchases of available-for-sale investment securities	(89,058)	(1,071,360)	(581,008)
Sale of Visa Class B common stock	8,506	0	0
Proceeds from maturities of and calls on held-to-maturity investment securities	33,469	0	0
Purchases of held-to-maturity investment securities	(20,041)	0
Loan (originations) payments, net	(133,501)	128,595	(479,619)
Purchases of loan portfolios	(323,402)	(266,712)	(53,158)
Proceeds from sales of loans originated for investment	0	0	10,691
Proceeds from sales of foreclosed loans and other real estate	0	0	213
Purchases of bank-owned life insurance	(1,300)	(3,550)	0
Proceeds from bank-owned life insurance death benefits	2,491	2,606	2,340
Purchases of premises and equipment	(18,440)	(22,161)	(25,997)
Contributions to unconsolidated entities	(10,249)	(2,912)	(8,437)
(Purchases of) proceeds from redemption of FHLB stock	(1,182)	273	6,746
Net cash used in investing activities	(384,483)	(662,296)	(596,946)
Cash flows from financing activities:
Net increase in deposits	97,065	843,040	676,095
Proceeds from long-term debt	0	0	119,782
Repayments of long-term debt	0	0	115,944
Net increase (decrease) in FHLB advances and other short-term borrowings	5,000	(22,000)	(128,000)
Cash dividends paid on common stock	(28,505)	(26,959)	(25,935)
Repurchases of common stock	(20,740)	(18,669)	(4,749)
Net proceeds from issuance of common stock and stock option exercises	679	1,236	0
Net cash provided by financing activities	53,499	776,648	521,249
Net (decrease) increase in cash and cash equivalents	(216,863)	224,840	1,095
Cash and cash equivalents:
At beginning of year	328,907	104,067	102,972
At end of year	112,044	328,907	104,067
Cash paid during the year for:
Interest	13,476	8,320	17,296
Income taxes	5,581	22,672	20,044
Supplemental non-cash disclosures:
Net change in common stock held by directors' deferred compensation plan	(2,041)	(889)	218
Net reclassification of loans to foreclosed loans and other real estate	0	0	128
Net transfer of portfolio loans to loans held for sale	0	0	6,565
Net transfer of investment securities from available-for-sale to held-to-maturity at fair value	675,177	0	0
Amortization of unrealized losses on investment securities transferred to held-to-maturity at fair value	4,295	0	0
Other intangible assets and services provided in exchange for Swell common stock	$ 1,500	$ 0	$ 0

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Central Pacific Financial Corp. is a bank holding company. Our principal operating subsidiary, Central Pacific Bank, is a full-service commercial bank with 27 branches and 64 ATMs located throughout the state of Hawaii. The bank engages in a broad range of lending activities including originating commercial loans, commercial and residential mortgage loans, home equity loans and consumer loans. The bank also offers a variety of deposit products and services. These include personal and business checking and savings accounts, money market accounts and time certificates of deposit. Other products and services include debit cards, internet banking, mobile banking, cash management services, full-service ATMs, safe deposit boxes, international banking services, night depository facilities, foreign exchange and wire transfers. Wealth management products and services include non-deposit investment products, annuities, insurance, investment management, asset custody and general consultation and planning services.

When we refer to "the Company," "we," "us" or "our," we mean Central Pacific Financial Corp. and Subsidiaries (consolidated). When we refer to "Central Pacific Financial Corp." or to the holding company, we are referring to the parent company on a standalone basis. When we refer to "our bank" or "the bank," we mean "Central Pacific Bank."

The banking business depends on rate differentials, the difference between the interest rates paid on deposits and other borrowings and the interest rates received on loans extended to customers and investment securities held in our portfolio. These rates are highly sensitive to many factors that are beyond our control. Accordingly, the earnings and growth of the Company are subject to the influence of domestic and foreign economic conditions, including inflation, recession and unemployment.

Operating Segments

Operations, resource allocation and financial performance are managed by the Company's Executive Committee, or its chief operating decision maker ("CODM"), on a Company-wide basis. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable segment.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

In January 2020, the bank acquired a 50% ownership interest in a mortgage loan origination and brokerage company, Oahu HomeLoans, LLC. The bank concluded that the investment meets the consolidation requirements under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810, "Consolidation." The bank also concluded that the entity meets the definition of a variable interest entity and that we are the primary beneficiary of the variable interest entity. Accordingly, the investment has been consolidated into the Company's financial statements. In March 2022, Oahu HomeLoans, LLC was terminated.

The bank has 50% ownership interests in three other mortgage loan origination and brokerage companies which are accounted for using the equity method and are included in investment in unconsolidated entities in the Company's consolidated balance sheets: Gentry HomeLoans, LLC, Haseko HomeLoans, LLC and Island Pacific HomeLoans, LLC.

The bank has low income housing tax credit partnership investments that are accounted for under the proportional amortization method and are included in investment in unconsolidated entities in the Company's consolidated balance sheets.

During the first quarter of 2022, the Company invested $2.0 million in Swell Financial, Inc. ("Swell"), which included $1.5 million in other intangible assets and services provided in exchange for Swell non-voting common stock and $0.5 million in cash in exchange for Swell preferred stock. During the fourth quarter of 2022, Swell launched a consumer banking application that combines checking, credit and more into one integrated account, with Central Pacific Bank serving as the bank sponsor. Swell began with an alpha pilot, where members off its waitlist were invited to sign up for Swell Cash and Credit. During the fourth quarter of 2022, Elevate announced that it had entered into a definitive agreement to be acquired by Park Cities Asset Management, LLC, who is also the largest investor in Swell. The Company does not have the ability to exercise

significant influence over Swell and the investment does not have a readily determinable fair value. As a result, the Company determined that the cost method of accounting for the investment was appropriate. The investment is included in investments in unconsolidated entities in the Company's consolidated balance sheets.

In 2021, the Company committed $2.0 million to the JAM FINTOP Banktech Fund, L.P., an investment fund designed to help develop and accelerate technology adoption at community banks across the United States. The Company does not have the ability to exercise significant influence over the JAM FINTOP Banktech Fund, L.P. and the investment does not have a readily determinable fair value. As a result, the Company determined that the cost method of accounting for the investment was appropriate. The investment is included in investment in unconsolidated entities in the Company's consolidated balance sheets.

The Company also has other non-controlling equity investments in affiliates that are accounted for under the cost method and are included in investment in unconsolidated entities in the Company's consolidated balance sheets.

Investments in unconsolidated entities accounted for under the equity, proportional amortization and cost methods were $0.1 million, $40.9 million and $5.6 million, respectively, at December 31, 2022 and $0.2 million, $25.9 million and $3.6 million, respectively, at December 31, 2021. Our policy for determining impairment of these investments includes an evaluation of whether a loss in value of an investment is other than temporary. Evidence of a loss in value includes absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain an earnings capacity which would justify the carrying amount of the investment. Impairment tests are performed whenever indicators of impairment are present. If the value of an investment declines and it is considered other than temporary, the investment is written down to its respective fair value in the period in which this determination is made.

The Company sponsors the Central Pacific Bank Foundation, which is not consolidated in the Company's financial statements.

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions that reflect the reported amounts of assets and liabilities and disclosures of contingent assets and contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance and provision for credit losses, reserve for credit losses on off-balance sheet credit exposures, deferred income tax assets and income tax expense, valuation of investment securities, mortgage servicing rights and the related amortization thereon, the liability related to the Supplemental Executive Retirement Plans, and the fair value of certain financial instruments.

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from financial institutions, interest-bearing deposits in other financial institutions, federal funds sold and all highly liquid investments with maturities of three months or less at the time of purchase. Net cash flows are reported for customer loan and deposit transactions, interest-bearing deposits in other financial institutions, and federal funds purchased and repurchase agreements.

Investment Securities

Investments in debt securities are designated as trading, available-for-sale ("AFS"), or held-to-maturity ("HTM"). Investments in debt securities are designated as HTM only if we have the positive intent and ability to hold these securities to maturity. HTM securities are reported at amortized cost in the consolidated balance sheets. Trading securities are reported at fair value, with changes in fair value included in net income. Debt securities not classified as HTM or trading are classified as AFS and are reported at fair value, with net unrealized gains and losses, net of applicable taxes, excluded from net income and included in accumulated other comprehensive income (loss) ("AOCI").

Transfers of investment securities from AFS to HTM are accounted for at fair value as of the date of the transfer. The difference between the fair value and the par value at the date of transfer is considered a premium or discount and is accounted for accordingly. Any unrealized gain or loss at the date of the transfer is reported in AOCI, and is amortized over the remaining life of the security as an adjustment of yield in a manner consistent with the amortization of any premium or discount, and will offset or mitigate the effect on interest income of the amortization of the premium or discount for that HTM security.

Equity securities with readily determinable fair values are carried at fair value, with changes in fair value included in net income. Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.

The Company classifies its investment securities portfolio into the following major security types: mortgage-backed securities ("MBS"), other debt securities and equity securities. The Company’s MBS portfolio is comprised primarily of residential MBS issued by United States of America ("U.S.") government entities and agencies. These securities are either explicitly or implicitly guaranteed by an agency of the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The remainder of the MBS portfolio are commercial MBS issued by U.S government entities and agencies (for which there is no minimum credit rating), non-agency residential MBS (which shall meet a minimum credit rating of AAA) and non-agency commercial MBS (which shall meet a minimum credit rating of BBB and meet minimum internal credit guidelines).

The Company’s other debt securities portfolio is comprised of obligations issued by U.S. government entities and agencies, obligations issued by states and political subdivisions (which shall meet a minimum credit rating of BBB), and corporate bonds (which shall meet a minimum credit rating of BBB-).

Interest income on investment securities includes amortization of premiums and accretion of discounts. We amortize premiums to the earliest call date. We accrete discounts associated with investment securities using the effective interest method over the life of the respective security instrument. Gains and losses on the sale of investment securities are recorded on the trade date and determined using the specific identification method.

A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. Interest accrued but not received for a security placed on non-accrual status is reversed against current period interest income. There were no investment securities on nonaccrual status as of December 31, 2022 and the Company did not reverse any accrued interest against interest income during the year ended December 31, 2022.

Allowance for Credit Losses (“ACL”) for AFS Debt Securities

AFS debt securities in an unrealized loss position are evaluated for impairment at least quarterly. For AFS debt securities in an unrealized loss position, the Company first assesses whether or not it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the investment security’s amortized cost basis is written down to fair value through net income.

For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In conducting this assessment for debt securities in an unrealized loss position, management evaluates the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the investment security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any unrealized loss that has not been recorded through an ACL is recognized in AOCI.

Changes in the ACL are recorded as a provision (credit) for credit losses. Losses are charged against the ACL when management believes the uncollectibility of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

As of December 31, 2022, the declines in market values of our AFS debt securities were primarily attributable to changes in interest rates and volatility in the financial markets. Because we have no intent to sell securities in an unrealized loss position and it is not more likely than not that we will be required to sell such securities before recovery of its amortized cost basis, we do not believe a credit loss exists and an ACL was not recorded.

The Company has made a policy election to exclude accrued interest receivable from the amortized cost basis of debt securities and report accrued interest receivable together with accrued interest on loans in the consolidated balance sheets. Accrued interest receivable on AFS debt securities totaled $3.1 million and $4.6 million as of December 31, 2022 and 2021, respectively. Accrued interest receivable on AFS debt securities is excluded from the estimate of credit losses.

ACL for HTM Debt Securities

Management measures expected credit losses on HTM debt securities on a collective basis by major security type. For pools of such securities with common risk characteristics, the historical lifetime probability of default and severity of loss in the event of default is derived or obtained from external sources. Expected credit losses for these securities are estimated using a loss rate methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

Expected credit loss on each security in the HTM portfolio that do not share common risk characteristics with any of the pools of debt securities is individually measured based on net realizable value, or the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the recorded amortized cost basis of the security.

Securities in the HTM portfolio are issued by or contain collateral issued by U.S. government sponsored enterprises ("GSEs") and carry implicit guarantees from the U.S. government. Due to the implicit guarantee and the long history of no credit losses, no allowance for credit losses was recorded for these securities.

Accrued interest on HTM debt securities is reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses.

Accrued interest receivable on HTM debt securities totaled $1.3 million as of December 31, 2022. The Company did not have any HTM debt securities or accrued interest receivable on HTM debt securities as of December 31, 2021.

Loans Held for Sale

Loans held for sale consists of the following two types: (1) Hawaii residential mortgage loans that are originated with the intent to sell them in the secondary market and (2) non-residential mortgage loans in both Hawaii and the U.S. Mainland that were originated with the intent to be held in our portfolio but were subsequently transferred to the held for sale category. Hawaii residential mortgage loans classified as held for sale are carried at the lower of cost or fair value on an aggregate basis, while the non-residential Hawaii and U.S. Mainland loans are recorded at the lower of cost or fair value on an individual basis. Net fees and costs associated with originating and acquiring the Hawaii residential mortgage loans held for sale are deferred and included in the basis for determining the gain or loss on sales of loans held for sale. We report the fair values of the non-residential mortgage loans classified as held for sale net of applicable selling costs on our consolidated balance sheets.

Loans originated with the intent to be held in our portfolio are subsequently transferred to held for sale when our intent to hold for the foreseeable future has changed. At the time of a loan's transfer to the held for sale account, the loan is recorded at the lower of cost or fair value. Any reduction in the loan's value is reflected as a write-down of the recorded investment resulting in a new cost basis, with a corresponding reduction in the allowance for credit losses.

In subsequent periods, if the fair value of a loan classified as held for sale is less than its cost basis, a valuation adjustment is recognized in our consolidated statement of income in other operating expense and the carrying value of the loan is adjusted accordingly. The valuation adjustment may be recovered in the event that the fair value increases, which is also recognized in our consolidated statement of income in other operating expense.

The fair value of loans classified as held for sale are generally based upon quoted prices for similar assets in active markets, acceptance of firm offer letters with agreed upon purchase prices, discounted cash flow models that take into account market observable assumptions, or independent appraisals of the underlying collateral securing the loans. Collateral values are determined based on appraisals received from qualified valuation professionals and are obtained periodically or when indicators that property values may be impaired are present.

We sell residential mortgage loans under industry standard contractual provisions that include various representations and warranties, which typically cover ownership of the loan, compliance with loan criteria set forth in the applicable agreement, validity of the lien securing the loan, and other similar matters. We may be required to repurchase certain loans sold with identified defects, indemnify the investor, or reimburse the investor for any credit losses incurred. Our repurchase risk generally relates to early payment defaults and borrower fraud. We establish residential mortgage repurchase reserves to reflect this risk based on our estimate of losses after considering a combination of factors, including our estimate of future repurchase activity and our projection of estimated credit losses resulting from repurchased loans.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost, net of the ACL. Amortized cost is the unpaid principal amount outstanding, net of unamortized purchase premiums and discounts, unamortized deferred loan origination fees and costs and cumulative principal charge-offs. Purchase premiums and discounts are generally amortized into interest income over the contractual terms of the underlying loans using the effective interest method. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income over the life of the related loan as an adjustment to yield and are amortized using the interest method over the contractual term of the loan, adjusted for actual prepayments. Deferred loan fees and costs on loans paid in full are recognized as a component of interest income on loans.

Interest income on loans is accrued at the contractual rate of interest on the unpaid principal balance. Accrued interest receivable on loans totaled $16.0 million and $12.1 million at December 31, 2022 and 2021, respectively, and is reported together with accrued interest on AFS debt securities on the consolidated balance sheets. Upon adoption of Accounting Standards Update ("ASU") 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” the Company made the accounting policy election to not measure an estimate of credit losses on accrued interest receivable as the Company writes off any uncollectible accrued interest receivable in a timely manner.

Nonaccrual Loans

The Company determines delinquency status by considering the number of days full payments required by the contractual terms of the loan are past due. Commercial, scored small business, automobile and other consumer loans are generally placed on nonaccrual status when principal and/or interest payments are 90 days past due, or earlier should management determine that the borrowers will be unable to meet contractual principal and/or interest obligations, unless the loans are well-secured and in the process of collection. Residential mortgage and home equity loans, are generally placed on nonaccrual status when principal and/or interest payments are 120 days past due, or earlier should management determine that the borrowers will be unable to meet contractual principal and/or interest obligations, unless the loans are well-secured and in the process of collection. When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income should management determine that the collectability of such accrued interest is doubtful. All subsequent receipts are applied to principal outstanding and no interest income is recognized unless the financial condition and payment record of the borrowers warrant such recognition and the loan is restored to accrual status. A nonaccrual loan may be restored to an accrual basis when principal and interest payments are current for a predetermined period, normally at least six months, and full payment of principal and interest is reasonably assured.

Troubled Debt Restructuring (“TDR”)

A loan is accounted for and reported as a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) the Company grants a concession to the borrower experiencing financial difficulty that it would not otherwise consider for a borrower or transaction with similar credit risk characteristics. A restructuring that results in only an insignificant delay in payment is not considered a concession. A delay may be considered insignificant if the payments subject to the delay are insignificant relative to the unpaid principal or collateral value and the contractual amount due, or the delay in timing of the restructured payment period is insignificant relative to the frequency of payments, the debt’s original contractual maturity or original expected duration.

TDRs that are performing and on accrual status as of the date of the modification remain on accrual status. TDRs that are nonperforming as of the date of modification generally remain as nonaccrual until the prospect of future payments in accordance with the modified loan agreement is reasonably assured, generally demonstrated when the borrower maintains compliance with the restructured terms for a predetermined period, normally at least six months. TDRs with temporary below-market concessions remain designated as a TDR regardless of the accrual or performance status until the loan is paid off.

Expected credit losses are estimated on a collective (pool) basis when they share similar risk characteristics. If a TDR financial asset shares similar risk characteristics with other financial assets, it is evaluated with those other financial assets on a collective basis. If it does not share similar risk characteristics with other financial assets, it is evaluated individually. The Company’s ACL reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. The Company has determined that a TDR is reasonably expected no later than the point when the lender concludes that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession from the lender to avoid a default. Reasonably expected TDRs and executed TDRs are evaluated to determine the required ACL using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the ACL is determined by discounting the expected future cash flows at the original interest rate of the loan.

Based on the underlying risk characteristics, TDRs performing in accordance with their modified contractual terms may be collectively evaluated.

ACL for Loans

Under the current expected credit loss methodology, the ACL for loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Our policy is to charge off a loan in the period in which the loan is deemed to be uncollectible and all interest previously accrued but not collected is reversed against current period interest income. We consider a loan to be uncollectible when it is probable that a loss has been incurred and the Company can make a reasonable estimate of the loss. In these instances, the likelihood of and/or timeframe for recovery of the amount due is uncertain, weak, or protracted. Subsequent receipts, if any, are credited first to the remaining principal, then to the ACL for loans as recoveries, and finally to unaccrued interest.

The ACL for loans represents management's estimate of all expected credit losses over the expected life of our existing loan portfolio. Management estimates the ACL balance using relevant available information about the collectability of cash flows, from internal and external sources, including historical information relating to past events, current conditions, and reasonable and supportable forecasts of future economic conditions. When the Company is unable to forecast future economic events, management may revert to historical information.

The Company's methodologies incorporate a reasonable and supportable forecast period of one year and revert to historical loss information on a straight-line basis over one year when its forecast is no longer deemed reasonable and supportable.

The Company maintains an ACL at an appropriate level as of a given balance sheet date to absorb management’s best estimate of expected life of loan credit losses.

Historical credit loss experience provides the basis for the Company’s expected credit loss estimate. Adjustments to historical loss information may be made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or when historical asset terms do not reflect the contractual terms of the financial assets being evaluated.

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

The Company uses the Moody’s Analytics Baseline forecast for its economic forecast consideration. The Moody’s Analytics Baseline forecast includes both National and Hawaii specific economic indicators. The Moody’s Analytics forecast service is widely used in the industry and is reasonable and supportable. It is updated at least monthly and includes a variety of upside and downside economic scenarios from the Baseline. Generally the Company will use the most recent Baseline forecast from Moody’s as of the balance sheet date. During times of economic and market volatility or instability, the Company may include a qualitative factor for forecast imprecision that factors in other potential economic scenarios available by Moody’s Analytics or may apply overrides to its statistical models to enhance the reasonableness of its loss estimates.

The ACL is measured on a collective or pool basis when similar risk characteristics exist. The Company segments its portfolio generally by Federal Financial Institutions Examination Council ("FFIEC") Call Report codes. Loan pools are further segmented by risk utilizing risk ratings or bands of payment delinquency (including TDR or non-accrual status), depending on what is most appropriate for each segment. Additional sub-segmentation may be utilized to identify groups of loans with unique risk characteristics relative to the rest of the portfolio.

The Company relies on a third-party platform which offers multiple methodologies to measure historical life-of-loan losses. The Company has also developed statistical models internally to incorporate future economic conditions and forecast expected credit losses based on various macro-economic indicators such as unemployment and income levels.

The Company has identified the following portfolio segments to measure the allowance for credit losses. For all segments the economic forecast length is one year and reversion method is one year.

Loan Segment	Historical Lifetime Loss Method	Historical Lookback Period	Economic Forecast Length	Reversion Method
Construction	Probability of Default/Loss Given Default ("PD/LGD")	2008-Present	One Year	One Year (straight-line basis)
Commercial real estate	PD/LGD	2008-Present
Multi-family mortgage	PD/LGD	2008-Present
Commercial, financial and agricultural	PD/LGD	2008-Present
Home equity lines of credit	Loss-Rate Migration	2008-Present
Residential mortgage	Loss-Rate Migration	2008-Present
Consumer - other revolving	Loss-Rate Migration	2008-Present
Consumer - non-revolving	Loss-Rate Migration	2008-Present
Purchased Mainland portfolios (Dealer, Other consumer)	Weighted-Average Remaining Maturity ("WARM")	2008-Present

Below is a description and the risk characteristics of each segment:

Construction loans

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

Commercial real estate loans

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

Multi-family mortgage loans

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

Commercial, financial and agricultural loans

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

Paycheck Protection Program ("PPP") loans are also in this category and are considered lower risk as they are guaranteed by the Small Business Administration ("SBA") and may be forgivable in whole or in part in accordance with the requirements of the PPP.

Residential mortgage loans

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

Home equity lines of credit

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

Consumer loans - other revolving

This segment consists of consumer unsecured lines of credit. Its predominant risk characteristics relate to current and projected economic conditions as well as employment and income levels attributed to the borrower.

Consumer loans - non-revolving

This segment consists of consumer non-revolving loans, including dealer loans. Its predominant risk characteristics relate to current and projected economic conditions as well as employment and income levels attributed to the borrower.

Purchased consumer portfolios

Credit risk for purchased consumer loans is managed on a pooled basis. The predominant risk characteristics of purchased consumer loans include current and projected economic conditions, employment and income levels, and the quality of purchased consumer loans.

Below is a description of the methodologies mentioned above:

Probability of Default ("PD")/Loss Given Default ("LGD")

The PD/LGD calculation is based on a cohort methodology whereby loans in the same cohort are tracked over time to identify defaults and corresponding losses. PD/LGD analysis requires a portfolio segmented into pools, and we elected to then further sub-segment by risk characteristics such as Risk Rating, TDR status and nonaccrual status to measure losses accurately. PD measures the count or dollar amount of loans that defaulted in a given cohort. LGD measures the losses related to the loans that defaulted. Total loss rate is calculated using the formula, "PD times LGD".

Loss-Rate Migration

Loss-rate migration analysis is a cohort-based approach that measures cumulative net charge-offs over a defined time-horizon to calculate a loss rate that will be applied to the loan pool. Loss-rate migration analysis requires the portfolio to be segmented into pools then further sub-segmented by risk characteristics such as days past due, delinquency counters, TDR status and nonaccrual status to measure loss rates accurately. The key inputs to run a loss-rate migration analysis are the length and frequency of the migration period, the dates for the migration periods to start and the number of migration periods used for the analysis. For each migration period, the analysis will determine the outstanding balance in each segment and/or sub-segment at the start of each period. These loans will then be followed for the length of the migration period to identify the amount of associated charge-offs and recoveries. A loss rate for each migration period is calculated using the formula, "net charge-offs over the period divided by beginning loan balance".

Weighted-Average Remaining Maturity ("WARM")

Under the WARM methodology, lifetime losses are calculated by determining the remaining life of the loan pool and then applying a loss rate which includes a forecast component over this remaining life. The methodology considers historical loss experience as well as a loss forecast expectation to estimate credit losses for the remaining balance of the loan pool. The calculated loss rate is applied to the contractual term (adjusted for prepayments) to determine the loan pool’s current expected credit losses.

Other

If a loan ceases to share similar risk characteristics with other loans in its segment, it will be moved to a different pool sharing similar risk characteristics. Loans that do not share risk characteristics are evaluated on an individual basis based on the fair value of the collateral or other approaches such as discounted cash flow (“DCF”) techniques. Loans evaluated individually are not included in the collective evaluation.

Determining the Term

Expected credit losses represent life-of-loan loss estimates and are calculated based on the estimated remaining life of the loans which considers the contractual term of the loans, prepayments and other assumptions. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company. If such renewal options or extensions are present, these options are evaluated in determining the contractual term.

Reserve for Off-Balance Sheet Credit Exposures

The Company maintains a separate and distinct reserve for off-balance-sheet credit exposures which is included in other liabilities in the Company’s consolidated balance sheets. The Company estimates the amount of expected losses by calculating a commitment usage factor for letters of credit, non-revolving lines of credit, and revolving lines of credit over the remaining life during which the Company is exposed to credit risk via a contractual obligation to extend credit.

Letters of credit are generally unlikely to advance since they are typically in place only to ensure various forms of performance of the borrowers. Many of the letters of credit are cash secured. Non-revolving lines of credit are determined to be likely to advance as these are typically construction lines. Meanwhile, the likelihood of revolving lines of credit advancing varies with each individual borrower. Therefore, the future usage of each line was estimated based on the average line utilization of the revolving line of credit portfolio as a whole.

The estimate also applies the loss factors for each loan type used in the ACL for loans methodology, which is based on historical losses, economic conditions and reasonable and supportable forecasts. The reserve for off-balance sheet credit exposures is adjusted as a provision for off-balance sheet credit exposures. In 2021, the provision for off-balance sheet credit exposures was reclassified from other operating expense and is now included in the provision for credit losses in the consolidated statements of income. The consolidated statements of income in prior periods have been adjusted retrospectively to reflect this change.

Premises and Equipment

Premises and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are included in other operating expense and are computed using the straight-line method over the shorter of the estimated useful lives of the assets or the applicable leases. Useful lives generally range from five to thirty-nine years for premises and improvements, and one to seven years for equipment. Major improvements and betterments are capitalized, while recurring maintenance and repairs are charged to operating expense. Net gains or losses on dispositions of premises and equipment are included in other operating income and operating expense.

Other Real Estate

Other real estate is composed of properties acquired through deed-in-lieu or foreclosure proceedings and is initially recorded at fair value less estimated costs to sell the property, thereby establishing the new cost basis of other real estate. Losses arising at the time of acquisition of such properties are charged against the ACL. Subsequent to acquisition, such properties are carried at the lower of cost or fair value less estimated selling expenses, determined on an individual asset basis. Any deficiency resulting from the excess of cost over fair value less estimated selling expenses is recognized as a valuation allowance. Any subsequent increase in fair value up to its cost basis is recorded as a reduction of the valuation allowance. Increases or decreases in the valuation allowance are included in other operating expense. Net gains or losses recognized on the sale of these properties are included in other operating income.

Mortgage Servicing Rights

Mortgage servicing rights are recorded when loans are sold to third-parties with servicing of those loans retained and we classify and pool our mortgage servicing rights into buckets of homogeneous characteristics. We utilize the amortization method to measure our mortgage servicing rights. Under the amortization method, we amortize our mortgage servicing rights in proportion to and over the period of net servicing income. Income generated as the result of new mortgage servicing rights is reported as gains on sales of loans and is a component of mortgage banking income in the other operating income section of our consolidated statements of income. Amortization of the servicing rights is also reported as a component of mortgage banking income. Ancillary income is recorded in other income.

Initial fair value of the servicing right is calculated by a discounted cash flow model prepared by a third-party service provider based on market value assumptions at the time of origination and we assess the servicing right for impairment using current market value assumptions at each reporting period. Critical assumptions used in the discounted cash flow model include mortgage prepayment speeds, discount rates, and servicing income and costs. Variations in our assumptions could materially affect the estimated fair values. Changes to our assumptions are made when current trends and market data indicate that new trends have developed. Current market value assumptions based on loan product types (fixed-rate, adjustable-rate and government FHA loans) include average discount rates, servicing cost and ancillary income. Many of these assumptions are subjective and require a high level of management judgment. Our mortgage servicing rights portfolio and valuation assumptions are periodically reviewed by management.

Prepayment speeds may be affected by economic factors such as home price appreciation, market interest rates, the availability of other credit products to our borrowers and customer payment patterns. Prepayment speeds include the impact of all borrower prepayments, including full payoffs, additional principal payments and the impact of loans paid off due to foreclosure liquidations.

We perform an impairment assessment of our mortgage servicing rights quarterly or whenever events or changes in circumstance indicate that the carrying value of those assets may not be recoverable. Our impairment assessments involve, among other valuation methods, the estimation of future cash flows and other methods of determining fair value. Estimating future cash flows and determining fair values are subject to judgments and often involve the use of significant estimates and assumptions. The variability of the factors we use to perform our impairment tests depend on a number of conditions, including the uncertainty about future events and cash flows. All such factors are interdependent and, therefore, do not change in isolation. Accordingly, our accounting estimates may materially change from period to period due to changing market factors.

Federal Home Loan Bank Stock

We are a member of the Federal Home Loan Bank of Des Moines (the "FHLB"). The bank is required to obtain and hold a specific number of shares of capital stock of the FHLB equal to the sum of a membership investment requirement and an activity-based investment requirement. The securities are reported at cost and are presented separately in the consolidated balance sheets. 

Non-Controlling Interest

Non-controlling interest is comprised of capital and undistributed profits of the member of Oahu HomeLoans, LLC, other than the bank. Non-controlling interest on our consolidated balance sheet totaled $48 thousand at December 31, 2021. In March 2022, Oahu HomeLoans, LLC was terminated. As a result, the Company did not hold any non-controlling interest on its consolidated balance sheet at December 31, 2022.

Share-Based Compensation

Share-based compensation cost is measured at the grant date, based on the estimated fair value of the award. We use the Black-Scholes option-pricing model to determine the fair-value of stock options, and the market price of the Company's common stock at the grant date for restricted stock awards. Share-based compensation is recognized as expense over the employee's requisite service period, generally defined as the vesting period. For awards with graded vesting, we recognize compensation expense on a straight-line basis over their respective vesting period. The Company's accounting policy is to recognize forfeitures as they occur. See Note 15 - Share-Based Compensation for further discussion of our stock-based compensation.

Income Taxes

Deferred tax assets and liabilities are recognized for the estimated future tax effects attributable to temporary differences and carryforwards. A valuation allowance may be required if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining whether a valuation allowance is necessary, we consider the level of taxable income in prior years, to the extent that carrybacks are permitted under current tax laws, as well as estimates of future taxable income and tax planning strategies that could be implemented to accelerate taxable income, if necessary. If our estimates of future taxable income were materially overstated or if our assumptions regarding the tax consequences of tax planning strategies were inaccurate, some or all of our deferred tax assets may not be realized, which would result in a charge to earnings. Net deferred tax assets (liabilities) are included in other assets (liabilities) in the Company's consolidated balance sheets. We recognize interest and penalties related to income tax matters in other expense.

We establish income tax contingency reserves for potential tax liabilities related to uncertain tax positions. Tax benefits are recognized when we determine that it is more likely than not that such benefits will be realized. Where uncertainty exists due to the complexity of income tax statutes, and where the potential tax amounts are significant, we generally seek independent tax opinions to support our positions. If our evaluation of the likelihood of the realization of benefits is inaccurate, we could incur additional income tax and interest expense that would adversely impact earnings, or we could receive tax benefits greater than anticipated which would positively impact earnings.

Earnings per Share

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period, excluding unvested restricted stock awards. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period, increased by the dilutive effect of stock options and stock awards, less shares held in a Rabbi trust pursuant to a deferred compensation plan for directors. As of December 31, 2022, the Company no longer has any shares held in a Rabbi trust pursuant to a deferred compensation plan for directors.

Forward Foreign Exchange Contracts

We are periodically a party to a limited amount of forward foreign exchange contracts to satisfy customer needs for foreign currencies. These contracts are not utilized for trading purposes and are carried at market value, with realized gains and losses included in fees on foreign exchange.

Derivatives and Hedging Activities

We recognize all derivatives on the balance sheet at fair value. On the date that we enter into a derivative contract, we designate the derivative as (1) a hedge of the fair value of an identified asset or liability ("fair value hedge"), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to an identified asset or liability ("cash flow hedge") or (3) a transaction not qualifying for hedge accounting ("free standing derivative"). For a fair value hedge, changes in the fair value of the derivative and, to the extent that it is effective, changes in the fair value of the hedged asset or liability, attributable to the hedged risk, are recorded in current period net income in the same financial statement category as the hedged item. For a cash flow hedge, changes in the fair value of the derivative, to the extent that it is effective, is recorded in other comprehensive income (loss) ("OCI"). These changes in fair value are subsequently reclassified to net income in the same period(s) that the hedged transaction affects net income in the same financial statement category as the hedged item. For free standing derivatives, changes in fair values are reported in current period other operating income.

Accounting Standards Adopted in 2022

In May 2021, the FASB issued ASU No. 2021-04, "Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options". ASU 2021-04 addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2021-04 effective January 1, 2022 and it did not have an impact on our consolidated financial statements as the Company does not have any freestanding equity-classified written call options.

In July 2021, the FASB issued ASU No. 2021-05, "Leases (Topic 842), Lessors—Certain Leases with Variable Lease Payments". ASU 2021-05 updates guidance in Topic 842 to restore long-standing accounting practice for certain sales-type leases with variable payments. ASU 2021-05 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company adopted ASU 2021-05 effective January 1, 2022 and it did not have an impact on our consolidated financial statements as the Company does not have sale-type leases with variable payments.

Impact of Other Recently Issued Accounting Pronouncements on Future Filings

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)". This ASU provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. Entities can (1) elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also

(2) elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. Finally, entities can (3) make a one-time election to sell and/or reclassify held-to-maturity (“HTM”) debt securities that reference an interest rate affected by reference rate reform. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848)", which clarifies that all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in Topic 848. ASU 2020-04 and 2021-01 are elective and can be adopted between March 12, 2020 and December 31, 2022. In December 2022, the FASB issued ASU 2022-06, "Deferral of the Sunset Date of Topic 848", which extends the temporary relief provision period and allows companies to defer the adoption to December 31, 2024. The Company will elect optional expedients above for applicable contract modifications and hedge accounting for hedging relationships that meet the stated criteria. The Company does not expect the adoption of this pronouncement to have a material impact on the consolidated financial statements.

In March 2022, the FASB issued ASU No. 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method". ASU 2022-01 updates guidance in Topic 815, to expand the current last-of-layer method, which will allow multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments on a prospective basis. ASU 2022-01 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is in the process of evaluating the provisions of this ASU and its effects on our consolidated financial statements. However, we currently do not use the last-of-layer hedge accounting method.

In March 2022, the FASB issued ASU No. 2022-02, "Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures". ASU 2022-02 updates guidance in Topic 326, to eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, "Receivables—Troubled Debt Restructurings by Creditors", while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty and to require entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company is in the process of evaluating the provisions of this ASU and its effects on our consolidated financial statements and plans on making the adoption for the upcoming effective interim period.

In June 2022, the FASB issued ASU 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions". ASU 2022-03, (1) clarifies the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) amends a related illustrative example, and (3) introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company is in the process of evaluating the impact of this pronouncement on the consolidated financial statements.

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INVESTMENT SECURITIES

12 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

2. INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, fair value and related allowance for credit losses on held-to-maturity ("HTM") and available-for-sale ("AFS") investment securities as of December 31, 2022 and 2021 are as follows:

(Dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value		ACL
December 31, 2022
Held-to-Maturity:
Debt securities:
States and political subdivisions	$	41,840	$	—	$	(4,727)	$	37,113	$	—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	623,043		—		(63,376)		559,667		—
Total held-to-maturity investment securities	$	664,883	$	—	$	(68,103)	$	596,780	$	—
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		ACL
Available-for-Sale:
Debt securities:
States and political subdivisions	$	172,427	$	6	$	(36,681)	$	135,752	$	—
Corporate securities	36,206		—		(5,995)		30,211		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	28,032		—		(2,317)		25,715		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	498,989		—		(75,186)		423,803		—
Residential - Non-government sponsored entities ("Non-GSEs")	9,829		—		(1,167)		8,662		—
Commercial - U.S. GSEs and agencies	54,346		—		(8,202)		46,144		—
Commercial - Non-GSEs	1,541		—		(34)		1,507		—
Total available-for-sale investment securities	$	801,370	$	6	$	(129,582)	$	671,794	$	—

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		ACL
Available-for-Sale:
Debt securities:
States and political subdivisions	$	235,521	$	3,156	$	(1,849)	$	236,828	$	—
Corporate securities	41,687		24		(1,065)		40,646		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	35,833		69		(568)		35,334		—
Mortgage-backed securities:
Residential - U.S. GSEs	1,213,910		4,899		(19,993)		1,198,816		—
Residential - Non-GSEs	11,942		335		(64)		12,213		—
Commercial - U.S. GSEs and agencies	66,287		756		(1,194)		65,849		—
Commercial - Non-GSEs	41,328		685		—		42,013		—
Total available-for-sale investment securities	$	1,646,508	$	9,924	$	(24,733)	$	1,631,699	$	—

In March 2022, the Company transferred 41 investment securities that were classified as AFS to HTM. The investment securities had an amortized cost basis of $361.8 million and a fair market value of $329.5 million. On the date of transfer, these securities had a total net unrealized loss of $32.3 million. There was no impact to net income as a result of the reclassification.

In May 2022, the Company transferred 40 investment securities that were classified as AFS to HTM. The investment securities had an amortized cost basis of $400.9 million and a fair market value of $343.7 million. On the date of transfer, these securities had a total net unrealized loss of $57.2 million. There was no impact to net income as a result of the reclassification.

These transfers were executed to mitigate the potential future impact to capital through accumulated other comprehensive loss in consideration of a rising interest rate environment and the impact of rising rates on the market value of the investment securities. The Company believes that it maintains sufficient liquidity for future business needs and it has the positive intent and ability to hold these securities to maturity.

The amortized cost and estimated fair value of our investment securities at December 31, 2022 by contractual maturity are shown below. Actual maturities may differ from contractual maturities as issuers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

	December 31, 2022
(Dollars in thousands)	Amortized Cost		Fair Value		Weighted Average Yield (1)
Held-to-Maturity:
Due in one year or less	$	—	$	—	—	%
Due after one year through five years	—		—		—
Due after five years through ten years	—		—		—
Due after ten years	41,840		37,113		2.26
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	623,043		559,667		1.93
Total held-to-maturity investment securities	$	664,883	$	596,780	1.95	%
Available-for-Sale:
Due in one year or less	$	5,774	$	5,751	2.91	%
Due after one year through five years	15,816		15,458		3.75
Due after five years through ten years	79,803		70,558		2.60
Due after ten years	135,272		99,911		2.43
Mortgage-backed securities
Residential - U.S. GSEs	498,989		423,803		2.03
Residential - Non-GSEs	9,829		8,662		3.33
Commercial - U.S. GSEs and agencies	54,346		46,144		2.35
Commercial - Non-GSEs	1,541		1,507		4.10
Total available-for-sale investment securities	$	801,370	$	671,794	2.24	%
Total investment securities	$	1,466,253	$	1,268,574	2.10	%

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

In 2022, the Company did not sell any investment securities except for its Class B common stock of Visa which is discussed later in this footnote.

In 2021, proceeds from the sale of available-for-sale investment securities were $279.5 million and resulted in a net realized gain of $0.2 million. Gross realized gains and losses on the sale of available-for-sale investment securities totaled $3.4 million and $3.2 million, respectively. In 2021, proceeds from the sale of equity investment securities were $1.7 million.

In 2020, proceeds from the sale of available-for-sale investment securities were $180.1 million and resulted in a net realized loss of $0.2 million. Gross realized losses and gains on the sale of available-for-sale investment securities totaled $0.9 million and $0.7 million, respectively.

Investment securities of $607.7 million and $455.8 million at December 31, 2022 and 2021, respectively, were pledged to secure public funds on deposit and other long-term and short-term borrowings.

There were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity as of December 31, 2022 and 2021.

There were a total of 83 HTM securities in an unrecognized loss position at December 31, 2022. There were no HTM securities in an unrecognized loss position at December 31, 2021. There were a total of 243 and 153 AFS securities in an unrealized loss position at December 31, 2022 and 2021, respectively.

The following table summarizes HTM and AFS securities which were in an unrealized or unrecognized loss position at December 31, 2022 and 2021, aggregated by major security type and length of time in a continuous unrealized or unrecognized loss position:

	Less Than 12 Months				12 Months or Longer				Total
Description of Securities	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses
	(Dollars in thousands)
December 31, 2022
Held-to-Maturity:
Debt securities:
States and political subdivisions	$	37,113	$	(4,727)	$	—	$	—	$	37,113	$	(4,727)
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	559,667		(63,376)		—		—		559,667		(63,376)
Total temporarily impaired HTM investment securities	$	596,780	$	(68,103)	$	—	$	—	$	596,780	$	(68,103)

	Less Than 12 Months				12 Months or Longer				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
December 31, 2022
Available-for-Sale:
Debt securities:
States and political subdivisions	$	52,244	$	(4,807)	$	78,389	$	(31,874)	$	130,633	$	(36,681)
Corporate securities	—		—		30,211		(5,995)		30,211		(5,995)
U.S. Treasury obligations and direct obligations of U.S Government agencies	9,651		(245)		15,541		(2,072)		25,192		(2,317)
Mortgage-backed securities:
Residential - U.S. GSEs	149,624		(13,990)		274,179		(61,196)		423,803		(75,186)
Residential - Non-GSEs	2,890		(334)		5,772		(833)		8,662		(1,167)
Commercial - U.S. GSEs and agencies	25,034		(1,724)		21,110		(6,478)		46,144		(8,202)
Commercial - Non-GSEs	1,506		(34)		—		—		1,506		(34)
Total temporarily impaired AFS investment securities	$	240,949	$	(21,134)	$	425,202	$	(108,448)	$	666,151	$	(129,582)

	Less Than 12 Months				12 Months or Longer				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
December 31, 2021
Available-for-Sale:
Debt securities:
States and political subdivisions	$	79,360	$	(1,252)	$	10,864	$	(597)	$	90,224	$	(1,849)
Corporate securities	8,633		(235)		21,960		(830)		30,593		(1,065)
U.S. Treasury obligations and direct obligations of U.S Government agencies	16,103		(415)		10,891		(153)		26,994		(568)
Mortgage-backed securities:
Residential - U.S. GSEs	926,570		(15,883)		114,747		(4,110)		1,041,317		(19,993)
Residential - Non-GSEs	—		—		938		(64)		938		(64)
Commercial - U.S. GSEs and agencies	6,313		(205)		16,281		(989)		22,594		(1,194)
Total temporarily impaired AFS investment securities	$	1,036,979	$	(17,990)	$	175,681	$	(6,743)	$	1,212,660	$	(24,733)

Investment securities in an unrealized loss position are evaluated on at least a quarterly basis, and include evaluating the changes in the investment securities' ratings issued by rating agencies and changes in the financial condition of the issuer. For mortgage-related securities, delinquency and loss information with respect to the underlying collateral, changes in levels of subordination for the Company's particular position within the repayment structure, and remaining credit enhancement as compared to projected credit losses of the security are also evaluated.

The Company has evaluated its AFS investment securities that are in an unrealized loss position and has determined that the unrealized losses on the Company's investment securities are unrelated to credit quality and are primarily attributable to changes in interest rates and volatility in the financial markets since purchase. All of the investment securities in an unrealized loss position continue to be rated investment grade by one or more major rating agencies. Because we have no intent to sell securities in an unrealized loss position and it is not more likely than not that we will be required to sell such securities before recovery of its amortized cost basis, the Company has not recorded an ACL and does not consider these securities to be other-than-temporarily impaired as of December 31, 2022, which would result in unrealized losses on these securities being recognized into income.

Visa and MasterCard Class B Common Stock

In 2022, the Company sold its 34,631 shares of Class B common stock of Visa, Inc. ("Visa") and received net proceeds of $8.5 million. As of December 31, 2022, the Company no longer holds any shares of Class B common stock of Visa.

The Company received these shares in 2008 as part of Visa's initial public offering ("IPO"). These shares were transferable only under limited circumstances until they can be converted into shares of the publicly traded Class A common stock. This conversion will not occur until the resolution of certain litigation, which is indemnified by Visa members. Since its IPO, Visa has funded a litigation reserve to settle these litigation claims. At its discretion, Visa may continue to increase the litigation reserve based upon a change in the conversion ratio of each member bank’s restricted Class B common stock to unrestricted Class A common stock.

Due to the existing transfer restriction and the uncertainty of the outcome of the Visa litigation, the Company determined that the Visa Class B common stock did not have a readily determinable fair value and chose to carry the shares on the Company's consolidated balance sheets at zero cost basis. As a result, the entire net proceeds of $8.5 million were recognized as a pre-tax gain and included in net gain on sales of investment securities in the Company's consolidated statements of income.

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LOANS AND LEASES

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

LOANS AND LEASES

3. LOANS

Loans, excluding loans held for sale, net of ACL as of December 31, 2022 and 2021 consisted of the following:

	December 31,
(Dollars in thousands)	2022		2021
Commercial, financial and agricultural:
Small Business Administration Paycheck Protection Program ("SBA PPP")	$	2,654	$	94,850
Other	544,495		530,383
Real estate:
Construction	167,366		123,351
Residential mortgage	1,940,456		1,875,200
Home equity	737,386		635,721
Commercial mortgage	1,364,998		1,222,138
Consumer	798,957		624,115
Gross loans	5,556,312		5,105,758
Net deferred fees	(846)		(4,109)
Total loans, net of deferred fees and costs	$	5,555,466	$	5,101,649
Allowance for credit losses	(63,738)		(68,097)
Total loans, net of allowance for credit losses	$	5,491,728	$	5,033,552

There are different types of risk characteristics for the loans in each portfolio segment. The construction and real estate segment's predominant risk characteristics are the collateral and the geographic location of the property collateralizing the loan, as well as the operating cash flow for the commercial real estate properties. The commercial, financial and agricultural segment's predominant risk characteristics are the cash flows of the business we lend to, the global cash flows and liquidity of the guarantors of such losses, as well as economic and market conditions. The consumer segment's predominant risk characteristics are employment and income levels as they relate to the consumer.

The bank is a Small Business Administration ("SBA") approved lender and actively participated in assisting customers with loan applications for the SBA’s Paycheck Protection Program, or PPP, which was part of the CARES Act. PPP loans have a two or five-year term and earn interest at 1%. The SBA paid the originating bank a processing fee ranging from 1% to 5%, based on the size of the loan, which the Company is recognizing over the life of the loan as an adjustment of yield.

The SBA began accepting submissions for the initial round of PPP loans on April 3, 2020. In April 2020, the Paycheck Protection Program and Health Care Enhancement Act added an additional round of funding for the PPP. In June 2020, the Paycheck Protection Program Flexibility Act of 2020 was enacted, which among other things, gave borrowers additional time and flexibility to use PPP loan proceeds. Through the end of the second round in August 2020, the Company funded over 7,200 PPP loans totaling $558.9 million and received gross processing fees of $21.2 million. In December 2020, the Consolidated Appropriations Act, 2021 was passed which among other things, included a third round of funding and a new simplified forgiveness procedure for PPP loans of $150,000 or less. During 2021, the Company funded over 4,600 loans totaling $320.9 million in the third round, which ended on May 31, 2021, and received additional gross processing fees of $18.4 million.

The Company received forgiveness payments from the SBA and repayments from borrowers totaling $877.1 million as of December 31, 2022. A total outstanding balance of $2.7 million and net deferred fees of $0.1 million remains as of December 31, 2022.

The Company did not transfer any loans to the held-for-sale category during the years ended December 31, 2022 and 2021.

The Company has purchased loan portfolios, none of which were credit deteriorated at the time of purchase.

The following table presents loan purchases by class for the periods presented:

(Dollars in thousands)	Consumer - Unsecured		Consumer - Automobile		Total
Year Ended December 31, 2022
Purchases:
Outstanding balance	$	229,283	$	101,500	$	330,783
Purchase (discount) premium	(12,119)		4,738		(7,381)
Purchase price	$	217,164	$	106,238	$	323,402
Year Ended December 31, 2021
Purchases:
Outstanding balance	$	199,813	$	71,432	$	271,245
Purchase (discount) premium	(9,613)		5,080		(4,533)
Purchase price	$	190,200	$	76,512	$	266,712

In the normal course of business, the bank makes loans to certain directors, executive officers and their affiliates. These loans are made in the ordinary course of business at normal credit terms. Related party loan balances were $37.4 million and $36.4 million as of December 31, 2022 and 2021, respectively.

Collateral-Dependent Loans

In accordance with ASC 326, a loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table presents the amortized cost basis of collateral-dependent loans by class, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans as of December 31, 2022 and 2021:

	December 31, 2022
(Dollars in thousands)	Secured by 1-4 Family Residential Properties		Secured by Nonfarm Nonresidential Properties		Secured by Real Estate and Business  Assets		Total		Allocated ACL
Real estate:
Residential mortgage	$	5,653	$	—	$	—	$	5,653	$	—
Home equity	570		—		—		570		—
Total	$	6,223	$	—	$	—	$	6,223	$	—

	December 31, 2021
(Dollars in thousands)	Secured by 1-4 Family Residential Properties		Secured by Nonfarm Nonresidential Properties		Secured by Real Estate and Business  Assets		Total		Allocated ACL
Real estate:
Residential mortgage	$	8,391	$	—	$	—	$	8,391	$	—
Home equity	786		—		—		786		—
Total	$	9,177	$	—	$	—	$	9,177	$	—

Foreclosure Proceedings

Residential mortgage loans collateralized by residential real estate property that were in the process of foreclosure totaled $0.1 million and $0.7 million as of December 31, 2022 and 2021, respectively.

We did not foreclose on any loans during the years ended December 31, 2022 and 2021. We did not sell any foreclosed properties during the years ended December 31, 2022 and 2021.

Nonaccrual and Past Due Loans

For all loan types, the Company determines delinquency status by considering the number of days full payments required by the contractual terms of the loan are past due. The following tables present by class, the aging of the recorded investment in past due loans as of December 31, 2022 and 2021:

	December 31, 2022
(Dollars in thousands)	Accruing Loans 30 - 59 Days Past Due		Accruing Loans 60 - 89 Days Past Due		Accruing Loans 90+  Days Past Due		Nonaccrual Loans		Total Past Due and Nonaccrual		Loans and Leases Not Past Due		Total		Nonaccrual Loans with No ACL
Commercial, financial and agricultural:
SBA PPP	$	471	$	37	$	13	$	—	$	521	$	2,034	$	2,555	$	—
Other	546		131		26		297		1,000		542,947		543,947		—
Real estate:
Construction	—		—		—		—		—		166,723		166,723		—
Residential mortgage	303		—		559		3,808		4,670		1,936,329		1,940,999		3,808
Home equity	1,540		—		—		570		2,110		737,270		739,380		570
Commercial mortgage	160		—		—		—		160		1,362,915		1,363,075		—
Consumer	5,173		1,921		1,240		576		8,910		789,877		798,787		—
Total	$	8,193	$	2,089	$	1,838	$	5,251	$	17,371	$	5,538,095	$	5,555,466	$	4,378

	December 31, 2021
(Dollars in thousands)	Accruing Loans 30 - 59 Days Past Due		Accruing Loans 60 - 89 Days Past Due		Accruing Loans 90+  Days Past Due		Nonaccrual Loans		Total Past Due and Nonaccrual		Loans and Leases Not Past Due		Total		Nonaccrual Loans with No ACL
Commercial, financial and agricultural:
SBA PPP	$	—	$	—	$	—	$	—	$	—	$	91,327	$	91,327	$	—
Other	970		604		945		183		2,702		527,419		530,121		—
Real estate:
Construction	638		—		—		—		638		122,229		122,867		—
Residential mortgage	5,315		—		—		4,623		9,938		1,866,042		1,875,980		4,623
Home equity	234		—		44		786		1,064		636,185		637,249		786
Commercial mortgage	—		—		—		—		—		1,220,204		1,220,204		—
Consumer	2,444		712		374		289		3,819		620,082		623,901		—
Total	$	9,601	$	1,316	$	1,363	$	5,881	$	18,161	$	5,083,488	$	5,101,649	$	5,409

Interest income totaling $1.6 million, $0.8 million, and $0.4 million was recognized on nonaccrual loans, including loans held for sale, in 2022, 2021 and 2020, respectively. Additional interest income of $0.2 million, $0.3 million, and $0.2 million would have been recognized in 2022, 2021 and 2020, respectively, had these loans been accruing interest throughout those periods. Additionally, interest income of $0.3 million, $0.3 million, and $0.2 million was collected and recognized on charged-off loans in 2022, 2021 and 2020, respectively.

Troubled Debt Restructurings

Troubled debt restructurings ("TDRs") included in nonperforming assets at December 31, 2022 consisted of five Hawaii residential mortgage loans with a combined principal balance of $1.1 million. At December 31, 2021, TDRs included in nonperforming assets consisted of four loans with a principal balance of $0.4 million. There were $2.8 million of TDRs still accruing interest at December 31, 2022, none of which were more than 90 days delinquent. At December 31, 2021, there were $4.9 million of TDRs still accruing interest, none of which were more than 90 days delinquent.

The Company offers various types of concessions when modifying a loan. Concessions made to the original contractual terms of the loan typically consist of the deferral of interest and/or principal payments due to deterioration in the borrowers' financial

condition. In these cases, the principal balance on the TDR had matured and/or was in default at the time of restructure, and there were no commitments to lend additional funds to the borrower during the year ended December 31, 2022 and 2021. The loans modified in a TDR did not have a material effect on the Company's Provision and ACL during the years ended December 31, 2022 and 2021.

No loans were modified in a TDR during the year ended December 31, 2022. The following table presents by class, information related to loans modified in a TDR during the years ended December 31, 2021 and 2020:

	Year Ended December 31, 2021
(Dollars in thousands)	Number of Loans	Recorded Investment (as of period end)		Increase in the ACL
Real estate: Residential mortgage	1	$	48	$	—
Total	1	$	48	$	—
	Year Ended December 31, 2020
(Dollars in thousands)	Number of Loans	Recorded Investment (as of period end)		Increase in the ACL
Real estate: Residential mortgage	1	$	677	$	—
Real estate: Commercial mortgage	1	$	276	$	—
Consumer	11	$	207	$	—
Total	13	$	1,160	$	—

No loans were modified as a TDR within the previous twelve months that subsequently defaulted during the years ended December 31, 2022, 2021 and 2020.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans by credit risk. This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk rating of loans:

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

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

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

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

Loans not meeting the criteria above are considered to be pass-rated loans.

The following table presents the amortized cost basis, net of deferred (fees) costs of the Company's loans by class, credit quality indicator and origination year as of December 31, 2022. Revolving loans converted to term as of and during the year ended December 31, 2022 were not material to the total loan portfolio.

	Amortized Cost of Term Loans by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Amortized Cost of Revolving Loans		Total
December 31, 2022
Commercial, financial and agricultural - SBA PPP:
Risk Rating
Pass	$	—	$	2,546	$	9	$	—	$	—	$	—	$	—	$	2,555
Subtotal	—		2,546		9		—		—		—		—		2,555
Commercial, financial and agricultural - Other:
Risk Rating
Pass	77,550		101,595		41,358		53,241		39,106		141,950		76,466		531,266
Special Mention	2,206		350		172		1,011		29		—		99		3,867
Substandard	188		176		833		256		116		7,215		30		8,814
Subtotal	79,944		102,121		42,363		54,508		39,251		149,165		76,595		543,947
Construction:
Risk Rating
Pass	25,663		61,027		23,384		2,387		14,309		18,048		15,044		159,862
Special Mention	—		417		—		—		898		—		—		1,315
Substandard	—		4,850		—		696		—		—		—		5,546
Subtotal	25,663		66,294		23,384		3,083		15,207		18,048		15,044		166,723
Residential mortgage:
Risk Rating
Pass	279,146		636,756		434,928		154,906		58,431		371,517		—		1,935,684
Substandard	—		—		948		—		503		3,864		—		5,315
Subtotal	279,146		636,756		435,876		154,906		58,934		375,381		—		1,940,999
Home equity:
Risk Rating
Pass	34,973		23,772		10,520		7,463		6,880		11,727		643,277		738,612
Special Mention	—		—		—		—		—		—		198		198
Substandard	—		—		—		—		78		453		39		570
Subtotal	34,973		23,772		10,520		7,463		6,958		12,180		643,514		739,380
Commercial mortgage:
Risk Rating
Pass	226,137		208,230		119,531		129,950		145,932		472,267		11,473		1,313,520
Special Mention	—		—		—		11,388		—		16,082		—		27,470
Substandard	—		10,149		—		1,700		2,133		8,103		—		22,085
Subtotal	226,137		218,379		119,531		143,038		148,065		496,452		11,473		1,363,075
Consumer:
Risk Rating
Pass	358,609		242,942		59,352		50,899		20,065		10,958		54,038		796,863
Special Mention	—		—		—		113		—		—		—		113
Substandard	1		261		91		126		42		790		—		1,311
Loss	—		—		—		—		—		500		—		500
Subtotal	358,610		243,203		59,443		51,138		20,107		12,248		54,038		798,787
Total loans, net of deferred fees and costs	$	1,004,473	$	1,293,071	$	691,126	$	414,136	$	288,522	$	1,063,474	$	800,664	$	5,555,466

	Amortized Cost of Term Loans by Origination Year
(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Amortized Cost of Revolving Loans		Total
December 31, 2021
Commercial, financial and agricultural - SBA PPP:
Risk Rating
Pass	$	84,254	$	7,073	$	—	$	—	$	—	$	—	$	—	$	91,327
Subtotal	84,254		7,073		—		—		—		—		—		91,327
Commercial, financial and agricultural - Other:
Risk Rating
Pass	122,729		68,021		56,531		52,375		31,817		93,957		79,131		504,561
Special Mention	1,441		1,278		2,443		96		8,671		354		—		14,283
Substandard	—		982		393		682		6,623		1,847		750		11,277
Subtotal	124,170		70,281		59,367		53,153		47,111		96,158		79,881		530,121
Construction:
Risk Rating
Pass	35,236		25,430		3,196		28,333		288		20,090		9,376		121,949
Substandard	—		—		—		918		—		—		—		918
Subtotal	35,236		25,430		3,196		29,251		288		20,090		9,376		122,867
Residential mortgage:
Risk Rating
Pass	670,011		478,891		180,687		75,820		92,394		372,539		42		1,870,384
Special Mention	—		973		—		—		—		—		—		973
Substandard	—		—		—		577		881		3,165		—		4,623
Subtotal	670,011		479,864		180,687		76,397		93,275		375,704		42		1,875,980
Home equity:
Risk Rating
Pass	26,479		13,008		10,329		10,593		480		7,743		567,600		636,232
Special Mention	—		—		—		—		—		—		187		187
Substandard	—		176		—		79		—		575		—		830
Subtotal	26,479		13,184		10,329		10,672		480		8,318		567,787		637,249
Commercial mortgage:
Risk Rating
Pass	229,108		126,169		146,584		126,014		153,041		387,751		9,472		1,178,139
Special Mention	—		—		3,106		3,219		283		9,455		—		16,063
Substandard	—		—		1,760		8,050		1,784		14,408		—		26,002
Subtotal	229,108		126,169		151,450		137,283		155,108		411,614		9,472		1,220,204
Consumer:
Risk Rating
Pass	308,326		96,066		91,194		41,995		20,719		9,446		55,311		623,057
Special Mention	—		—		181		—		10		7		—		198
Substandard	10		35		128		80		19		221		—		493
Loss	—		—		—		—		—		153		—		153
Subtotal	308,336		96,101		91,503		42,075		20,748		9,827		55,311		623,901
Total loans, net of deferred fees and costs	$	1,477,594	$	818,102	$	496,532	$	348,831	$	317,010	$	921,711	$	721,869	$	5,101,649

The following tables present the recorded investment in the Company's loans by class and credit indicator as of December 31, 2022 and 2021:

(Dollars in thousands)	Pass		Special Mention		Substandard		Loss		Gross Loans		Net Deferred (Fees) Costs		Total Loans
December 31, 2022
Commercial, financial and agricultural:
SBA PPP	$	2,654	$	—	$	—	$	—	$	2,654	$	(99)	$	2,555
Other	531,814		3,867		8,814		—		544,495		(548)		543,947
Real estate:
Construction	160,505		1,315		5,546		—		167,366		(643)		166,723
Residential mortgage	1,935,141		—		5,315		—		1,940,456		543		1,940,999
Home equity	736,618		198		570		—		737,386		1,994		739,380
Commercial mortgage	1,315,443		27,470		22,085		—		1,364,998		(1,923)		1,363,075
Consumer	797,029		113		1,315		500		798,957		(170)		798,787
Total	$	5,479,204	$	32,963	$	43,645	$	500	$	5,556,312	$	(846)	$	5,555,466

(Dollars in thousands)	Pass		Special Mention		Substandard		Loss		Gross Loans		Net Deferred (Fees) Costs		Total Loans
December 31, 2021
Commercial, financial and agricultural:
SBA PPP	$	94,850	$	—	$	—	$	—	$	94,850	$	(3,523)	$	91,327
Other	504,823		14,283		11,277		—		530,383		(262)		530,121
Real estate:
Construction	122,433		—		918		—		123,351		(484)		122,867
Residential mortgage	1,869,604		973		4,623		—		1,875,200		780		1,875,980
Home equity	634,704		187		830		—		635,721		1,528		637,249
Commercial mortgage	1,180,074		16,062		26,002		—		1,222,138		(1,934)		1,220,204
Consumer	623,271		181		510		153		624,115		(214)		623,901
Total	$	5,029,759	$	31,686	$	44,160	$	153	$	5,105,758	$	(4,109)	$	5,101,649

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ALLOWANCE FOR LOAN AND LEASE LOSSES

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

ALLOWANCE FOR LOAN AND LEASE LOSSES

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

The following tables present the activity in the ACL for loans by class for the years ended December 31, 2022, 2021 and 2020:

	Commercial, Financial and Agricultural				Real Estate
(Dollars in thousands)	SBA PPP		Other		Construction		Residential Mortgage		Home Equity		Commercial Mortgage		Consumer		Total
Year ended December 31, 2022
Beginning balance	$	77	$	10,314	$	3,908	$	12,463	$	4,509	$	18,411	$	18,415	$	68,097
Provision (credit) for credit losses on loans	(75)		(2,518)		(1,117)		(954)		(431)		(509)		5,892		288
Subtotal	2		7,796		2,791		11,509		4,078		17,902		24,307		68,385
Charge-offs	—		1,969		—		—		—		—		6,399		8,368
Recoveries	—		995		76		295		36		—		2,319		3,721
Net charge-offs (recoveries)	—		974		(76)		(295)		(36)		—		4,080		4,647
Ending balance	$	2	$	6,822	$	2,867	$	11,804	$	4,114	$	17,902	$	20,227	$	63,738

	Commercial, Financial and Agricultural				Real Estate
(Dollars in thousands)	SBA PPP		Other		Construction		Residential Mortgage		Home Equity		Commercial Mortgage		Consumer		Total
Year ended December 31, 2021
Beginning balance	$	304	$	18,717	$	4,277	$	16,484	$	5,449	$	22,163	$	15,875	$	83,269
Provision (credit) for credit losses on loans [1]	(227)		(7,684)		(1,528)		(4,379)		(949)		(3,825)		4,269		(14,323)
Subtotal	77		11,033		2,749		12,105		4,500		18,338		20,144		68,946
Charge-offs	—		1,723		—		—		—		—		4,402		6,125
Recoveries	—		1,004		1,159		358		9		73		2,673		5,276
Net charge-offs (recoveries)	—		719		(1,159)		(358)		(9)		(73)		1,729		849
Ending balance	$	77	$	10,314	$	3,908	$	12,463	$	4,509	$	18,411	$	18,415	$	68,097

	Commercial, Financial and Agricultural				Real Estate
(Dollars in thousands)	SBA PPP		Other		Construction		Residential Mortgage		Home Equity		Commercial Mortgage		Consumer		Total
Year ended December 31, 2020
Beginning balance	$	—	$	8,136	$	1,792	$	13,327	$	4,206	$	11,113	$	9,397	$	47,971
Impact of adoption of ASC 326	—		(627)		479		608		(1,614)		2,624		2,096		3,566
Balance after adoption of ASC 326	—		7,509		2,271		13,935		2,592		13,737		11,493		51,537
Provision for credit losses on loans [1]	304		13,077		1,875		2,383		2,824		8,485		9,982		38,930
Subtotal	304		20,586		4,146		16,318		5,416		22,222		21,475		90,467
Charge-offs	—		3,026		—		63		—		75		8,191		11,355
Recoveries	—		1,157		131		229		33		16		2,591		4,157
Net charge-offs	—		1,869		(131)		(166)		(33)		59		5,600		7,198
Ending balance	$	304	$	18,717	$	4,277	$	16,484	$	5,449	$	22,163	$	15,875	$	83,269
[1] In 2020, the Company recorded a reserve on accrued interest receivable for loans on active payment forbearance or deferral, which were granted to borrowers impacted by the COVID-19 pandemic. This reserve was recorded as a contra-asset against accrued interest receivable with the offset to provision for credit losses. Due to the significant decline in loans on active forbearance or deferral, the Company reversed the $0.2 million reserve during the second quarter of 2021 and no longer has a reserve on accrued interest receivable as of December 31, 2022 and 2021. The provision for credit losses presented in this table excludes the provision (credit) for credit losses on accrued interest receivable of $0.2 million.

The following table presents the activity in the reserve for off-balance sheet credit exposures, included in other liabilities, under ASC 326 during the years ended December 31, 2022, 2021 and 2020.

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Balance, beginning of year	$	4,804	$	4,884	$	1,272
Impact of adoption of ASC 326	—		—		740
Balance after adoption of ASC 326	4,804		4,884		2,012
(Credit) provision for off-balance sheet credit exposures	(1,561)		(80)		2,872
Balance, end of year	$	3,243	$	4,804	$	4,884

In accordance with GAAP, loans held for sale and other real estate assets are not included in our assessment of the ACL.

In determining the amount of our ACL, the Company relies on an analysis of its loan portfolio, experience and evaluation of general economic conditions, as well as regulatory requirements and input. If assumptions prove to be incorrect, the current ACL may not be sufficient to cover future credit losses and the Company may experience significant increases to the provision.

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PREMISES AND EQUIPMENT

12 Months Ended

Dec. 31, 2022

Property, Plant and Equipment [Abstract]

PREMISES AND EQUIPMENT

5. PREMISES AND EQUIPMENT

Premises and equipment consisted of the following as of December 31, 2022 and 2021:

	December 31,
(Dollars in thousands)	2022		2021
Land	$	23,150	$	14,184
Office buildings and improvements	145,793		141,628
Furniture, fixtures and equipment	37,194		35,515
Gross premises and equipment	206,137		191,327
Accumulated depreciation and amortization	(114,503)		(110,973)
Net premises and equipment	$	91,634	$	80,354

Depreciation and amortization of premises and equipment were charged to the following operating expenses:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Net occupancy	$	4,720	$	4,570	$	3,616
Equipment	2,145		2,414		2,607
Total	$	6,865	$	6,984	$	6,223

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INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES

12 Months Ended

Dec. 31, 2022

Investments in and Advances to Affiliates, Schedule of Investments [Abstract]

INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES

6. INVESTMENTS IN UNCONSOLIDATED ENTITIES

Investments in unconsolidated entities as of December 31, 2022 and 2021 consisted of the following components:

	December 31,
(Dollars in thousands)	2022		2021
Investments in low income housing tax credit partnerships	$	40,939	$	25,916
Investments in common securities of statutory trusts	1,547		1,547
Investments in affiliates	110		162
Other	4,045		2,054
Total	$	46,641	$	29,679

During the first quarter of 2022, the Company invested $2.0 million in Swell Financial, Inc. ("Swell"), which included $1.5 million in other intangible assets and services provided in exchange for Swell non-voting common stock and $0.5 million in cash in exchange for Swell preferred stock. During the fourth quarter of 2022, Swell launched a consumer banking application that combines checking, credit and more into one integrated account, with Central Pacific Bank serving as the bank sponsor. The Company does not have the ability to exercise significant influence over Swell and the investment does not have a readily determinable fair value. As a result, the Company determined that the cost method of accounting for the investment was appropriate. The investment is included in investments in unconsolidated entities in the Company's consolidated balance sheets.

In 2021, the Company committed $2.0 million in the JAM FINTOP Banktech Fund, L.P., an investment fund designed to help develop and accelerate technology adoption at community banks across the United States. The Company does not have the ability to exercise significant influence over the JAM FINTOP Banktech Fund, L.P. and the investment does not have a readily determinable fair value. As a result, the Company determined that the cost method of accounting for the investment was appropriate. The investment is included in investment in unconsolidated entities in the Company's consolidated balance sheets. As of December 31, 2022, the Company had an unfunded commitment of $1.3 million related to the investment, which is expected to be paid in 2023. The unfunded commitment is included in other liabilities in the Company's consolidated balance sheets.

The Company invests in low income housing tax credit ("LIHTC") partnerships. As of December 31, 2022 and 2021, the Company had $23.6 million and $14.3 million, respectively, in unfunded commitments related to the LIHTC partnerships, which is included in other liabilities in the Company's consolidated balance sheets.

The expected payments for the unfunded commitments related to the Company's investments in unconsolidated entities as of December 31, 2022 are as follows:

(Dollars in thousands)	LIHTC		Other
Year Ending December 31:	Partnerships		Partnerships		Total
2023	$	9,693	$	1,303	$	10,996
2024	9,280		—		9,280
2025	4,248		—		4,248
2026	26		—		26
2027	26		—		26
Thereafter	333		—		333
Total commitments	$	23,606	$	1,303	$	24,909

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

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Proportional amortization method:
Amortization expense recognized in income tax expense	$	2,566	$	2,174	$	1,391
Federal and state tax credits recognized in income tax expense	2,938		2,373		1,599

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MORTGAGE SERVICING RIGHTS

12 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

MORTGAGE SERVICING RIGHTS

7. MORTGAGE SERVICING RIGHTS

The following table presents changes in our mortgage servicing rights for the periods presented:

(Dollars in thousands)	Mortgage Servicing Rights
Balance as of December 31, 2020	$	11,865
Additions	1,341
Amortization	(3,468)
Balance as of December 31, 2021	9,738
Additions	631
Amortization	(1,295)
Balance as of December 31, 2022	$	9,074

The gross carrying value, accumulated amortization, and net carrying value related to our mortgage servicing rights as of December 31, 2022 and 2021 are presented below:

	December 31, 2022						December 31, 2021
(Dollars in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Mortgage servicing rights	$	69,413	$	(60,339)	$	9,074	$	72,250	$	(62,512)	$	9,738
Total	$	69,413	$	(60,339)	$	9,074	$	72,250	$	(62,512)	$	9,738

Based on our mortgage servicing rights held as of December 31, 2022, estimated amortization expense for the next five succeeding fiscal years and all years thereafter are as follows:

(Dollars in thousands)
Year Ending December 31:
2023	$	994
2024	950
2025	844
2026	749
2027	656
Thereafter	4,881
Total	$	9,074

The Company utilizes the amortization method to measure our mortgage servicing rights. Under the amortization method, mortgage servicing rights are amortized in proportion to and over the period of net servicing income. Income generated as the result of new mortgage servicing rights is reported as a component of mortgage banking income and totaled $0.6 million, $1.3 million, and $3.3 million in 2022, 2021 and 2020, respectively. Amortization of the servicing rights is reported as a component of mortgage banking income in the Company's consolidated statements of income. Ancillary income is recorded in other income. Mortgage servicing rights are recorded when loans are sold to third-parties with servicing of those loans retained, and are classified and pooled into buckets of homogeneous characteristics.

Initial fair value of the servicing right is calculated by a discounted cash flow model prepared by a third-party service provider based on market value assumptions at the time of origination. The servicing right is assessed for impairment using current market value assumptions at each reporting period. Critical assumptions used in the discounted cash flow model include mortgage prepayment speeds, discount rates, and servicing income and costs. Variations in our assumptions could materially affect the estimated fair values. Changes to our assumptions are made when current trends and market data indicate that new trends have developed. Current market value assumptions based on loan product types (fixed-rate, adjustable-rate and government FHA loans) include average discount rates, servicing costs and ancillary income. Many of these assumptions are subjective and require a high level of management judgment. The Company's mortgage servicing rights portfolio and valuation assumptions are periodically reviewed by management.

Prepayment speeds may be affected by economic factors such as home price appreciation, market interest rates, availability of other credit products to our borrowers and customer payment patterns. Prepayment speeds include the impact of all borrower prepayments, including full payoffs, additional principal payments and the impact of loans paid off due to foreclosure liquidations. As market interest rates decline, prepayment speeds will generally increase as customers refinance existing mortgages under more favorable interest rate terms. As prepayment speeds increase, anticipated cash flows will generally decline resulting in a potential reduction, or impairment, to the fair value of the capitalized mortgage servicing rights. Alternatively, an increase in market interest rates may cause a decrease in prepayment speeds and therefore an increase in fair value of mortgage servicing rights.

The following table presents the fair market value and key assumptions used in determining the fair market value of our mortgage servicing rights:

	Year Ended December 31,
(Dollars in thousands)	2022			2021
Fair market value, beginning of period	$	10,504		$	12,003
Fair market value, end of period	12,061			10,504
Weighted-average discount rate	9.5		%	9.5		%
Weighted-average prepayment speed assumption	10.4		%	19.0		%

Loans serviced for others as of December 31, 2022 and 2021 totaled $1.28 billion and $1.40 billion, respectively. Loans serviced for others are not reported as assets on the Company's consolidated balance sheets.

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DERIVATIVES

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES

8. DERIVATIVES

The Company utilizes various designated and undesignated derivative financial instruments to reduce our exposure to movements in interest rates. All derivatives are measured at fair value on the Company's consolidated balance sheet. In each reporting period, we record the derivative instruments in other assets or other liabilities depending on whether the derivatives are in an asset or liability position. For derivative instruments that are designated as hedging instruments, the effective portion of the changes in the fair value of the derivative in AOCI, net of tax, is recorded until earnings are affected by the variability of cash flows of the hedged transaction. The portion of the gain or loss in the fair value of the derivative that represents hedge ineffectiveness is immediately recognized in current period earnings. For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivative are included in current period earnings. In 2022, the Company entered into a forward starting interest rate swap designated as a fair value hedge of certain municipal securities. The Company had no derivative instruments designated as hedging instruments as of December 31, 2021.

Interest Rate Lock and Forward Sale Commitments

The Company enters into interest rate lock commitments on certain mortgage loans that are intended to be sold. To manage interest rate risk on interest rate lock commitments, the Company also enters into forward loan sale commitments. The interest rate lock and forward loan sale commitments are accounted for as undesignated derivatives and are recorded at their respective fair values in other assets or other liabilities, with changes in fair value recorded in current period earnings. These instruments serve to reduce our exposure to movements in interest rates. At December 31, 2022 and 2021, the Company was party to forward sale commitments on $1.1 million and $3.5 million of mortgage loans, respectively. As of December 31, 2022 and 2021, the Company did not have any outstanding interest rate lock commitments on mortgage loans.

Risk Participation Agreements

In the first and fourth quarters of 2020, the Company entered into credit risk participation agreements ("RPA") with financial institution counterparties for interest rate swaps related to loans in which the Company participates. The risk participation agreements entered into by us as a participant bank provide credit protection to the financial institution counterparties should the borrowers fail to perform on their interest rate derivative contracts with the financial institutions.

Back-to-Back Swap Agreements

The Company established a program whereby it originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer. The Company also enters into an equal and offsetting swap with a highly rated third-party financial institution. These "back-to-back swap agreements" are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. These back-to-back swap agreements are free-standing derivatives and are recorded at fair value in other assets or other liabilities on the Company's consolidated balance sheet, with changes recorded in current period earnings. The Company did not enter into any swap agreements with its borrowers and third party financial institutions during the year ended December 31, 2022. During the year ended December 31, 2021, the Company entered into swap agreements with its borrowers with a total notional amount of $33.1 million, offset by swap agreements with third party financial institutions with a total notional amount of $33.1 million. As of December 31, 2022, the Company pledged $10.0 million in cash as collateral for the back-to-back swap agreements.

Interest Rate Swaps

During the first quarter of 2022, we entered into a forward starting interest rate swap, with an effective date of March 31, 2024. This transaction had a notional amount totaling $115.5 million as of December 31, 2022, and was designated as a fair value hedge of certain municipal debt securities. The Company will pay the counterparty a fixed rate of 2.095% and will receive a floating rate based on the Federal Funds effective rate. The fair value hedge has a maturity date of March 31, 2029. The interest rate swap is carried on the Company’s consolidated balance sheet at its fair value in other assets (when the fair value is positive) or in other liabilities (when the fair value is negative). The changes in the fair value of the interest rate swap are recorded in interest income. The unrealized gains or losses due to changes in fair value of the hedged debt securities due to changes in benchmark interest rates are recorded as an adjustment to the hedged debt securities and offset in the same interest income line item.

The following table presents the location of all assets and liabilities associated with our derivative instruments within the Company's consolidated balance sheet: 

		Asset Derivatives				Liability Derivatives
Derivatives Not Designated as	Balance Sheet	Fair Value at		Fair Value at		Fair Value at		Fair Value at
Hedging Instruments	Location	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
		(Dollars in thousands)
Interest rate lock and forward sale commitments	Other assets / other liabilities	$	10	$	5	$	2	$	20
Risk participation agreements	Other assets / other liabilities	—		—		—		16
Back-to-back swap agreements	Other assets / other liabilities	4,611		435		4,611		435

		Asset Derivatives				Liability Derivatives
Derivatives Designated as	Balance Sheet	Fair Value at		Fair Value at		Fair Value at		Fair Value at
Hedging Instruments	Location	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
		(Dollars in thousands)
Interest rate swap	Other assets / other liabilities	$	5,986	$	—	$	—	$	—

The following table presents the impact of derivative instruments and their location within the Company's consolidated statements of income for the periods presented: 

Derivatives Not in Cash Flow Hedging Relationship	Location of Gain (Loss) Recognized in Earnings on Derivatives	Amount of Gain (Loss) Recognized in Earnings on Derivatives
	(Dollars in thousands)
Year ended December 31, 2022
Interest rate lock and forward sale commitments	Mortgage banking income	$	8
Loans held for sale	Other income	(3)
Risk participation agreements	Other service charges and fees	16
Year ended December 31, 2021
Interest rate lock and forward sale commitments	Mortgage banking income	98
Risk participation agreements	Other service charges and fees	32
Back-to-back swap agreements	Other service charges and fees	600
Year ended December 31, 2020
Interest rate lock and forward sale commitments	Mortgage banking income	(76)
Risk participation agreements	Other service charges and fees	1,323

Derivatives in Cash Flow Hedging Relationship	Location of Gain (Loss) Recognized in Earnings on Derivatives	Amount of Gain (Loss) Recognized in Earnings on Derivatives
	(Dollars in thousands)
Year ended December 31, 2022
Interest rate swap	Interest income	$	(340)

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DEPOSITS

12 Months Ended

Dec. 31, 2022

Deposits [Abstract]

DEPOSITS

9. DEPOSITS

The Company had $991.2 million and $706.7 million of total time deposits as of December 31, 2022 and 2021, respectively. Contractual maturities of total time deposits as of December 31, 2022 were as follows:

(Dollars in thousands)
Year Ending December 31:
2023	$	912,198
2024	52,870
2025	12,048
2026	6,527
2027	7,186
Thereafter	376
Total	$	991,205

Time deposits that meet or exceed the FDIC insurance limit of $250,000 totaled $678.6 million and $488.8 million at December 31, 2022 and 2021, respectively. This includes $290.1 million and $215.0 million in government time deposits at December 31, 2022 and 2021, respectively, which are collateralized.

Contractual maturities of time deposits of $250,000 or more as of December 31, 2022 were as follows:

(Dollars in thousands)
Three months or less	$	370,239
Over three months through six months	97,913
Over six months through twelve months	188,943
2024	15,185
2025	2,326
2026	1,540
2027	2,411
Thereafter	—
Total	$	678,557

Overdrawn deposit accounts totaling $0.7 million and $0.5 million have been reclassified as loans on the Company's consolidated balance sheets as of December 31, 2022 and 2021, respectively.

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SHORT-TERM BORROWINGS

12 Months Ended

Dec. 31, 2022

Short-Term Debt [Abstract]

SHORT-TERM BORROWINGS

10. SHORT-TERM BORROWINGS

The bank is a member of the FHLB and maintained a $2.23 billion line of credit, of which $2.19 billion remained available as of December 31, 2022. At December 31, 2022, there were $5.0 million in short-term borrowings outstanding under this arrangement. At December 31, 2021, there were no short-term borrowings outstanding under this arrangement.

The FHLB provides standby letters of credit on behalf of the bank to secure certain public deposits. If the FHLB is required to make a payment on a standby letter of credit, the payment amount is converted to an advance at the FHLB.  The standby letters of credit issued on our behalf by the FHLB totaled $36.0 million and $32.2 million as of December 31, 2022 and 2021, respectively.

The bank had additional unused borrowings available at the Federal Reserve discount window of $75.9 million and $55.4 million as of December 31, 2022 and 2021, respectively. Certain commercial real estate and commercial loans with carrying values totaling $125.0 million and $131.0 million were pledged as collateral on our line of credit with the Federal Reserve discount window as of December 31, 2022 and 2021, respectively. The Federal Reserve does not have the right to sell or repledge these loans.

Interest expense on short-term borrowings totaled $1.1 million, $2 thousand and $0.7 million in 2022, 2021 and 2020, respectively.

A summary of the bank's short-term borrowings as of December 31, 2022, 2021 and 2020 is as follows:

	Year Ended December 31,
(Dollars in thousands)	2022			2021			2020
Amount outstanding at December 31	$	5,000		$	—		$	22,000
Average amount outstanding during year	37,210			607			89,904
Highest month-end balance during year	140,000			6,500			222,000
Weighted-average interest rate on balances outstanding at December 31	4.60		%	—		%	0.29		%
Weighted-average interest rate during year	2.84		%	0.30		%	0.80		%

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LONG-TERM DEBT

12 Months Ended

Dec. 31, 2022

Long-Term Debt, Unclassified [Abstract]

LONG-TERM DEBT

11. LONG-TERM DEBT

Long-term debt, which is based on original maturity, consisted of subordinated notes and debentures totaling $105.9 million and $105.6 million at December 31, 2022 and 2021, respectively. There were no long-term FHLB advances outstanding at December 31, 2022 and 2021.

	December 31,
(Dollars in thousands)	2022		2021
Subordinated debentures	$	51,547	$	51,547
Subordinated notes, net of issuance costs	54,312		54,069
Total	$	105,859	$	105,616

At December 31, 2022, future principal payments on long-term debt based on redemption date or final maturity are as follows (dollars in thousands):

(Dollars in thousands)
Year Ending December 31:
2023	$	—
2024	—
2025	—
2026	—
2027	—
Thereafter	106,547
Total	$	106,547

FHLB Advances

The bank had no FHLB long-term advances outstanding as of December 31, 2022 and 2021. At December 31, 2022, the bank had FHLB advances available of approximately $2.19 billion, which was secured by certain real estate loans with a carrying value of $3.28 billion in accordance with the collateral provisions of the Advances, Pledge and Security Agreement with the FHLB. The bank did not incur any interest expense on FHLB long-term advances in 2022 and 2021. Interest expense on FHLB long-term advances was $1.5 million in 2020.

Subordinated Debentures

As of December 31, 2022 and 2021, the Company had the following junior subordinated debentures outstanding:

(Dollars in thousands)	December 31, 2022 and 2021
Name of Trust	Amount of Subordinated Debentures		Interest Rate
Trust IV	$	30,928	Three month LIBOR + 2.45%
Trust V	20,619		Three month LIBOR + 1.87%
Total	$	51,547

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

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

The Company is not considered the primary beneficiary of Trusts IV and V, therefore the trusts are not considered a variable interest entity and are not consolidated in the Company's financial statements. Rather the subordinated debentures are shown as a liability on the Company's consolidated balance sheets. The Company's investment in the common securities of the trusts are included in investment in unconsolidated entities in the Company's consolidated balance sheets.

The floating rate trust preferred securities, the junior subordinated debentures that are the assets of Trusts IV and V and the common securities issued by Trusts IV and V are redeemable in whole or in part on any interest payment date on or after December 15, 2009 for Trust IV and V, or at any time in whole but not in part within 90 days following the occurrence of certain events. Our obligations with respect to the issuance of the trust preferred securities constitute a full and unconditional guarantee by the Company of each trust's obligations with respect to its trust preferred securities. Subject to certain exceptions and limitations, we may elect from time to time to defer interest payments on the subordinated debentures, which would result in a deferral of distribution payments on the related trust preferred securities, for up to 20 consecutive quarterly periods without default or penalty.

The subordinated debentures may be included in Tier 1 capital, with certain limitations applicable, under current regulatory guidelines and interpretations.

Subordinated Notes

As of December 31, 2022 and 2021, the Company had the following subordinated notes outstanding:

(Dollars in thousands)	December 31, 2022 and 2021
Name	Amount of Subordinated Notes		Interest Rate
October 2020 Private Placement	$	55,000	4.75% for the first five years. Resets quarterly thereafter to the then current three-month SOFR.
Total	$	55,000

On October 20, 2020, the Company completed a $55.0 million private placement of ten-year fixed-to-floating rate subordinated notes, which will be used to support regulatory capital ratios and for general corporate purposes. The Company exchanged the privately placed notes for registered notes with the same terms and in the same aggregate principal amount at the end of the fourth quarter of 2020. The Notes bear a fixed interest rate of 4.75% for the first five years through November 1, 2025 and will reset quarterly thereafter for the remaining five years to the then current three-month Secured Overnight Financing Rate ("SOFR"), as published by the Federal Reserve Bank of New York, plus 456 basis points.

The subordinated notes may be included in Tier 2 capital, with certain limitations applicable, under current regulatory guidelines and interpretations. The subordinated notes had a carrying value of $54.3 million, net of unamortized debt issuance costs of $0.7 million, at December 31, 2022.

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EQUITY

12 Months Ended

Dec. 31, 2022

Equity [Abstract]

EQUITY

12. EQUITY

As a Hawaii state-chartered bank, Central Pacific Bank may only pay dividends to the extent it has retained earnings as defined under Hawaii banking law ("Statutory Retained Earnings"), which differs from GAAP retained earnings. As of December 31, 2022 and 2021, the bank had Statutory Retained Earnings of $145.7 million and $114.0 million, respectively.

Dividends are payable at the discretion of the Board of Directors and there can be no assurance that the Board of Directors will continue to pay dividends at the same rate, or at all, in the future. Our ability to pay cash dividends to our shareholders is subject to restrictions under federal and Hawaii law, including restrictions imposed by the FRB and covenants set forth in various agreements we are a party to, including covenants set forth in our subordinated debentures.

We repurchase shares of our common stock when we believe such repurchases are in the best interests of the Company.

In January 2021, the Company’s Board of Directors authorized the repurchase of up to $25.0 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the "2021 Repurchase Plan"). The 2021 Repurchase Plan replaced and superseded in its entirety the share repurchase program previously approved by the Company's Board of Directors, which had $26.6 million in remaining repurchase authority due to the Company temporarily suspending the share repurchase program in March 2020 due to uncertainty in the wake of the COVID-19 pandemic.

In January 2022, the Company’s Board of Directors authorized the repurchase of up to $30.0 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program (the "2022 Repurchase Plan"). The 2022 Repurchase Plan replaced and superseded in its entirety the 2021 Repurchase Plan, which had $5.3 million in remaining repurchase authority. The Company's 2022 Repurchase Plan is subject to a one year expiration.

In the year ended December 31, 2022, a total of 868,613 shares of common stock, at a cost of $20.7 million, were repurchased under the Company's share purchase programs. A total of $10.3 million remained available for repurchase under the Company's 2022 Repurchase Plan at December 31, 2022.

In the year ended December 31, 2021, 696,894 shares of common stock, at a cost of $18.7 million, were repurchased under the Company's share repurchase programs.

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REVENUE FROM CONTRACTS WITH CUSTOMERS

12 Months Ended

Dec. 31, 2022

Revenue from Contract with Customer [Abstract]

REVENUE FROM CONTRACTS WITH CUSTOMERS

13. REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue Recognition

Accounting Standards Codification ("ASC") 606, "Revenue from Contracts with Customers", establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts to provide goods or services to its customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services. Revenue is recognized as performance obligations are satisfied.

The Company recognizes revenues as they are earned based on contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured. Our principal source of revenue is derived from interest income on financial instruments, such as our loan and investment securities portfolios, as well as revenue related to our mortgage banking activities. These revenue-generating transactions are out of scope of ASC 606, but are subject to other GAAP and discussed elsewhere within our disclosures.

The Company also generates other revenue in connection with our broad range of banking products and financial services. Descriptions of our other revenue-generating activities that are within the scope of ASC 606, which are presented in the Company's consolidated statements of income as components of other operating income are as follows:

Mortgage banking income

Loan placement fees, included in mortgage banking income, primarily represent revenues earned by the Company for loan placement and underwriting. Revenues for these services are recorded at a point-in-time, upon completion of a contractually identified transaction, or when an advisory opinion is provided.

Service charges on deposit accounts

Revenue from service charges on deposit accounts includes general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when our performance obligation is completed, which is

generally monthly for account maintenance services or when a transaction has been completed (such as stop payment fees). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

Other Service Charges and Fees

Revenue from other service charges and fees includes fees on foreign exchange, cards and payments income, safe deposit rental income and other service charges, commissions and fees.

The Company provides foreign currency exchange services to customers, whereby cash can be converted to different foreign currencies, and vice versa. As a result of the services, a gain or loss is recognized on foreign currency transactions, as well as income related to commissions and fees earned on each transaction. Revenue from the commissions and fees earned on the transactions fall within the scope of ASC 606, and is recorded in a manner that reflects the timing of when transactions occur, and as services are provided. Realized and unrealized gains or losses related to foreign currency are out of scope of ASC 606.

Cards and payments income includes interchange fees from debit cards processed through card association networks, merchant services, and other card related services. Interchange rates are generally set by the credit card associations and based on purchase volumes and other factors. Interchange fees are recognized as transactions occur. Interchange expenses related to cards and payments income are presented gross in other operating expense. Merchant services income represents account management fees and transaction fees charged to merchants for the processing of card association network transactions. Merchant services revenue is recognized as transactions occur, or as services are performed.

Other service charges, commissions and fees include automated teller machines ("ATM") surcharge and interchange fees, bill payment fees, cashier’s check and money order fees, wire transfer fees, loan brokerage fees, and commissions on sales of insurance, broker-dealer products, and letters of credit. Revenue from these fees and commissions is recorded in a manner that reflects the timing of when transactions occur, and as services are provided.

Based on the nature of the commission agreement with the broker-dealer and each insurance provider, we may recognize revenue from broker-dealer and insurance commissions over time or at a point-in-time as our performance obligation is satisfied.

Income from Fiduciary Activities

Income from fiduciary activities includes fees from wealth management, trust, custodial and escrow services provided to individual and institutional customers. Revenue is generally recognized monthly based on a minimum annual fee and/or the market value of assets in custody. Additional fees are recognized for transactional activity.

Revenue from trade execution and brokerage services is earned through commissions from trade execution on behalf of clients. Revenue from these transactions is recognized at the trade date. Any ongoing service fees are recognized on a monthly basis as services are performed.

Net Gain (Loss) on Sales of Foreclosed Assets

The Company records a gain or loss on the sale of a foreclosed property when control of the property transfers to the Company, which typically occurs at the time the deed is executed. The Company does not finance the sale of the foreclosed property.

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

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Other operating income:
In-scope of ASC 606
Mortgage banking income	$	1,060	$	1,993	$	1,128
Service charges on deposit accounts	8,197		6,358		$	6,234
Other service charges and fees	16,581		15,281		11,621
Income on fiduciary activities	4,565		5,075		4,829
In-scope other operating income	30,403		28,707		23,812
Out-of-scope other operating income	17,516		14,353		21,386
Total other operating income	$	47,919	$	43,060	$	45,198

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MORTGAGE BANKING INCOME MORTGAGE BANKING INCOME

12 Months Ended

Dec. 31, 2022

Other Income and Expenses [Abstract]

MORTGAGE BANKING INCOME

14. MORTGAGE BANKING INCOME

Noninterest income from the Company's mortgage banking activities includes the following components for the periods presented:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Mortgage banking income:
Net loan servicing fees	$	2,259	$	2,733	$	2,754
Amortization of mortgage servicing rights	(1,295)		(3,468)		(6,167)
Net gain on sale of residential mortgage loans	1,778		6,376		16,043
Unrealized gain (loss) on interest rate locks	8		98		(76)
Loan placement fees	1,060		1,993		1,128
Total mortgage banking income	$	3,810	$	7,732	$	13,682

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SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

15. SHARE-BASED COMPENSATION

In accordance with ASC 718, compensation expense is recognized only for those shares expected to vest, based on the Company's historical experience and future expectations. The following table summarizes the effects of share-based compensation for options and awards granted under the Company's equity incentive plans for each of the periods presented:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Salaries and employee benefits	$	4,567	$	4,580	$	3,822
Directors stock awards	350		91		165
Income tax benefit	(1,461)		(1,449)		(809)
Net share-based compensation effect	$	3,456	$	3,222	$	3,178

Upon exercise or vesting of a share-based award, if the tax deduction exceeds the compensation cost that was previously recorded for financial statement purposes, this will result in an excess tax benefit. Effective January 1, 2017, ASU 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" requires the Company to recognize all excess tax benefits or tax deficiencies through the income statement as income tax expense/benefit. Under previous GAAP, any excess tax benefits were recognized in additional-paid-in-capital to offset current-period and subsequent-period tax deficiencies. The Company recorded income tax benefit of $0.1 million in 2022, income tax benefit of $0.2 million in 2021, and income tax expense of $0.3 million in 2020, as a result of restricted stock units vesting during the year.

The Company's share-based compensation arrangements are described below:

Equity Incentive Plans

The Company has adopted equity incentive plans for the purpose of granting options, restricted stock and other equity based awards for the Company's common stock to directors, officers and other key individuals. Option awards are generally granted with an exercise price equal to the market price of the Company's common stock at the date of grant; those option awards generally vest based on three or five years of continuous service and have 10-year contractual terms. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined in the stock option plans below). The Company has historically issued new shares of common stock upon exercises of stock options and purchases of restricted awards.

In April 2013, the Company adopted and shareholders approved the 2013 Stock Compensation Plan ("2013 Plan") making available 2,200,000 shares for grants to employees and directors. Upon adoption of the 2013 Plan, all unissued shares from the previous plan were frozen and no new grants were granted under the previous plan. Shares may continue to be settled under the previous plan pursuant to previously outstanding awards. New shares are issued from the 2013 Plan.

A total of 747,332, 843,469 and 996,850 shares were available for future grants under our 2013 Plan as of December 31, 2022, 2021 and 2020, respectively.

Stock Options 

The fair value of each option award is estimated on the date of grant based on the following:

Valuation and amortization method— The fair value of stock options granted is estimated using the Black-Scholes option pricing formula and a single option award approach. Historical data is used to estimate option exercise and employee termination activity within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

Expected life —The expected life of options represents the period of time that options granted are expected to be outstanding.

Expected volatility —Expected volatility is based on the historical volatility of the Company's common stock.

Risk-free interest rate —The risk-free interest rate for periods within the contractual life of the option is based on the Treasury yield curve in effect at the time of grant.

Expected dividend —The expected dividend assumption is based on our current expectations about our anticipated dividend policy.

The following is a summary of option activity for our stock option plans for the year ended December 31, 2022:

	Number of Units	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Stock options outstanding as of January 1, 2022	47,440	$	14.32
Changes during the year:
Granted	—	—
Exercised	(47,440)	14.32			$	706
Expired	—	—
Forfeited	—	—
Stock options outstanding as of December 31, 2022	—	—		0.0	—
Vested and exercisable as of December 31, 2022	—			0.0	—

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying option awards and the quoted price of the Company's common stock for the options that were in-the-money as of December 31, 2022.

There were 47,440 and 86,373 options exercised during the years ended December 31, 2022 and 2021, respectively. The aggregate intrinsic value of options exercised in 2022 and 2021 under our stock option plan determined as of the date of exercise was $0.7 million and $0.9 million, respectively. There were no options exercised in 2020.

As of December 31, 2022, all compensation costs related to stock options granted to employees under our stock option plans have been recognized.

There were no shares that vested in 2022, 2021 and 2020. As of December 31, 2022, all shares have been vested and exercised.

No stock options were granted during the years ended December 31, 2022, 2021 and 2020.

Restricted Stock and and Performance Stock Units

Under the 2013 Plan, the Company awarded restricted stock units ("RSUs") and performance stock units ("PSUs") to non-officer directors and certain senior management personnel. The awards typically vest over a two, three or five year period from the date of grant and are subject to forfeiture until performance and employment targets are achieved. Compensation expense is measured as the market price of the stock awards on the grant date, and is recognized over the specified vesting periods.

As of December 31, 2022, there was $3.5 million of total unrecognized compensation cost related to RSUs and PSUs that is expected to be recognized over a weighted-average period of 1.7 years.

The table below presents the activity of RSUs and PSUs for each of the periods presented:

	Number of Units	Weighted Average Grant Date Fair Value		Fair Value of RSUs and PSUs That Vested During The Year (in thousands)
Unvested as of December 31, 2019	366,467	$	28.89
Changes during the year:
Granted	322,180	18.11
Forfeited	(28,058)	23.79
Vested	(128,215)	29.48		$	3,780
Unvested as of December 31, 2020	532,374	22.49
Changes during the year:
Granted	221,774	21.93
Forfeited	(75,850)	21.95
Vested	(192,959)	23.42		5,077
Unvested as of December 31, 2021	485,339	21.95
Changes during the year:
Granted	99,887	28.99
Forfeited	(53,980)	25.66
Vested	(178,781)	21.91		4,787
Unvested as of December 31, 2022	352,465	23.40

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PENSION PLANS

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

PENSION PLANS

16. PENSION PLANS

Defined Benefit Retirement Plan

The bank had a defined benefit retirement plan that covered substantially all of its employees who were employed during the period that the plan was in effect. The plan was initially curtailed in 1986, and accordingly, plan benefits were fixed as of that date. Effective January 1, 1991, the bank reactivated its defined benefit retirement plan. As a result of the reactivation, employees for whom benefits were fixed in 1986 began to accrue additional benefits under a new formula that became effective January 1, 1991. Employees who were not participants at curtailment, but were subsequently eligible to join, became participants effective January 1, 1991. Under the reactivated plan, benefits are based upon the employees' years of service and their highest average annual salaries in a 60-consecutive-month period of service, reduced by benefits provided from the bank's terminated money purchase pension plan. The reactivation of the defined benefit retirement plan resulted in an increase of $5.9 million in the unrecognized prior service cost, which was amortized over a period of 13 years. Effective December 31, 2002, the bank curtailed its defined benefit retirement plan, and accordingly, plan benefits were fixed as of that date.

In January 2021, the Board of Directors approved termination of, and authorized Company management to commence taking action to terminate, the defined benefit retirement plan. The Company received a favorable determination letter from the IRS and no objection from the Pension Benefit Guaranty Corporation on the Form 500 standard termination notice in January 2022. The Company completed the termination and settlement of the plan in the second quarter of 2022. Upon final plan termination and settlement, the Company recognized a one-time noncash settlement expense of $4.9 million, which was recorded in other operating expense. As of December 31, 2022, the Company has no further defined benefit retirement plan liability or ongoing pension expense recognition.

The following tables set forth information pertaining to the defined benefit retirement plan:

	Year Ended December 31,
(Dollars in thousands)	2022		2021
Change in benefit obligation:
Benefit obligation at beginning of year	$	20,420	$	21,919
Interest cost	212		485
Actuarial gains	(1,766)		(427)
Benefits paid	(5,398)		(1,557)
Annuity purchase	(13,468)		—
Benefit obligation at end of the year	—		20,420
Change in plan assets, at fair value:
Fair value of plan assets at beginning of year	20,785		21,153
Actual return on plan assets	(1,969)		1,189
Employer contributions	50		—
Benefits paid	(5,398)		(1,557)
Annuity purchase	(13,468)		—
Fair value of plan assets at end of year	—		20,785
Funded status at end of year	$	—	$	365
Amounts recognized in AOCI:
Net actuarial losses	$	—	$	(4,699)
Benefit obligation actuarial assumptions:
Weighted-average discount rate	N/A		2.4		%

	Year Ended December 31,
(Dollars in thousands)	2022			2021			2020
Components of net periodic benefit cost:
Interest cost	$	212		$	485		$	641
Expected return on plan assets	(207)			(549)			(920)
Amortization of net actuarial losses	225			701			909
Settlement	4,884			—			—
Net periodic benefit cost	$	5,114		$	637		$	630
Net periodic cost actuarial assumptions:
Weighted-average discount rate	2.4		%	2.3		%	3.1		%
Expected long-term rate of return on plan assets	2.3		%	2.7		%	4.5		%

The long-term rate of return on plan assets reflects the weighted-average long-term rates of return for the various categories of investments held in the plan. The expected long-term rate of return is adjusted when there are fundamental changes in expected returns on the plan investments.

There were no plan assets remaining as of December 31, 2022. The defined benefit retirement plan assets as of December 31, 2021 consisted of debt securities and money market funds. The asset allocations by asset category were as follows:

	December 31, 2021
Debt securities	85.9	%
Money market funds	14.1
Total	100.0	%

In preparation of the defined benefit retirement plan termination, the plan asset allocations were adjusted to minimize market risk, which included eliminating all equity securities and adjusting the portfolio duration in 2021. There were no equity securities and no shares of the Company's common stock included in plan assets as of December 31, 2022 and 2021.

The fair values of the defined benefit retirement plan as of December 31, 2021 by asset category were as follows: 

(Dollars in thousands)	Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
December 31, 2021
Money market funds	$	2,938	$	—	$	—	$	2,938
Exchange traded funds	10,712		—		—		10,712
Government obligations	—		1,899		—		1,899
Corporate bonds and debentures	—		5,236		—		5,236
Total	$	13,650	$	7,135	$	—	$	20,785

With the termination of the defined benefit retirement plan in the second quarter of 2022, the Company no longer has any estimated future payments due and is no longer required by funding regulations or laws to make any contributions to our defined benefit retirement plan.

Supplemental Executive Retirement Plans

In 1995, 2001, 2004 and 2006, our bank established Supplemental Executive Retirement Plans ("SERP") that provide certain officers of the Company with supplemental retirement benefits. On December 31, 2002, the 1995 and 2001 SERP were curtailed. In conjunction with the merger with CB Bancshares, Inc. ("CBBI"), we assumed CBBI's SERP obligation.

The following tables set forth information pertaining to the SERP:

	Year Ended December 31,
(Dollars in thousands)	2022			2021
Change in benefit obligation
Benefit obligation at beginning of year	$	12,297		$	12,740
Interest cost	301			264
Actuarial gains	(2,960)			(398)
Benefits paid	(418)			(309)
Benefit obligation at end of year	9,220			12,297
Change in plan assets
Fair value of plan assets at beginning of year	—			—
Employer contributions	418			309
Benefits paid	(418)			(309)
Fair value of plan assets at end of year	—			—
Funded status at end of year	$	(9,220)		$	(12,297)
Amounts recognized in AOCI
Net transition obligation	$	(7)		$	(26)
Net actuarial losses	701			(2,337)
Total amounts recognized in AOCI	$	694		$	(2,363)
Benefit obligation actuarial assumptions
Weighted-average discount rate	5.0		%	2.5		%

	Year Ended December 31,
(Dollars in thousands)	2022			2021			2020
Components of net periodic benefit cost
Interest cost	$	301		$	264		$	341
Amortization of net actuarial (gains) losses	79			335			251
Amortization of net transition obligation	18			18			18
Amortization of prior service cost	—			—			14
Net periodic benefit cost	$	398		$	617		$	624
Net periodic cost actuarial assumptions
Weighted-average discount rate	2.7		%	2.1		%	3.1		%

The SERP holds no plan assets other than employer contributions that are paid as benefits during the year. The Company expects to contribute $0.6 million to the SERP in 2023.

Estimated future benefit payments reflecting expected future service for the SERP in each of the next five years, in the aggregate for the five years and thereafter are as follows:

(Dollars in thousands)
Year Ending December 31:
2023	$	573
2024	570
2025	566
2026	561
2027	556
2028-2032	4,817
Thereafter	1,577
Total	$	9,220

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401(K) RETIREMENT SAVINGS PLAN

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

401(K) RETIREMENT SAVINGS PLAN

17. 401(K) RETIREMENT SAVINGS PLAN

The Company maintains a 401(k) Retirement Savings Plan ("Retirement Savings Plan") that covers substantially all employees of the Company. The Retirement Savings Plan allows employees to direct their own investments among a selection of investment alternatives and is funded by employee elective deferrals, employer matching contributions and employer discretionary contributions.

The Company has the option of making regular matching contributions on employee's elective deferrals. The Company has sole discretion in determining the percentage to be matched, subject to limitations of the Internal Revenue Code. From January 1, 2020 to June 30, 2020, the Company matched 100% of an employee's elective deferrals, up to 4% of the employee's pay each pay period. Effective July 1, 2020, matching contributions were temporarily suspended due to economic uncertainty in the wake of the COVID-19 pandemic. In lieu of matching contributions, an equity grant of the Company's common stock was granted to all 401(k)-eligible employees as of June 30, 2020 that will vest ratably over three years. The equity grants were made outside of the Retirement Savings Plan.

From January 1, 2021 through June 30, 2021, matching contributions remained suspended. Effective July 1, 2021 through December 31, 2021, we matched 100% of an employees effective deferrals, up to 2% of the employee's pay each pay period. Effective January 1, 2022 through December 31, 2022, we matched 100% of an employees effective deferrals, up to 4% of the employee's pay each pay period.

The Company also has the option of making discretionary contributions into the Retirement Savings Plan and has sole discretion in determining the discretionary contribution, subject to limitations of the Internal Revenue Code. On December 31, 2020, the Company made a discretionary contribution to all 401(k)-eligible employees, excluding Executive Committee and Managing Committee members, of 2% of the employee's eligible compensation, up to $1,250 per employee. The Company did not make any discretionary contributions in 2022 and 2021.

Total contributions to the Retirement Savings Plan totaled $2.4 million, $0.5 million and $2.1 million in 2022, 2021 and 2020, respectively.

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OPERATING LEASES

12 Months Ended

Dec. 31, 2022

Leases, Operating [Abstract]

OPERATING LEASES

18. OPERATING LEASES

The Company leases certain property and equipment with lease terms expiring through 2045. In some instances, a lease may contain renewal options for periods ranging from five to 15 years. All renewal options are likely to be exercised and therefore have been recognized as part of our right-of-use assets and lease liabilities in accordance with ASC 842, "Leases". Certain leases also contain variable payments that are primarily determined based on common area maintenance costs and Hawaii state tax rates. All leases are operating leases and any short-term leases are not included in the calculation of the right-of-use assets and lease liabilities. The most significant assumption related to the Company’s application of ASC 842 was the discount rate assumption. As most of the Company’s lease agreements do not provide for an implicit interest rate, the Company uses the collateralized interest rate that the Company would have to pay to borrow over a similar term to estimate the Company’s lease liability.

Total lease cost, cash flow information, weighted-average remaining lease term and weighted-average discount rate is summarized below for the periods indicated:

	Year Ended December 31,
(Dollars in thousands)	2022			2021
Lease cost:
Operating lease cost	$	5,495		$	6,397
Variable lease cost	3,278			2,476
Less: sublease income	(48)			(78)
Total lease cost	$	8,725		8,795
Other information:
Operating cash flows from operating leases	$	(5,896)		$	(6,533)
Weighted-average remaining lease term - operating leases	11.22 years			11.91 years
Weighted-average discount rate - operating leases	3.95		%	3.93		%

The following is a schedule of annual undiscounted cash flows for our operating leases and a reconciliation of those cash flows to the operating lease liabilities for the next five succeeding fiscal years and all years thereafter:

(Dollars in thousands)
Year Ending December 31,	Undiscounted Cash Flows		Lease Liability Expense		Lease Liability Reduction
2023	$	5,100	$	1,328	$	3,772
2024	4,438		1,202		3,236
2025	4,152		1,078		3,074
2026	4,089		958		3,131
2027	4,080		835		3,245
Thereafter	23,049		3,618		19,431
Total	$	44,908	$	9,019	$	35,889

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

	Year Ended December 31,
(Dollars in thousands)	2022		2021
Total rental income recognized	$	2,228	2,094

Based on the Company's leases as lessor as of December 31, 2022, estimated lease payments for the next five succeeding fiscal years and all years thereafter are as follows:

(Dollars in thousands)
Year Ending December 31,
2023	$	1,001
2024	835
2025	675
2026	555
2027	533
Thereafter	2,300
Total	$	5,899

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INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

19. INCOME TAXES

Components of income tax expense (benefit) for the years ended December 31, 2022, 2021 and 2020 were as follows:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Current expense:
Federal	$	996	$	11,304	$	22,014
State	(1,965)		3,626		2,833
Total current	(969)		14,930		24,847
Deferred expense:
Federal	18,854		8,654		(12,952)
State	6,956		2,174		(135)
Total deferred	25,810		10,828		(13,087)
Provision for income taxes	$	24,841	$	25,758	$	11,760

Income tax expense (benefit) for the periods presented differed from the "expected" tax expense (computed by applying the U.S. federal corporate tax rate of 21% for the years ended December 31, 2022, 2021 and 2020, to income (loss) before income taxes) for the following reasons:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Computed "expected" tax expense (benefit)	$	20,741	$	22,187	$	10,297
Increase (decrease) in taxes resulting from:
Tax-exempt interest income	(692)		(526)		(528)
Other tax-exempt income	(392)		(734)		(799)
Low-income housing tax credits	(530)		(365)		(332)
State income taxes, net of Federal income tax effect, excluding impact of deferred tax valuation allowance	4,982		5,377		2,590
Change in the beginning-of-the-year balance of the valuation allowance for deferred tax assets allocated to income tax expense	39		(39)		(22)
Other, net	693		(142)		554
Total	$	24,841	$	25,758	$	11,760

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:

	December 31,
(Dollars in thousands)	2022		2021
Deferred tax assets
Lease liability	$	9,598	$	10,891
Allowance for credit losses	13,534		14,382
Accrued expenses	3,737		3,616
Employee retirement benefits	1,941		2,547
Federal net operating loss carryforwards	16,363		—
State net operating loss carryforwards	7,583		3,091
Restricted stock and non-qualified stock options	388		611
Premises and equipment	4,717		4,678
Other	9,504		6,333
Total deferred tax assets	67,365		46,149
Deferred tax liabilities
Right-of-use lease asset	9,356		10,546
Intangible assets	2,427		2,604
Other	3,647		3,808
Total deferred tax liabilities	15,430		16,958
Less: Deferred tax valuation allowance	3,398		3,359
Net deferred tax assets	$	48,537	$	25,832

In assessing the realizability of our net DTA, management considers whether it is more likely than not that some portion or all of the DTA will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income and tax-planning strategies in making this assessment.

As of December 31, 2022, the valuation allowance on our net DTA totaled $3.4 million, which related to our DTA from net apportioned net operating loss ("NOL") carryforwards for California state income tax purposes as the Company does not expect to generate sufficient income in California to utilize the DTA. The net change in the valuation allowance was an increase of $39 thousand in 2022, compared to a decrease of $39 thousand in 2021.

Net of this valuation allowance, the Company's net DTA totaled $48.5 million as of December 31, 2022, compared to a net DTA of $25.8 million as of December 31, 2021, and is included in other assets in the Company's consolidated balance sheets.

At December 31, 2022, the Company had NOL carryforwards for U.S. Federal income tax purposes of $77.9 million and state income tax purposes of $132.0 million, which are available to offset future taxable income. The U.S. Federal NOL carryforwards can be carried forward indefinitely to offset future federal taxable income. The Hawaii NOL carryforwards can also be carried forward indefinitely, while the other state NOL carryforwards will begin to expire if not utilized beginning in 2028.

Utilization of the NOL carryforwards and credits may be subject to annual limitations due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before they are able to be utilized. The Company does not expect any previous ownership changes, as defined under Sections 382 and 383 of the Internal Revenue Code, to result in an ultimate limitation that will materially reduce the total amount of net operating loss carryforwards that can be utilized.

At December 31, 2022, the Company did not have any material unrecognized tax benefits that, if recognized would favorably affect the effective income tax rate in future periods. The Company does not expect our unrecognized tax benefits to change significantly over the next 12 months.

The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. As of December 31, 2022, the Company’s federal tax returns for 2016 and earlier, and the state tax returns for 2018 and earlier were no longer subject to examination by the taxing authorities. However, tax periods closed in a prior period may be subject to audit and re-examination by tax authorities for which tax carryforwards are utilized in subsequent years.

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

12 Months Ended

Dec. 31, 2022

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

20. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the components of other comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020, by component:

(Dollars in thousands)	Before Tax		Tax Effect		Net of Tax
Year ended December 31, 2022
Net change in fair value of investment securities:
Net unrealized losses on investment securities arising during the period	$	(204,250)	$	(54,109)	$	(150,141)
Less: Amortization of unrealized losses on investment securities transferred to HTM	6,218		1,520		4,698
Net change in fair value of investment securities	(198,032)		(52,589)		(145,443)
Net change in fair value of derivative:
Net unrealized gains arising during the period	6,326		1,681		4,645
Net change in fair value of derivative	6,326		1,681		4,645
Defined benefit retirement plan and SERPs:
Net actuarial gains arising during the period	2,007		537		1,470
Amortization of net actuarial losses	304		81		223
Amortization of net transition obligation	18		4		14
Settlement	4,884		1,817		3,067
Defined benefit retirement plan and SERPs	7,213		2,439		4,774
Other comprehensive loss	$	(184,493)	$	(48,469)	$	(136,024)

(Dollars in thousands)	Before Tax		Tax Effect		Net of Tax
Year ended December 31, 2021
Net change in fair value of investment securities:
Net unrealized losses on investment securities arising during the period	$	(41,237)	$	(11,030)	$	(30,207)
Less: Reclassification adjustment for gains realized in net income	(150)		(40)		(110)
Net change in fair value of investment securities	(41,387)		(11,070)		(30,317)
Defined benefit retirement plan and SERPs:
Net actuarial gains arising during the period	2,014		544		1,470
Amortization of net actuarial losses	1,036		291		745
Amortization of net transition obligation	18		4		14
Defined benefit retirement plan and SERPs	3,068		839		2,229
Other comprehensive loss	$	(38,319)	$	(10,231)	$	(28,088)

(Dollars in thousands)	Before Tax		Tax Effect		Net of Tax
Year ended December 31, 2020
Net change in fair value of investment securities:
Net unrealized gains on investment securities arising during the period	$	15,939	$	4,260	$	11,679
Less: Reclassification adjustment for losses realized in net income	201		54		147
Net change in fair value of investment securities	16,140		4,314		11,826
Defined benefit retirement plan and SERPs:
Net actuarial losses arising during the period	(1,488)		(508)		(980)
Amortization of net actuarial losses	1,160		310		850
Amortization of net transition obligation	18		5		13
Amortization of prior service cost	14		4		10
Defined benefit retirement plan and SERPs	(296)		(189)		(107)
Other comprehensive income	$	15,844	$	4,125	$	11,719

The following table presents the changes in each component of AOCI, net of tax, for the years ended December 31, 2022, 2021 and 2020:

(Dollars in thousands)	Investment Securities		Derivatives		Defined Benefit Plans		AOCI
Year ended December 31, 2022
Balance at beginning of period	$	(3,666)	$	—	$	(4,294)	$	(7,960)
Other comprehensive (loss) income before reclassifications	(150,141)		4,645		1,470		(144,026)
Amounts reclassified from AOCI	4,698		—		3,304		8,002
Net other comprehensive income (loss)	(145,443)		4,645		4,774		(136,024)
Balance at end of period	$	(149,109)	$	4,645	$	480	$	(143,984)

(Dollars in thousands)	Investment Securities		Defined Benefit Plans		AOCI
Year ended December 31, 2021
Balance at beginning of period	$	26,651	$	(6,523)	$	20,128
Other comprehensive (loss) income before reclassifications	(30,207)		1,470		(28,737)
Amounts reclassified from AOCI	(110)		759		649
Net other comprehensive income (loss)	(30,317)		2,229		(28,088)
Balance at end of period	$	(3,666)	$	(4,294)	$	(7,960)

(Dollars in thousands)	Investment Securities		Defined Benefit Plans		AOCI
Year ended December 31, 2020
Balance at beginning of period	$	14,825	$	(6,416)	$	8,409
Other comprehensive income (loss) before reclassifications	11,679		(980)		10,699
Amounts reclassified from AOCI	147		873		1,020
Total other comprehensive income (loss)	11,826		(107)		11,719
Balance at end of period	$	26,651	$	(6,523)	$	20,128

The following table presents the amounts reclassified out of each component of AOCI for the years ended December 31, 2022, 2021 and 2020:

	Amount Reclassified from AOCI						Affected Line Item in the
	Year ended December 31,						Statement Where Net
Details about AOCI Components	2022		2021		2020		Income is Presented
	(Dollars in thousands)
Sale of available-for-sale investment securities:
Realized gains (losses) on available-for-sale investment securities	$	—	$	150	$	(201)	Net gains (losses) on sales of investment securities
Tax effect	—		(40)		54		Income tax benefit (expense)
Net of tax	$	—	$	110	$	(147)
Amortization of unrealized losses on investment securities transferred to HTM	$	(6,218)	$	—	$	—	Interest and dividends on investment securities
Tax effect	1,520		—		—		Income tax expense
Net of tax	$	(4,698)	$	—	$	—
Defined benefit plan items:
Amortization of net actuarial losses	$	(304)	$	(1,036)	$	(1,160)	Other operating expense - other (1)
Amortization of net transition obligation	(18)		(18)		(18)		Other operating expense - other (1)
Amortization of prior service cost	—		—		(14)		Other operating expense - other (1)
Settlement	(4,884)		—		—		Other operating expense - other (1)
Total before tax	(5,206)		(1,054)		(1,192)
Tax effect	1,902		295		319		Income tax expense
Net of tax	$	(3,304)	$	(759)	$	(873)
Total reclassifications, net of tax	$	(8,002)	$	(649)	$	(1,020)

(1)These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 16 - Pension Plans for additional details).

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EARNINGS PER SHARE

12 Months Ended

Dec. 31, 2022

Earnings Per Share [Abstract]

EARNINGS PER SHARE

21. EARNINGS PER SHARE

The table below presents the information used to compute basic and diluted earnings per share for the years ended December 31, 2022, 2021 and 2020:

	Year Ended December 31,
(In thousands, except per share data)	2022		2021		2020
Net income	$	73,928	$	79,894	$	37,273
Weighted-average shares outstanding for basic earnings per share	27,398,445		28,003,744		28,074,543
Add: Dilutive effect of employee stock options and awards	169,335		253,579		106,033
Weighted-average shares outstanding for diluted earnings per share	27,567,780		28,257,323		28,180,576
Basic earnings per share	$	2.70	$	2.85	$	1.33
Diluted earnings per share	$	2.68	$	2.83	$	1.32

There were no potentially anti-dilutive securities that have been excluded from the dilutive share calculation for the years ended December 31, 2022, 2021, and 2020.

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CONTINGENT LIABILITIES AND OTHER COMMITMENTS

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

CONTINGENT LIABILITIES AND OTHER COMMITMENTS

22. CONTINGENT LIABILITIES AND OTHER COMMITMENTS

The Company and its subsidiaries are involved in legal actions arising in the ordinary course of business. Management, after consultation with legal counsel, believes the ultimate disposition of those matters will not have a material adverse effect on our consolidated financial statements.

In the normal course of business there are outstanding contingent liabilities and other commitments such as unused letters of credit and items held for collections, which are not reflected in the accompanying consolidated financial statements. Management does not anticipate any material losses as a result of these transactions.

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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

12 Months Ended

Dec. 31, 2022

Investments, All Other Investments [Abstract]

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

23. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees written, forward foreign exchange contracts, interest rate contracts, risk participation agreements, and back-to-back swap agreements. Those instruments involve, to varying degrees, elements of credit, interest rate and foreign exchange risk in excess of the amounts recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

Exposure to credit loss in the event of nonperformance by the counter-party to the financial instrument for commitments to extend credit and standby letters of credit and financial guarantees written is represented by the contractual amount of those instruments. For forward foreign exchange contracts and interest rate contracts, the contract amounts do not represent exposure to credit loss. The Company controls the credit risk of these contracts through credit approvals, limits and monitoring procedures. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation of the counter-party. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Standby letters of credit and financial guarantees written are conditional commitments issued by us to guarantee the performance of a customer to a third-party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company holds collateral for those commitments in which collateral is deemed necessary.

Interest rate options issued on residential mortgage loans expose us to interest rate risk, which is economically hedged with forward interest rate contracts. These derivatives are carried at fair value with changes in fair value recorded as a component of mortgage banking income in other operating income in the consolidated statements of income. The amount of interest rate options fluctuates based on residential mortgage volume.

Forward interest rate contracts represent commitments to purchase or sell loans at a future date at a specified price. The Company enters into forward interest rate contracts on our residential mortgage held for sale loans. These derivatives are carried at fair value with changes in fair value recorded as a component of mortgage banking income in other operating income in the consolidated statements of income. Risks arise from the possible inability of counter-parties to meet the terms of their contracts and from movements in market rates. Management reviews and approves the creditworthiness of the counter-parties to its forward interest rate contracts.

Risk participation agreements represent agreements with a financial institution counterparty for interest rate swaps related to loans in which we participate. These derivatives are carried at fair value with changes in fair value recorded as a component of other service charges and fees. The risk participation agreements entered into by us as a participant bank provide credit protection to the financial institution counterparty should the borrowers fail to perform on their interest rate derivative contracts with that financial institution.

The Company established a program whereby it originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer. The Company also enters into an equal and offsetting swap with a highly rated third-party financial

institution. These "back-to-back swap agreements" are intended to offset each other and allows the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. These back-to-back swap agreements are free-standing derivatives and are recorded at fair value on the Company's consolidated balance sheet in other assets or other liabilities, and changes to the fair value recorded in other service charges and fees on the consolidated statement of income.

Forward foreign exchange contracts represent commitments to purchase or sell foreign currencies at a future date at a specified price. These derivatives are carried at fair value with changes in fair value recorded as a component of other operating income in the consolidated statements of income. Risks arise from the possible inability of counter-parties to meet the terms of their contracts and from movements in foreign currency exchange rates. Management reviews and approves the creditworthiness of its forward foreign exchange counter-parties. At December 31, 2022 and 2021, the Company did not have any forward foreign exchange contracts.

During the first quarter of 2022, the Company entered into a forward starting interest rate swap, with an effective date of March 31, 2024. This transaction had a notional amount totaling $115.5 million as of December 31, 2022, and was designated as a fair value hedge of certain municipal debt securities. The Company will pay the counterparty a fixed rate of 2.095% and will receive a floating rate based on the Federal Funds effective rate. The fair value hedge has a maturity date of March 31, 2029. The interest rate swap is carried on the Company’s consolidated balance sheet at its fair value in other assets (when the fair value is positive) or in other liabilities (when the fair value is negative). The changes in the fair value of the interest rate swap are recorded in interest income. The unrealized gains or losses due to changes in fair value of the hedged debt securities due to changes in benchmark interest rates are recorded as an adjustment to the hedged debt securities and offset in the same interest income line item.

At December 31, 2022 and 2021, financial instruments with off-balance sheet risk were as follows:

	December 31,
(Dollars in thousands)	2022		2021
Notional amount of:
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	1,328,791	$	1,266,596
Standby letters of credit and financial guarantees written	5,367		6,634
Notional amount of:
Financial instruments whose contract amounts exceed the amount of credit risk:
Back-to-back swap agreements:
Assets	32,335		33,112
Liabilities	32,335		33,112
Forward interest rate contracts	1,110		3,525
Risk participation agreements	36,835		37,531
Interest rate swap agreements	115,545		—

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FAIR VALUE OF ASSETS AND LIABILITIES

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

FAIR VALUE OF ASSETS AND LIABILITIES

24. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Disclosures about Fair Value of Financial Instruments

Fair value estimates, methods and assumptions are set forth below for our financial instruments.

Short-Term Financial Instruments

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

Investment Securities

The fair value of investment securities is based on market price quotations received from third-party pricing services. The third-party pricing services utilize pricing models supported with timely market data information. Where quoted market prices are not available, fair values are based on quoted market prices of comparable securities.

Loans

Fair values of loans are estimated based on discounted cash flows of portfolios of loans with similar financial characteristics including the type of loan, interest terms and repayment history. Fair values are calculated by discounting scheduled cash flows through estimated maturities using estimated market discount rates. Estimated market discount rates are reflective of credit and interest rate risks inherent in the Company’s various loan types and are derived from available market information, as well as specific borrower information. The weighted-average discount rate used in the valuation of loans was 7.44% as of December 31, 2022. In accordance with ASU 2016-01, the fair value of loans are based on the notion of exit price as of December 31, 2022 and 2021.

Loans Held for Sale

The fair value of loans classified as held for sale are generally based upon quoted prices for similar assets in active markets, acceptance of firm offer letters with agreed upon purchase prices, discounted cash flow models that take into account market observable assumptions, or independent appraisals of the underlying collateral securing the loans. The fair values of Hawaii and U.S. Mainland construction and commercial real estate loans, if any, are reported net of applicable selling costs on the Company's consolidated balance sheets.

Deposit Liabilities

The fair values of deposits with no stated maturity, such as noninterest-bearing demand deposits and interest-bearing demand and savings accounts, are equal to the amount payable on demand. The fair value of time deposits is estimated using discounted cash flow analyses. The fair value of time deposits is estimated by discounting future cash flows using rates currently offered for FHLB advances of similar remaining maturities. The weighted-average discount rate used in the valuation of time deposits was 4.96% as of December 31, 2022.

Long-Term Debt

The fair value of our long-term debt is estimated by discounting scheduled cash flows over the contractual borrowing period at the estimated market rate for similar borrowing arrangements. The weighted-average discount rate used in the valuation of long-term debt was 7.28% as of December 31, 2022.

Derivatives

The fair values of derivative financial instruments are based upon current market values, if available. If there are no relevant comparables, fair values are based on pricing models using current assumptions for interest rate swaps and options.

Off-Balance Sheet Financial Instruments

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

Limitations

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

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of future business and the value of assets and liabilities that are not considered financial instruments. For example, significant assets and liabilities that are not considered financial assets or liabilities include deferred tax assets and liabilities and premises and equipment.

					Fair Value Measurement Using
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022
Financial assets:
Cash and due from financial institutions	$	97,150	$	97,150	$	97,150	$	—	$	—
Interest-bearing deposits in other financial institutions	14,894		14,894		14,894		—		—
Investment securities	1,336,677		1,268,574		—		1,261,306		7,268
Loans held for sale	1,105		1,105		—		1,105		—
Loans, net of ACL	5,491,728		5,043,436		—		—		5,043,436
Accrued interest receivable	20,345		20,345		20,345		—		—
Financial liabilities:
Deposits:
Noninterest-bearing deposits	2,092,823		2,092,823		2,092,823		—		—
Interest-bearing demand and savings deposits	3,652,195		3,652,195		3,652,195		—		—
Time deposits	991,205		975,086		—		—		975,086
FHLB advances and other short-term borrowings	5,000		5,000		—		5,000		—
Long-term debt	105,859		93,729		—		—		93,729
Accrued interest payable (included in other liabilities)	4,739		4,739		4,739		—		—

							Fair Value Measurement Using
(Dollars in thousands)	Notional Amount		Carrying Amount		Estimated Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022
Off-balance sheet financial instruments:
Commitments to extend credit	$	1,328,791	$	—	$	1,270	$	—	$	1,270	$	—
Standby letters of credit and financial guarantees written	5,367		—		80		—		80		—
Derivatives:
Back-to-back swap agreements:
Assets	32,335		4,611		4,611		—		—		4,611
Liabilities	(32,335)		(4,611)		(4,611)		—		—		(4,611)
Forward sale commitments	1,110		8		8		—		8		—
Risk participation agreements	36,835		—		—		—		—		—
Interest rate swap agreements	115,545		5,986		5,986		—		—		5,986

					Fair Value Measurement Using
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2021
Financial assets:
Cash and due from financial institutions	$	81,506	$	81,506	$	81,506	$	—	$	—
Interest-bearing deposits in other financial institutions	247,401		247,401		247,401		—		—
Investment securities	1,631,699		1,631,699		—		1,623,080		8,619
Loans held for sale	3,531		3,531		—		3,531		—
Loans, net of ACL	5,033,552		4,741,379		—		—		4,741,379
Accrued interest receivable	16,709		16,709		16,709		—		—
Financial liabilities:
Deposits:
Noninterest-bearing deposits	2,291,246		2,291,246		2,291,246		—		—
Interest-bearing demand and savings deposits	3,641,180		3,641,180		3,641,180		—		—
Time deposits	706,732		704,645		—		—		704,645
Long-term debt	105,616		94,558		—		—		94,558
Accrued interest payable (included in other liabilities)	1,122		1,122		1,122		—		—

							Fair Value Measurement Using
(Dollars in thousands)	Notional Amount		Carrying Amount		Estimated Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2021
Off-balance sheet financial instruments:
Commitments to extend credit	$	1,266,596	$	—	$	1,347	$	—	$	1,347	$	—
Standby letters of credit and financial guarantees written	6,634		—		100		—		100		—
Derivatives:
Back-to-back swap agreements:
Assets	33,112		435		435		—		—		435
Liabilities	33,112		(435)		(435)		—		—		(435)
Forward sale commitments	3,525		1		1		—		1		—
Risk participation agreements	37,531		(16)		(16)		—		—		(16)

Fair Value Measurements

Financial assets and liabilities are grouped at fair value into three levels based on the markets in which the financial assets and liabilities are traded and the reliability of the assumptions used to determine fair value as follows:

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

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

•Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use

in pricing the asset or liability. Valuation techniques include use of discounted cash flow models and similar techniques that require the use of significant judgment or estimation.

Fair values are based on the price that the Company would expect to receive if an asset were sold or pay to transfer a liability in an orderly transaction between market participants at the measurement date. When developing fair value measurements, the use of observable inputs are maximized and the use of unobservable inputs are minimized.

Fair value measurements are used to record adjustments to certain financial assets and liabilities and to determine fair value disclosures. Available-for-sale investment securities and derivatives are recorded at fair value on a recurring basis. From time to time, the Company may be required to record other financial assets at fair value on a nonrecurring basis such as loans held for sale, impaired loans and mortgage servicing rights. These nonrecurring fair value adjustments typically involve application of the lower of cost or fair value accounting or write-downs of individual assets.

There were no transfers of financials assets and liabilities into and out of Level 3 of the fair value hierarchy during the year ended December 31, 2022.

The following table below presents the fair value of assets and liabilities measured on a recurring basis:

			Fair Value at Reporting Date Using
(Dollars in thousands)	Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022
Available-for-sale investment securities:
Debt securities:
States and political subdivisions	$	135,752	$	—	$	129,168	$	6,584
Corporate securities	30,211		—		30,211		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	25,715		—		25,715		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	423,803		—		423,803		—
Residential - Non-government sponsored entities ("Non-GSEs")	8,662		—		7,978		684
Commercial - U.S. GSEs and agencies	46,144		—		46,144		—
Commercial - Non-GSEs	1,507		—		1,507		—
Total investment securities	671,794		—		664,526		7,268
Derivatives:
Forward sale commitments	8		—		8		—
Interest rate swap agreements	5,986		—		—		5,986
Total derivatives	5,994		—		8		5,986
Total	$	677,788	$	—	$	664,534	$	13,254

			Fair Value at Reporting Date Using
(Dollars in thousands)	Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2021
Available-for-sale investment securities:
Debt securities:
States and political subdivisions	$	236,828	$	—	$	229,147	$	7,681
Corporate securities	40,646		—		40,646		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	35,334		—		35,334		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	1,198,816		—		1,198,816		—
Residential - Non-government sponsored entities ("Non-GSEs")	12,213		—		11,275		938
Commercial - U.S. GSEs and agencies	65,849		—		65,849		—
Commercial - Non-GSEs	42,013		—		42,013		—
Total investment securities	1,631,699		—		1,623,080		8,619
Derivatives:
Interest rate lock commitments	1		—		1		—
Forward sale commitments	(16)		—		—		(16)
Total derivatives	(15)		—		1		(16)
Total	$	1,631,684	$	—	$	1,623,081	$	8,603

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:

	Available-For-Sale Debt Securities:
(Dollars in thousands)	States and Political Subdivisions		Residential - Non-Government Agencies		Total
Balance as of December 31, 2020	$	11,337	$	989	$	12,326
Principal payments received	(2,841)		(22)		(2,863)
Unrealized net loss included in other comprehensive loss	(815)		(29)		(844)
Balance as of December 31, 2021	7,681		938		8,619
Principal payments received	(212)		(23)		(235)
Unrealized net loss included in other comprehensive loss	(885)		(231)		(1,116)
Balance as of December 31, 2022	$	6,584	$	684	$	7,268

Within the state and political subdivisions debt securities category, the Company holds two mortgage revenue bonds issued by the City and County of Honolulu with an aggregate fair value of $6.6 million and $7.7 million at December 31, 2022 and 2021, respectively. Within the residential non-government agency available-for-sale debt securities category, the Company holds two mortgage backed bonds issued by Habitat for Humanity with an aggregate fair value of $0.7 million and $0.9 million at December 31, 2022 and 2021, respectively. The Company estimates the aggregate fair value of $7.3 million by using a discounted cash flow model to calculate the present value of estimated future principal and interest payments.

The significant unobservable input used in the fair value measurement of the Company’s mortgage revenue bonds and Habitat for Humanity mortgage backed bonds is the weighted-average discount rate. As of December 31, 2022, the weighted-average discount rate utilized was 6.41%, which was derived by incorporating a credit spread over the FHLB Fixed-Rate Advance curve. Significant increases (decreases) in the weighted-average discount rate could result in a significantly lower (higher) fair value measurement.

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PARENT COMPANY AND REGULATORY RESTRICTIONS

12 Months Ended

Dec. 31, 2022

Condensed Financial Information Disclosure [Abstract]

PARENT COMPANY AND REGULATORY RESTRICTIONS

25. PARENT COMPANY AND REGULATORY RESTRICTIONS

The retained earnings of the parent company, Central Pacific Financial Corp., included $339.4 million of equity in undistributed losses of Central Pacific Bank as of December 31, 2022.

Central Pacific Bank, as a Hawaii state-chartered bank, may only pay dividends to the extent it has retained earnings as defined under Hawaii banking law ("Statutory Retained Earnings"), which differs from GAAP retained earnings. The bank had Statutory Retained Earnings of $145.7 million and $114.0 million as of December 31, 2022 and 2021, respectively. For further information, see Note 12 - Equity.

The Company and the bank are subject to various regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks ("Basel III rules") became effective for the Company on January 1, 2015, and were fully phased in on January 1, 2019. Under the Basel III rules, the Company must hold a "capital conservation buffer" above the adequately capitalized risk-based capital ratios. The capital conservation buffer was phased in at the rate of 0.625% per year from 0.625% in 2016 to 2.50% on January 1, 2019. The capital conservation buffer for 2019, 2018 and 2017 was 2.50%, 1.875% and 1.25%, respectively. The net unrealized gain or loss on investment securities is not included in computing regulatory capital. Management believes the Company and bank met all capital adequacy requirements to which they are subject as of December 31, 2022.

Prompt corrective action regulations provide five classifications: well-capitalized, adequately capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If under-capitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. The bank was categorized as "well-capitalized" and maintained the required capital conservation buffer under the regulatory framework for prompt corrective action as of December 31, 2022 and 2021. There are no conditions or events since then that management believes have changed the institution’s category.

The following table sets forth actual and required capital and capital ratios for the Company and the bank, as well as the minimum capital adequacy requirements applicable generally to all financial institutions as of the dates indicated.

	Actual				Minimum required for capital adequacy purposes				Minimum required to be well-capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio (1)		Amount		Ratio
Company
As of December 31, 2022
Tier 1 capital to avg. assets (leverage ratio)	$	642,302	8.5	%	$	301,053	4.0	%			N/A
Tier 1 capital to risk-weighted assets	642,302		11.3		340,151		6.0				N/A
Total capital to risk-weighted assets	764,283		13.5		453,535		8.0				N/A
Common equity tier 1 ("CET1") capital to risk-weighted assets	592,302		10.5		255,113		4.5				N/A
As of December 31, 2021
Tier 1 capital to avg. assets (leverage ratio)	622,130		8.5		293,382		4.0				N/A
Tier 1 capital to risk-weighted assets	622,130		12.2		307,215		6.0				N/A
Total capital to risk-weighted assets	741,291		14.5		409,620		8.0				N/A
CET1 capital to risk-weighted assets	572,130		11.2		230,411		4.5				N/A
Central Pacific Bank
As of December 31, 2022
Tier 1 capital to avg. assets (leverage ratio)	$	675,331	9.0	%	$	300,584	4.0	%	$	375,730	5.0	%
Tier 1 capital to risk-weighted assets	675,331		11.9		339,422		6.0		452,563		8.0
Total capital to risk-weighted assets	742,312		13.1		452,563		8.0		565,704		10.0
CET1 capital to risk-weighted assets	675,331		11.9		254,567		4.5		367,708		6.5
As of December 31, 2021
Tier 1 capital to avg. assets (leverage ratio)	652,987		8.9		292,877		4.0		366,096		5.0
Tier 1 capital to risk-weighted assets	652,987		12.8		306,497		6.0		408,663		8.0
Total capital to risk-weighted assets	717,000		14.0		408,663		8.0		510,828		10.0
CET1 capital to risk-weighted assets	652,987		12.8		229,873		4.5		332,038		6.5
(1) Under the Basel III Capital Rules, the Company and the bank must also maintain the required Capital Conservation Buffer ("CCB") to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. The CCB is calculated as a ratio of CET1 capital to risk-weighted assets, and effectively increases the required minimum risk-based capital ratios. The CCB requirement was phased in over a three-year period that began on January 1, 2016. The phase-in period ended on January 1, 2019, and the CCB is now at its fully phased-in level of 2.5%.

Condensed financial statements of the parent company are as follows:

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED BALANCE SHEETS

	December 31,
(Dollars in thousands)	2022		2021
Assets
Cash and cash equivalents	$	16,915	$	20,090
Investment in subsidiary bank	534,817		639,050
Other assets	14,442		12,029
Total assets	$	566,174	$	671,169
Liabilities and Equity
Long-term debt	$	105,859	$	105,616
Other liabilities	7,444		7,334
Total liabilities	113,303		112,950
Shareholders’ equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding none at December 31, 2022 and 2021	—		—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding 27,025,070 and 27,714,071 shares at December 31, 2022 and 2021, respectively	408,071		433,263
Additional paid-in capital	101,346		98,073
Retained earnings	87,438		34,843
Accumulated other comprehensive loss	(143,984)		(7,960)
Total shareholders’ equity	452,871		558,219
Total equity	452,871		558,219
Total liabilities and equity	$	566,174	$	671,169

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED STATEMENTS OF INCOME

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Income:
Dividends from subsidiary bank	$	47,427	$	54,016	$	24,015
Interest income:
Interest income from subsidiary bank	3		3		4
Other income	64		43		52
Total income	47,494		54,062		24,071
Expense:
Interest expense on long-term debt	4,930		4,097		2,095
Other expenses	2,317		3,504		1,293
Total expenses	7,247		7,601		3,388
Income before income taxes and equity in undistributed income of subsidiaries	40,247		46,461		20,683
Income tax expense (benefit)	(1,917)		(1,968)		(690)
Income before equity in undistributed income of subsidiaries	42,164		48,429		21,373
Equity in undistributed income of subsidiary bank	31,764		31,465		15,900
Net income	$	73,928	$	79,894	$	37,273

CENTRAL PACIFIC FINANCIAL CORP.

CONDENSED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Cash flows from operating activities:
Net income	$	73,928	$	79,894	$	37,273
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax expense (benefit)	(26)		70		2,552
Equity in undistributed income of subsidiary bank	(31,764)		(31,465)		(15,900)
Share-based compensation expense	3,273		3,231		3,231
Net change in other assets and liabilities	(20)		(85)		(3,010)
Net cash provided by operating activities	45,391		51,645		24,146
Cash flows from investing activities:
Contributions to subsidiary bank	—		—		(46,750)
Proceeds from sale of investment securities	—		1,653		—
Net cash provided by (used in) investing activities	—		1,653		(46,750)
Cash flows from financing activities:
Net proceeds from issuance of common stock and stock option exercises	679		1,236		—
Net proceeds from subordinated debt	—		—		53,838
Repurchases of common stock	(20,740)		(18,669)		(4,749)
Cash dividends paid on common stock	(28,505)		(26,959)		(25,935)
Net cash (used in) provided by financing activities	(48,566)		(44,392)		23,154
Net (decrease) increase in cash and cash equivalents	(3,175)		8,906		550
Cash and cash equivalents at beginning of year	20,090		11,184		10,634
Cash and cash equivalents at end of year	$	16,915	$	20,090	$	11,184

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2022

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

26. SUBSEQUENT EVENTS

In January 2023, the Board of Directors authorized the repurchase of up to $25.0 million of its common stock from time to time in the open market or in privately negotiated transactions, pursuant to a newly authorized share repurchase program. The share repurchase program replaced and superseded in its entirety the 2022 Repurchase Plan. The 2022 Repurchase Plan had $10.3 million in remaining repurchase authority as of December 31, 2022.

In accordance with the Inflation Reduction Act of 2022, beginning January 1, 2023, an excise tax of 1% on the aggregate fair value of stock repurchased less the fair value of stock issued will be imposed if repurchases of stock exceed $1 million over the course of the year.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Operating Segments

Operating Segments

Operations, resource allocation and financial performance are managed by the Company's Executive Committee, or its chief operating decision maker ("CODM"), on a Company-wide basis. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable segment.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

In January 2020, the bank acquired a 50% ownership interest in a mortgage loan origination and brokerage company, Oahu HomeLoans, LLC. The bank concluded that the investment meets the consolidation requirements under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810, "Consolidation." The bank also concluded that the entity meets the definition of a variable interest entity and that we are the primary beneficiary of the variable interest entity. Accordingly, the investment has been consolidated into the Company's financial statements. In March 2022, Oahu HomeLoans, LLC was terminated.

The bank has 50% ownership interests in three other mortgage loan origination and brokerage companies which are accounted for using the equity method and are included in investment in unconsolidated entities in the Company's consolidated balance sheets: Gentry HomeLoans, LLC, Haseko HomeLoans, LLC and Island Pacific HomeLoans, LLC.

The bank has low income housing tax credit partnership investments that are accounted for under the proportional amortization method and are included in investment in unconsolidated entities in the Company's consolidated balance sheets.

During the first quarter of 2022, the Company invested $2.0 million in Swell Financial, Inc. ("Swell"), which included $1.5 million in other intangible assets and services provided in exchange for Swell non-voting common stock and $0.5 million in cash in exchange for Swell preferred stock. During the fourth quarter of 2022, Swell launched a consumer banking application that combines checking, credit and more into one integrated account, with Central Pacific Bank serving as the bank sponsor. Swell began with an alpha pilot, where members off its waitlist were invited to sign up for Swell Cash and Credit. During the fourth quarter of 2022, Elevate announced that it had entered into a definitive agreement to be acquired by Park Cities Asset Management, LLC, who is also the largest investor in Swell. The Company does not have the ability to exercise

significant influence over Swell and the investment does not have a readily determinable fair value. As a result, the Company determined that the cost method of accounting for the investment was appropriate. The investment is included in investments in unconsolidated entities in the Company's consolidated balance sheets.

In 2021, the Company committed $2.0 million to the JAM FINTOP Banktech Fund, L.P., an investment fund designed to help develop and accelerate technology adoption at community banks across the United States. The Company does not have the ability to exercise significant influence over the JAM FINTOP Banktech Fund, L.P. and the investment does not have a readily determinable fair value. As a result, the Company determined that the cost method of accounting for the investment was appropriate. The investment is included in investment in unconsolidated entities in the Company's consolidated balance sheets.

The Company also has other non-controlling equity investments in affiliates that are accounted for under the cost method and are included in investment in unconsolidated entities in the Company's consolidated balance sheets.

Investments in unconsolidated entities accounted for under the equity, proportional amortization and cost methods were $0.1 million, $40.9 million and $5.6 million, respectively, at December 31, 2022 and $0.2 million, $25.9 million and $3.6 million, respectively, at December 31, 2021. Our policy for determining impairment of these investments includes an evaluation of whether a loss in value of an investment is other than temporary. Evidence of a loss in value includes absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain an earnings capacity which would justify the carrying amount of the investment. Impairment tests are performed whenever indicators of impairment are present. If the value of an investment declines and it is considered other than temporary, the investment is written down to its respective fair value in the period in which this determination is made.

The Company sponsors the Central Pacific Bank Foundation, which is not consolidated in the Company's financial statements.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions that reflect the reported amounts of assets and liabilities and disclosures of contingent assets and contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance and provision for credit losses, reserve for credit losses on off-balance sheet credit exposures, deferred income tax assets and income tax expense, valuation of investment securities, mortgage servicing rights and the related amortization thereon, the liability related to the Supplemental Executive Retirement Plans, and the fair value of certain financial instruments.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from financial institutions, interest-bearing deposits in other financial institutions, federal funds sold and all highly liquid investments with maturities of three months or less at the time of purchase. Net cash flows are reported for customer loan and deposit transactions, interest-bearing deposits in other financial institutions, and federal funds purchased and repurchase agreements.

Investment Securities

Investment Securities

Investments in debt securities are designated as trading, available-for-sale ("AFS"), or held-to-maturity ("HTM"). Investments in debt securities are designated as HTM only if we have the positive intent and ability to hold these securities to maturity. HTM securities are reported at amortized cost in the consolidated balance sheets. Trading securities are reported at fair value, with changes in fair value included in net income. Debt securities not classified as HTM or trading are classified as AFS and are reported at fair value, with net unrealized gains and losses, net of applicable taxes, excluded from net income and included in accumulated other comprehensive income (loss) ("AOCI").

Transfers of investment securities from AFS to HTM are accounted for at fair value as of the date of the transfer. The difference between the fair value and the par value at the date of transfer is considered a premium or discount and is accounted for accordingly. Any unrealized gain or loss at the date of the transfer is reported in AOCI, and is amortized over the remaining life of the security as an adjustment of yield in a manner consistent with the amortization of any premium or discount, and will offset or mitigate the effect on interest income of the amortization of the premium or discount for that HTM security.

Equity securities with readily determinable fair values are carried at fair value, with changes in fair value included in net income. Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.

The Company classifies its investment securities portfolio into the following major security types: mortgage-backed securities ("MBS"), other debt securities and equity securities. The Company’s MBS portfolio is comprised primarily of residential MBS issued by United States of America ("U.S.") government entities and agencies. These securities are either explicitly or implicitly guaranteed by an agency of the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The remainder of the MBS portfolio are commercial MBS issued by U.S government entities and agencies (for which there is no minimum credit rating), non-agency residential MBS (which shall meet a minimum credit rating of AAA) and non-agency commercial MBS (which shall meet a minimum credit rating of BBB and meet minimum internal credit guidelines).

The Company’s other debt securities portfolio is comprised of obligations issued by U.S. government entities and agencies, obligations issued by states and political subdivisions (which shall meet a minimum credit rating of BBB), and corporate bonds (which shall meet a minimum credit rating of BBB-).

Interest income on investment securities includes amortization of premiums and accretion of discounts. We amortize premiums to the earliest call date. We accrete discounts associated with investment securities using the effective interest method over the life of the respective security instrument. Gains and losses on the sale of investment securities are recorded on the trade date and determined using the specific identification method.

A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. Interest accrued but not received for a security placed on non-accrual status is reversed against current period interest income. There were no investment securities on nonaccrual status as of December 31, 2022 and the Company did not reverse any accrued interest against interest income during the year ended December 31, 2022.

Allowance for Credit Losses (“ACL”) for AFS Debt Securities

AFS debt securities in an unrealized loss position are evaluated for impairment at least quarterly. For AFS debt securities in an unrealized loss position, the Company first assesses whether or not it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the investment security’s amortized cost basis is written down to fair value through net income.

For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In conducting this assessment for debt securities in an unrealized loss position, management evaluates the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the investment security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any unrealized loss that has not been recorded through an ACL is recognized in AOCI.

Changes in the ACL are recorded as a provision (credit) for credit losses. Losses are charged against the ACL when management believes the uncollectibility of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

As of December 31, 2022, the declines in market values of our AFS debt securities were primarily attributable to changes in interest rates and volatility in the financial markets. Because we have no intent to sell securities in an unrealized loss position and it is not more likely than not that we will be required to sell such securities before recovery of its amortized cost basis, we do not believe a credit loss exists and an ACL was not recorded.

The Company has made a policy election to exclude accrued interest receivable from the amortized cost basis of debt securities and report accrued interest receivable together with accrued interest on loans in the consolidated balance sheets. Accrued interest receivable on AFS debt securities totaled $3.1 million and $4.6 million as of December 31, 2022 and 2021, respectively. Accrued interest receivable on AFS debt securities is excluded from the estimate of credit losses.

ACL for HTM Debt Securities

Management measures expected credit losses on HTM debt securities on a collective basis by major security type. For pools of such securities with common risk characteristics, the historical lifetime probability of default and severity of loss in the event of default is derived or obtained from external sources. Expected credit losses for these securities are estimated using a loss rate methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

Expected credit loss on each security in the HTM portfolio that do not share common risk characteristics with any of the pools of debt securities is individually measured based on net realizable value, or the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the recorded amortized cost basis of the security.

Securities in the HTM portfolio are issued by or contain collateral issued by U.S. government sponsored enterprises ("GSEs") and carry implicit guarantees from the U.S. government. Due to the implicit guarantee and the long history of no credit losses, no allowance for credit losses was recorded for these securities.

Accrued interest on HTM debt securities is reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses.

Accrued interest receivable on HTM debt securities totaled $1.3 million as of December 31, 2022. The Company did not have any HTM debt securities or accrued interest receivable on HTM debt securities as of December 31, 2021.

Loans Held for Sale

Loans Held for Sale

Loans held for sale consists of the following two types: (1) Hawaii residential mortgage loans that are originated with the intent to sell them in the secondary market and (2) non-residential mortgage loans in both Hawaii and the U.S. Mainland that were originated with the intent to be held in our portfolio but were subsequently transferred to the held for sale category. Hawaii residential mortgage loans classified as held for sale are carried at the lower of cost or fair value on an aggregate basis, while the non-residential Hawaii and U.S. Mainland loans are recorded at the lower of cost or fair value on an individual basis. Net fees and costs associated with originating and acquiring the Hawaii residential mortgage loans held for sale are deferred and included in the basis for determining the gain or loss on sales of loans held for sale. We report the fair values of the non-residential mortgage loans classified as held for sale net of applicable selling costs on our consolidated balance sheets.

Loans originated with the intent to be held in our portfolio are subsequently transferred to held for sale when our intent to hold for the foreseeable future has changed. At the time of a loan's transfer to the held for sale account, the loan is recorded at the lower of cost or fair value. Any reduction in the loan's value is reflected as a write-down of the recorded investment resulting in a new cost basis, with a corresponding reduction in the allowance for credit losses.

In subsequent periods, if the fair value of a loan classified as held for sale is less than its cost basis, a valuation adjustment is recognized in our consolidated statement of income in other operating expense and the carrying value of the loan is adjusted accordingly. The valuation adjustment may be recovered in the event that the fair value increases, which is also recognized in our consolidated statement of income in other operating expense.

The fair value of loans classified as held for sale are generally based upon quoted prices for similar assets in active markets, acceptance of firm offer letters with agreed upon purchase prices, discounted cash flow models that take into account market observable assumptions, or independent appraisals of the underlying collateral securing the loans. Collateral values are determined based on appraisals received from qualified valuation professionals and are obtained periodically or when indicators that property values may be impaired are present.

We sell residential mortgage loans under industry standard contractual provisions that include various representations and warranties, which typically cover ownership of the loan, compliance with loan criteria set forth in the applicable agreement, validity of the lien securing the loan, and other similar matters. We may be required to repurchase certain loans sold with identified defects, indemnify the investor, or reimburse the investor for any credit losses incurred. Our repurchase risk generally relates to early payment defaults and borrower fraud. We establish residential mortgage repurchase reserves to reflect this risk based on our estimate of losses after considering a combination of factors, including our estimate of future repurchase activity and our projection of estimated credit losses resulting from repurchased loans.

Loans

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost, net of the ACL. Amortized cost is the unpaid principal amount outstanding, net of unamortized purchase premiums and discounts, unamortized deferred loan origination fees and costs and cumulative principal charge-offs. Purchase premiums and discounts are generally amortized into interest income over the contractual terms of the underlying loans using the effective interest method. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income over the life of the related loan as an adjustment to yield and are amortized using the interest method over the contractual term of the loan, adjusted for actual prepayments. Deferred loan fees and costs on loans paid in full are recognized as a component of interest income on loans.

Interest income on loans is accrued at the contractual rate of interest on the unpaid principal balance. Accrued interest receivable on loans totaled $16.0 million and $12.1 million at December 31, 2022 and 2021, respectively, and is reported together with accrued interest on AFS debt securities on the consolidated balance sheets. Upon adoption of Accounting Standards Update ("ASU") 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” the Company made the accounting policy election to not measure an estimate of credit losses on accrued interest receivable as the Company writes off any uncollectible accrued interest receivable in a timely manner.

Nonaccrual Loans

The Company determines delinquency status by considering the number of days full payments required by the contractual terms of the loan are past due. Commercial, scored small business, automobile and other consumer loans are generally placed on nonaccrual status when principal and/or interest payments are 90 days past due, or earlier should management determine that the borrowers will be unable to meet contractual principal and/or interest obligations, unless the loans are well-secured and in the process of collection. Residential mortgage and home equity loans, are generally placed on nonaccrual status when principal and/or interest payments are 120 days past due, or earlier should management determine that the borrowers will be unable to meet contractual principal and/or interest obligations, unless the loans are well-secured and in the process of collection. When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income should management determine that the collectability of such accrued interest is doubtful. All subsequent receipts are applied to principal outstanding and no interest income is recognized unless the financial condition and payment record of the borrowers warrant such recognition and the loan is restored to accrual status. A nonaccrual loan may be restored to an accrual basis when principal and interest payments are current for a predetermined period, normally at least six months, and full payment of principal and interest is reasonably assured.

Troubled Debt Restructuring (“TDR”)

A loan is accounted for and reported as a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) the Company grants a concession to the borrower experiencing financial difficulty that it would not otherwise consider for a borrower or transaction with similar credit risk characteristics. A restructuring that results in only an insignificant delay in payment is not considered a concession. A delay may be considered insignificant if the payments subject to the delay are insignificant relative to the unpaid principal or collateral value and the contractual amount due, or the delay in timing of the restructured payment period is insignificant relative to the frequency of payments, the debt’s original contractual maturity or original expected duration.

TDRs that are performing and on accrual status as of the date of the modification remain on accrual status. TDRs that are nonperforming as of the date of modification generally remain as nonaccrual until the prospect of future payments in accordance with the modified loan agreement is reasonably assured, generally demonstrated when the borrower maintains compliance with the restructured terms for a predetermined period, normally at least six months. TDRs with temporary below-market concessions remain designated as a TDR regardless of the accrual or performance status until the loan is paid off.

Expected credit losses are estimated on a collective (pool) basis when they share similar risk characteristics. If a TDR financial asset shares similar risk characteristics with other financial assets, it is evaluated with those other financial assets on a collective basis. If it does not share similar risk characteristics with other financial assets, it is evaluated individually. The Company’s ACL reflects all effects of a TDR when an individual asset is specifically identified as a reasonably expected TDR. The Company has determined that a TDR is reasonably expected no later than the point when the lender concludes that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession from the lender to avoid a default. Reasonably expected TDRs and executed TDRs are evaluated to determine the required ACL using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the ACL is determined by discounting the expected future cash flows at the original interest rate of the loan.

Based on the underlying risk characteristics, TDRs performing in accordance with their modified contractual terms may be collectively evaluated.

ACL for Loans

ACL for Loans

Under the current expected credit loss methodology, the ACL for loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Our policy is to charge off a loan in the period in which the loan is deemed to be uncollectible and all interest previously accrued but not collected is reversed against current period interest income. We consider a loan to be uncollectible when it is probable that a loss has been incurred and the Company can make a reasonable estimate of the loss. In these instances, the likelihood of and/or timeframe for recovery of the amount due is uncertain, weak, or protracted. Subsequent receipts, if any, are credited first to the remaining principal, then to the ACL for loans as recoveries, and finally to unaccrued interest.

The ACL for loans represents management's estimate of all expected credit losses over the expected life of our existing loan portfolio. Management estimates the ACL balance using relevant available information about the collectability of cash flows, from internal and external sources, including historical information relating to past events, current conditions, and reasonable and supportable forecasts of future economic conditions. When the Company is unable to forecast future economic events, management may revert to historical information.

The Company's methodologies incorporate a reasonable and supportable forecast period of one year and revert to historical loss information on a straight-line basis over one year when its forecast is no longer deemed reasonable and supportable.

The Company maintains an ACL at an appropriate level as of a given balance sheet date to absorb management’s best estimate of expected life of loan credit losses.

Historical credit loss experience provides the basis for the Company’s expected credit loss estimate. Adjustments to historical loss information may be made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or when historical asset terms do not reflect the contractual terms of the financial assets being evaluated.

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

The Company uses the Moody’s Analytics Baseline forecast for its economic forecast consideration. The Moody’s Analytics Baseline forecast includes both National and Hawaii specific economic indicators. The Moody’s Analytics forecast service is widely used in the industry and is reasonable and supportable. It is updated at least monthly and includes a variety of upside and downside economic scenarios from the Baseline. Generally the Company will use the most recent Baseline forecast from Moody’s as of the balance sheet date. During times of economic and market volatility or instability, the Company may include a qualitative factor for forecast imprecision that factors in other potential economic scenarios available by Moody’s Analytics or may apply overrides to its statistical models to enhance the reasonableness of its loss estimates.

The ACL is measured on a collective or pool basis when similar risk characteristics exist. The Company segments its portfolio generally by Federal Financial Institutions Examination Council ("FFIEC") Call Report codes. Loan pools are further segmented by risk utilizing risk ratings or bands of payment delinquency (including TDR or non-accrual status), depending on what is most appropriate for each segment. Additional sub-segmentation may be utilized to identify groups of loans with unique risk characteristics relative to the rest of the portfolio.

The Company relies on a third-party platform which offers multiple methodologies to measure historical life-of-loan losses. The Company has also developed statistical models internally to incorporate future economic conditions and forecast expected credit losses based on various macro-economic indicators such as unemployment and income levels.

The Company has identified the following portfolio segments to measure the allowance for credit losses. For all segments the economic forecast length is one year and reversion method is one year.

Loan Segment	Historical Lifetime Loss Method	Historical Lookback Period	Economic Forecast Length	Reversion Method
Construction	Probability of Default/Loss Given Default ("PD/LGD")	2008-Present	One Year	One Year (straight-line basis)
Commercial real estate	PD/LGD	2008-Present
Multi-family mortgage	PD/LGD	2008-Present
Commercial, financial and agricultural	PD/LGD	2008-Present
Home equity lines of credit	Loss-Rate Migration	2008-Present
Residential mortgage	Loss-Rate Migration	2008-Present
Consumer - other revolving	Loss-Rate Migration	2008-Present
Consumer - non-revolving	Loss-Rate Migration	2008-Present
Purchased Mainland portfolios (Dealer, Other consumer)	Weighted-Average Remaining Maturity ("WARM")	2008-Present

Below is a description and the risk characteristics of each segment:

Construction loans

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

Commercial real estate loans

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

Multi-family mortgage loans

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

Commercial, financial and agricultural loans

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

Paycheck Protection Program ("PPP") loans are also in this category and are considered lower risk as they are guaranteed by the Small Business Administration ("SBA") and may be forgivable in whole or in part in accordance with the requirements of the PPP.

Residential mortgage loans

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

Home equity lines of credit

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

Consumer loans - other revolving

This segment consists of consumer unsecured lines of credit. Its predominant risk characteristics relate to current and projected economic conditions as well as employment and income levels attributed to the borrower.

Consumer loans - non-revolving

This segment consists of consumer non-revolving loans, including dealer loans. Its predominant risk characteristics relate to current and projected economic conditions as well as employment and income levels attributed to the borrower.

Purchased consumer portfolios

Credit risk for purchased consumer loans is managed on a pooled basis. The predominant risk characteristics of purchased consumer loans include current and projected economic conditions, employment and income levels, and the quality of purchased consumer loans.

Below is a description of the methodologies mentioned above:

Probability of Default ("PD")/Loss Given Default ("LGD")

The PD/LGD calculation is based on a cohort methodology whereby loans in the same cohort are tracked over time to identify defaults and corresponding losses. PD/LGD analysis requires a portfolio segmented into pools, and we elected to then further sub-segment by risk characteristics such as Risk Rating, TDR status and nonaccrual status to measure losses accurately. PD measures the count or dollar amount of loans that defaulted in a given cohort. LGD measures the losses related to the loans that defaulted. Total loss rate is calculated using the formula, "PD times LGD".

Loss-Rate Migration

Loss-rate migration analysis is a cohort-based approach that measures cumulative net charge-offs over a defined time-horizon to calculate a loss rate that will be applied to the loan pool. Loss-rate migration analysis requires the portfolio to be segmented into pools then further sub-segmented by risk characteristics such as days past due, delinquency counters, TDR status and nonaccrual status to measure loss rates accurately. The key inputs to run a loss-rate migration analysis are the length and frequency of the migration period, the dates for the migration periods to start and the number of migration periods used for the analysis. For each migration period, the analysis will determine the outstanding balance in each segment and/or sub-segment at the start of each period. These loans will then be followed for the length of the migration period to identify the amount of associated charge-offs and recoveries. A loss rate for each migration period is calculated using the formula, "net charge-offs over the period divided by beginning loan balance".

Weighted-Average Remaining Maturity ("WARM")

Under the WARM methodology, lifetime losses are calculated by determining the remaining life of the loan pool and then applying a loss rate which includes a forecast component over this remaining life. The methodology considers historical loss experience as well as a loss forecast expectation to estimate credit losses for the remaining balance of the loan pool. The calculated loss rate is applied to the contractual term (adjusted for prepayments) to determine the loan pool’s current expected credit losses.

Other

If a loan ceases to share similar risk characteristics with other loans in its segment, it will be moved to a different pool sharing similar risk characteristics. Loans that do not share risk characteristics are evaluated on an individual basis based on the fair value of the collateral or other approaches such as discounted cash flow (“DCF”) techniques. Loans evaluated individually are not included in the collective evaluation.

Determining the TermExpected credit losses represent life-of-loan loss estimates and are calculated based on the estimated remaining life of the loans which considers the contractual term of the loans, prepayments and other assumptions. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company. If such renewal options or extensions are present, these options are evaluated in determining the contractual term

Reserve for Off-Balance Sheet Credit Exposure

Reserve for Off-Balance Sheet Credit Exposures

The Company maintains a separate and distinct reserve for off-balance-sheet credit exposures which is included in other liabilities in the Company’s consolidated balance sheets. The Company estimates the amount of expected losses by calculating a commitment usage factor for letters of credit, non-revolving lines of credit, and revolving lines of credit over the remaining life during which the Company is exposed to credit risk via a contractual obligation to extend credit.

Letters of credit are generally unlikely to advance since they are typically in place only to ensure various forms of performance of the borrowers. Many of the letters of credit are cash secured. Non-revolving lines of credit are determined to be likely to advance as these are typically construction lines. Meanwhile, the likelihood of revolving lines of credit advancing varies with each individual borrower. Therefore, the future usage of each line was estimated based on the average line utilization of the revolving line of credit portfolio as a whole.

The estimate also applies the loss factors for each loan type used in the ACL for loans methodology, which is based on historical losses, economic conditions and reasonable and supportable forecasts. The reserve for off-balance sheet credit exposures is adjusted as a provision for off-balance sheet credit exposures. In 2021, the provision for off-balance sheet credit exposures was reclassified from other operating expense and is now included in the provision for credit losses in the consolidated statements of income. The consolidated statements of income in prior periods have been adjusted retrospectively to reflect this change.

Premises and Equipment

Premises and Equipment

Premises and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are included in other operating expense and are computed using the straight-line method over the shorter of the estimated useful lives of the assets or the applicable leases. Useful lives generally range from five to thirty-nine years for premises and improvements, and one to seven years for equipment. Major improvements and betterments are capitalized, while recurring maintenance and repairs are charged to operating expense. Net gains or losses on dispositions of premises and equipment are included in other operating income and operating expense.

Other Real Estate

Other Real Estate

Other real estate is composed of properties acquired through deed-in-lieu or foreclosure proceedings and is initially recorded at fair value less estimated costs to sell the property, thereby establishing the new cost basis of other real estate. Losses arising at the time of acquisition of such properties are charged against the ACL. Subsequent to acquisition, such properties are carried at the lower of cost or fair value less estimated selling expenses, determined on an individual asset basis. Any deficiency resulting from the excess of cost over fair value less estimated selling expenses is recognized as a valuation allowance. Any subsequent increase in fair value up to its cost basis is recorded as a reduction of the valuation allowance. Increases or decreases in the valuation allowance are included in other operating expense. Net gains or losses recognized on the sale of these properties are included in other operating income.

Mortgage Servicing Rights

Mortgage Servicing Rights

Mortgage servicing rights are recorded when loans are sold to third-parties with servicing of those loans retained and we classify and pool our mortgage servicing rights into buckets of homogeneous characteristics. We utilize the amortization method to measure our mortgage servicing rights. Under the amortization method, we amortize our mortgage servicing rights in proportion to and over the period of net servicing income. Income generated as the result of new mortgage servicing rights is reported as gains on sales of loans and is a component of mortgage banking income in the other operating income section of our consolidated statements of income. Amortization of the servicing rights is also reported as a component of mortgage banking income. Ancillary income is recorded in other income.

Initial fair value of the servicing right is calculated by a discounted cash flow model prepared by a third-party service provider based on market value assumptions at the time of origination and we assess the servicing right for impairment using current market value assumptions at each reporting period. Critical assumptions used in the discounted cash flow model include mortgage prepayment speeds, discount rates, and servicing income and costs. Variations in our assumptions could materially affect the estimated fair values. Changes to our assumptions are made when current trends and market data indicate that new trends have developed. Current market value assumptions based on loan product types (fixed-rate, adjustable-rate and government FHA loans) include average discount rates, servicing cost and ancillary income. Many of these assumptions are subjective and require a high level of management judgment. Our mortgage servicing rights portfolio and valuation assumptions are periodically reviewed by management.

Prepayment speeds may be affected by economic factors such as home price appreciation, market interest rates, the availability of other credit products to our borrowers and customer payment patterns. Prepayment speeds include the impact of all borrower prepayments, including full payoffs, additional principal payments and the impact of loans paid off due to foreclosure liquidations.

We perform an impairment assessment of our mortgage servicing rights quarterly or whenever events or changes in circumstance indicate that the carrying value of those assets may not be recoverable. Our impairment assessments involve, among other valuation methods, the estimation of future cash flows and other methods of determining fair value. Estimating future cash flows and determining fair values are subject to judgments and often involve the use of significant estimates and assumptions. The variability of the factors we use to perform our impairment tests depend on a number of conditions, including the uncertainty about future events and cash flows. All such factors are interdependent and, therefore, do not change in isolation. Accordingly, our accounting estimates may materially change from period to period due to changing market factors.

Federal Home Loan Bank Stock

Federal Home Loan Bank StockWe are a member of the Federal Home Loan Bank of Des Moines (the "FHLB"). The bank is required to obtain and hold a specific number of shares of capital stock of the FHLB equal to the sum of a membership investment requirement and an activity-based investment requirement. The securities are reported at cost and are presented separately in the consolidated balance sheets.

Non-Controlling Interest

Non-Controlling Interest

Non-controlling interest is comprised of capital and undistributed profits of the member of Oahu HomeLoans, LLC, other than the bank. Non-controlling interest on our consolidated balance sheet totaled $48 thousand at December 31, 2021. In March 2022, Oahu HomeLoans, LLC was terminated. As a result, the Company did not hold any non-controlling interest on its consolidated balance sheet at December 31, 2022.

Share Based Compensation

Share-Based Compensation

Share-based compensation cost is measured at the grant date, based on the estimated fair value of the award. We use the Black-Scholes option-pricing model to determine the fair-value of stock options, and the market price of the Company's common stock at the grant date for restricted stock awards. Share-based compensation is recognized as expense over the employee's requisite service period, generally defined as the vesting period. For awards with graded vesting, we recognize compensation expense on a straight-line basis over their respective vesting period. The Company's accounting policy is to recognize forfeitures as they occur. See Note 15 - Share-Based Compensation for further discussion of our stock-based compensation.

Income Taxes

Income Taxes

Deferred tax assets and liabilities are recognized for the estimated future tax effects attributable to temporary differences and carryforwards. A valuation allowance may be required if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining whether a valuation allowance is necessary, we consider the level of taxable income in prior years, to the extent that carrybacks are permitted under current tax laws, as well as estimates of future taxable income and tax planning strategies that could be implemented to accelerate taxable income, if necessary. If our estimates of future taxable income were materially overstated or if our assumptions regarding the tax consequences of tax planning strategies were inaccurate, some or all of our deferred tax assets may not be realized, which would result in a charge to earnings. Net deferred tax assets (liabilities) are included in other assets (liabilities) in the Company's consolidated balance sheets. We recognize interest and penalties related to income tax matters in other expense.

We establish income tax contingency reserves for potential tax liabilities related to uncertain tax positions. Tax benefits are recognized when we determine that it is more likely than not that such benefits will be realized. Where uncertainty exists due to the complexity of income tax statutes, and where the potential tax amounts are significant, we generally seek independent tax opinions to support our positions. If our evaluation of the likelihood of the realization of benefits is inaccurate, we could incur additional income tax and interest expense that would adversely impact earnings, or we could receive tax benefits greater than anticipated which would positively impact earnings.

Earnings per Share

Earnings per Share

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period, excluding unvested restricted stock awards. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period, increased by the dilutive effect of stock options and stock awards, less shares held in a Rabbi trust pursuant to a deferred compensation plan for directors. As of December 31, 2022, the Company no longer has any shares held in a Rabbi trust pursuant to a deferred compensation plan for directors.

Forward Foreign Exchange Contracts

Forward Foreign Exchange Contracts

We are periodically a party to a limited amount of forward foreign exchange contracts to satisfy customer needs for foreign currencies. These contracts are not utilized for trading purposes and are carried at market value, with realized gains and losses included in fees on foreign exchange.

Derivatives and Hedging Activities

Derivatives and Hedging Activities

We recognize all derivatives on the balance sheet at fair value. On the date that we enter into a derivative contract, we designate the derivative as (1) a hedge of the fair value of an identified asset or liability ("fair value hedge"), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to an identified asset or liability ("cash flow hedge") or (3) a transaction not qualifying for hedge accounting ("free standing derivative"). For a fair value hedge, changes in the fair value of the derivative and, to the extent that it is effective, changes in the fair value of the hedged asset or liability, attributable to the hedged risk, are recorded in current period net income in the same financial statement category as the hedged item. For a cash flow hedge, changes in the fair value of the derivative, to the extent that it is effective, is recorded in other comprehensive income (loss) ("OCI"). These changes in fair value are subsequently reclassified to net income in the same period(s) that the hedged transaction affects net income in the same financial statement category as the hedged item. For free standing derivatives, changes in fair values are reported in current period other operating income.

Recent Accounting Pronouncements

Accounting Standards Adopted in 2022

In May 2021, the FASB issued ASU No. 2021-04, "Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options". ASU 2021-04 addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2021-04 effective January 1, 2022 and it did not have an impact on our consolidated financial statements as the Company does not have any freestanding equity-classified written call options.

In July 2021, the FASB issued ASU No. 2021-05, "Leases (Topic 842), Lessors—Certain Leases with Variable Lease Payments". ASU 2021-05 updates guidance in Topic 842 to restore long-standing accounting practice for certain sales-type leases with variable payments. ASU 2021-05 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company adopted ASU 2021-05 effective January 1, 2022 and it did not have an impact on our consolidated financial statements as the Company does not have sale-type leases with variable payments.

Impact of Other Recently Issued Accounting Pronouncements on Future Filings

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)". This ASU provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. Entities can (1) elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also

(2) elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. Finally, entities can (3) make a one-time election to sell and/or reclassify held-to-maturity (“HTM”) debt securities that reference an interest rate affected by reference rate reform. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848)", which clarifies that all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in Topic 848. ASU 2020-04 and 2021-01 are elective and can be adopted between March 12, 2020 and December 31, 2022. In December 2022, the FASB issued ASU 2022-06, "Deferral of the Sunset Date of Topic 848", which extends the temporary relief provision period and allows companies to defer the adoption to December 31, 2024. The Company will elect optional expedients above for applicable contract modifications and hedge accounting for hedging relationships that meet the stated criteria. The Company does not expect the adoption of this pronouncement to have a material impact on the consolidated financial statements.

In March 2022, the FASB issued ASU No. 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method". ASU 2022-01 updates guidance in Topic 815, to expand the current last-of-layer method, which will allow multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments on a prospective basis. ASU 2022-01 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is in the process of evaluating the provisions of this ASU and its effects on our consolidated financial statements. However, we currently do not use the last-of-layer hedge accounting method.

In March 2022, the FASB issued ASU No. 2022-02, "Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures". ASU 2022-02 updates guidance in Topic 326, to eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, "Receivables—Troubled Debt Restructurings by Creditors", while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty and to require entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company is in the process of evaluating the provisions of this ASU and its effects on our consolidated financial statements and plans on making the adoption for the upcoming effective interim period.

In June 2022, the FASB issued ASU 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions". ASU 2022-03, (1) clarifies the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) amends a related illustrative example, and (3) introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company is in the process of evaluating the impact of this pronouncement on the consolidated financial statements.

Revenue

Revenue Recognition

Accounting Standards Codification ("ASC") 606, "Revenue from Contracts with Customers", establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts to provide goods or services to its customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services. Revenue is recognized as performance obligations are satisfied.

The Company recognizes revenues as they are earned based on contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured. Our principal source of revenue is derived from interest income on financial instruments, such as our loan and investment securities portfolios, as well as revenue related to our mortgage banking activities. These revenue-generating transactions are out of scope of ASC 606, but are subject to other GAAP and discussed elsewhere within our disclosures.

The Company also generates other revenue in connection with our broad range of banking products and financial services. Descriptions of our other revenue-generating activities that are within the scope of ASC 606, which are presented in the Company's consolidated statements of income as components of other operating income are as follows:

Mortgage banking income

Loan placement fees, included in mortgage banking income, primarily represent revenues earned by the Company for loan placement and underwriting. Revenues for these services are recorded at a point-in-time, upon completion of a contractually identified transaction, or when an advisory opinion is provided.

Service charges on deposit accounts

Revenue from service charges on deposit accounts includes general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when our performance obligation is completed, which is

generally monthly for account maintenance services or when a transaction has been completed (such as stop payment fees). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

Other Service Charges and Fees

Revenue from other service charges and fees includes fees on foreign exchange, cards and payments income, safe deposit rental income and other service charges, commissions and fees.

The Company provides foreign currency exchange services to customers, whereby cash can be converted to different foreign currencies, and vice versa. As a result of the services, a gain or loss is recognized on foreign currency transactions, as well as income related to commissions and fees earned on each transaction. Revenue from the commissions and fees earned on the transactions fall within the scope of ASC 606, and is recorded in a manner that reflects the timing of when transactions occur, and as services are provided. Realized and unrealized gains or losses related to foreign currency are out of scope of ASC 606.

Cards and payments income includes interchange fees from debit cards processed through card association networks, merchant services, and other card related services. Interchange rates are generally set by the credit card associations and based on purchase volumes and other factors. Interchange fees are recognized as transactions occur. Interchange expenses related to cards and payments income are presented gross in other operating expense. Merchant services income represents account management fees and transaction fees charged to merchants for the processing of card association network transactions. Merchant services revenue is recognized as transactions occur, or as services are performed.

Other service charges, commissions and fees include automated teller machines ("ATM") surcharge and interchange fees, bill payment fees, cashier’s check and money order fees, wire transfer fees, loan brokerage fees, and commissions on sales of insurance, broker-dealer products, and letters of credit. Revenue from these fees and commissions is recorded in a manner that reflects the timing of when transactions occur, and as services are provided.

Based on the nature of the commission agreement with the broker-dealer and each insurance provider, we may recognize revenue from broker-dealer and insurance commissions over time or at a point-in-time as our performance obligation is satisfied.

Income from Fiduciary Activities

Income from fiduciary activities includes fees from wealth management, trust, custodial and escrow services provided to individual and institutional customers. Revenue is generally recognized monthly based on a minimum annual fee and/or the market value of assets in custody. Additional fees are recognized for transactional activity.

Revenue from trade execution and brokerage services is earned through commissions from trade execution on behalf of clients. Revenue from these transactions is recognized at the trade date. Any ongoing service fees are recognized on a monthly basis as services are performed.

Net Gain (Loss) on Sales of Foreclosed Assets

The Company records a gain or loss on the sale of a foreclosed property when control of the property transfers to the Company, which typically occurs at the time the deed is executed. The Company does not finance the sale of the foreclosed property.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Schedule of Financing Receivable Portfolio Segments

The Company has identified the following portfolio segments to measure the allowance for credit losses. For all segments the economic forecast length is one year and reversion method is one year.

Loan Segment	Historical Lifetime Loss Method	Historical Lookback Period	Economic Forecast Length	Reversion Method
Construction	Probability of Default/Loss Given Default ("PD/LGD")	2008-Present	One Year	One Year (straight-line basis)
Commercial real estate	PD/LGD	2008-Present
Multi-family mortgage	PD/LGD	2008-Present
Commercial, financial and agricultural	PD/LGD	2008-Present
Home equity lines of credit	Loss-Rate Migration	2008-Present
Residential mortgage	Loss-Rate Migration	2008-Present
Consumer - other revolving	Loss-Rate Migration	2008-Present
Consumer - non-revolving	Loss-Rate Migration	2008-Present
Purchased Mainland portfolios (Dealer, Other consumer)	Weighted-Average Remaining Maturity ("WARM")	2008-Present

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INVESTMENT SECURITIES (Tables)

12 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Summary of available for sale and held to maturity investment securities

The amortized cost, gross unrealized gains and losses, fair value and related allowance for credit losses on held-to-maturity ("HTM") and available-for-sale ("AFS") investment securities as of December 31, 2022 and 2021 are as follows:

(Dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value		ACL
December 31, 2022
Held-to-Maturity:
Debt securities:
States and political subdivisions	$	41,840	$	—	$	(4,727)	$	37,113	$	—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	623,043		—		(63,376)		559,667		—
Total held-to-maturity investment securities	$	664,883	$	—	$	(68,103)	$	596,780	$	—
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		ACL
Available-for-Sale:
Debt securities:
States and political subdivisions	$	172,427	$	6	$	(36,681)	$	135,752	$	—
Corporate securities	36,206		—		(5,995)		30,211		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	28,032		—		(2,317)		25,715		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	498,989		—		(75,186)		423,803		—
Residential - Non-government sponsored entities ("Non-GSEs")	9,829		—		(1,167)		8,662		—
Commercial - U.S. GSEs and agencies	54,346		—		(8,202)		46,144		—
Commercial - Non-GSEs	1,541		—		(34)		1,507		—
Total available-for-sale investment securities	$	801,370	$	6	$	(129,582)	$	671,794	$	—

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		ACL
Available-for-Sale:
Debt securities:
States and political subdivisions	$	235,521	$	3,156	$	(1,849)	$	236,828	$	—
Corporate securities	41,687		24		(1,065)		40,646		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	35,833		69		(568)		35,334		—
Mortgage-backed securities:
Residential - U.S. GSEs	1,213,910		4,899		(19,993)		1,198,816		—
Residential - Non-GSEs	11,942		335		(64)		12,213		—
Commercial - U.S. GSEs and agencies	66,287		756		(1,194)		65,849		—
Commercial - Non-GSEs	41,328		685		—		42,013		—
Total available-for-sale investment securities	$	1,646,508	$	9,924	$	(24,733)	$	1,631,699	$	—

Schedule of amortized cost and estimated fair value of investment securities by contractual maturity

The amortized cost and estimated fair value of our investment securities at December 31, 2022 by contractual maturity are shown below. Actual maturities may differ from contractual maturities as issuers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

	December 31, 2022
(Dollars in thousands)	Amortized Cost		Fair Value		Weighted Average Yield (1)
Held-to-Maturity:
Due in one year or less	$	—	$	—	—	%
Due after one year through five years	—		—		—
Due after five years through ten years	—		—		—
Due after ten years	41,840		37,113		2.26
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	623,043		559,667		1.93
Total held-to-maturity investment securities	$	664,883	$	596,780	1.95	%
Available-for-Sale:
Due in one year or less	$	5,774	$	5,751	2.91	%
Due after one year through five years	15,816		15,458		3.75
Due after five years through ten years	79,803		70,558		2.60
Due after ten years	135,272		99,911		2.43
Mortgage-backed securities
Residential - U.S. GSEs	498,989		423,803		2.03
Residential - Non-GSEs	9,829		8,662		3.33
Commercial - U.S. GSEs and agencies	54,346		46,144		2.35
Commercial - Non-GSEs	1,541		1,507		4.10
Total available-for-sale investment securities	$	801,370	$	671,794	2.24	%
Total investment securities	$	1,466,253	$	1,268,574	2.10	%

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

Schedule of investment securities in an unrealized loss position

The following table summarizes HTM and AFS securities which were in an unrealized or unrecognized loss position at December 31, 2022 and 2021, aggregated by major security type and length of time in a continuous unrealized or unrecognized loss position:

	Less Than 12 Months				12 Months or Longer				Total
Description of Securities	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses
	(Dollars in thousands)
December 31, 2022
Held-to-Maturity:
Debt securities:
States and political subdivisions	$	37,113	$	(4,727)	$	—	$	—	$	37,113	$	(4,727)
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	559,667		(63,376)		—		—		559,667		(63,376)
Total temporarily impaired HTM investment securities	$	596,780	$	(68,103)	$	—	$	—	$	596,780	$	(68,103)

	Less Than 12 Months				12 Months or Longer				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
December 31, 2022
Available-for-Sale:
Debt securities:
States and political subdivisions	$	52,244	$	(4,807)	$	78,389	$	(31,874)	$	130,633	$	(36,681)
Corporate securities	—		—		30,211		(5,995)		30,211		(5,995)
U.S. Treasury obligations and direct obligations of U.S Government agencies	9,651		(245)		15,541		(2,072)		25,192		(2,317)
Mortgage-backed securities:
Residential - U.S. GSEs	149,624		(13,990)		274,179		(61,196)		423,803		(75,186)
Residential - Non-GSEs	2,890		(334)		5,772		(833)		8,662		(1,167)
Commercial - U.S. GSEs and agencies	25,034		(1,724)		21,110		(6,478)		46,144		(8,202)
Commercial - Non-GSEs	1,506		(34)		—		—		1,506		(34)
Total temporarily impaired AFS investment securities	$	240,949	$	(21,134)	$	425,202	$	(108,448)	$	666,151	$	(129,582)

	Less Than 12 Months				12 Months or Longer				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
December 31, 2021
Available-for-Sale:
Debt securities:
States and political subdivisions	$	79,360	$	(1,252)	$	10,864	$	(597)	$	90,224	$	(1,849)
Corporate securities	8,633		(235)		21,960		(830)		30,593		(1,065)
U.S. Treasury obligations and direct obligations of U.S Government agencies	16,103		(415)		10,891		(153)		26,994		(568)
Mortgage-backed securities:
Residential - U.S. GSEs	926,570		(15,883)		114,747		(4,110)		1,041,317		(19,993)
Residential - Non-GSEs	—		—		938		(64)		938		(64)
Commercial - U.S. GSEs and agencies	6,313		(205)		16,281		(989)		22,594		(1,194)
Total temporarily impaired AFS investment securities	$	1,036,979	$	(17,990)	$	175,681	$	(6,743)	$	1,212,660	$	(24,733)

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LOANS AND LEASES (Tables)

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

Schedule of loans and leases, excluding loans held for sale

Loans, excluding loans held for sale, net of ACL as of December 31, 2022 and 2021 consisted of the following:

	December 31,
(Dollars in thousands)	2022		2021
Commercial, financial and agricultural:
Small Business Administration Paycheck Protection Program ("SBA PPP")	$	2,654	$	94,850
Other	544,495		530,383
Real estate:
Construction	167,366		123,351
Residential mortgage	1,940,456		1,875,200
Home equity	737,386		635,721
Commercial mortgage	1,364,998		1,222,138
Consumer	798,957		624,115
Gross loans	5,556,312		5,105,758
Net deferred fees	(846)		(4,109)
Total loans, net of deferred fees and costs	$	5,555,466	$	5,101,649
Allowance for credit losses	(63,738)		(68,097)
Total loans, net of allowance for credit losses	$	5,491,728	$	5,033,552

Financing Receivable, Purchased With Credit Deterioration

The following table presents loan purchases by class for the periods presented:

(Dollars in thousands)	Consumer - Unsecured		Consumer - Automobile		Total
Year Ended December 31, 2022
Purchases:
Outstanding balance	$	229,283	$	101,500	$	330,783
Purchase (discount) premium	(12,119)		4,738		(7,381)
Purchase price	$	217,164	$	106,238	$	323,402
Year Ended December 31, 2021
Purchases:
Outstanding balance	$	199,813	$	71,432	$	271,245
Purchase (discount) premium	(9,613)		5,080		(4,533)
Purchase price	$	190,200	$	76,512	$	266,712

Schedule of balance in the allowance for loan and lease losses and the recorded investment in loans and lease based on the impairment measurement methods, by class

In accordance with ASC 326, a loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table presents the amortized cost basis of collateral-dependent loans by class, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans as of December 31, 2022 and 2021:

	December 31, 2022
(Dollars in thousands)	Secured by 1-4 Family Residential Properties		Secured by Nonfarm Nonresidential Properties		Secured by Real Estate and Business  Assets		Total		Allocated ACL
Real estate:
Residential mortgage	$	5,653	$	—	$	—	$	5,653	$	—
Home equity	570		—		—		570		—
Total	$	6,223	$	—	$	—	$	6,223	$	—

	December 31, 2021
(Dollars in thousands)	Secured by 1-4 Family Residential Properties		Secured by Nonfarm Nonresidential Properties		Secured by Real Estate and Business  Assets		Total		Allocated ACL
Real estate:
Residential mortgage	$	8,391	$	—	$	—	$	8,391	$	—
Home equity	786		—		—		786		—
Total	$	9,177	$	—	$	—	$	9,177	$	—

Schedule of aging of the recorded investment in past due loans and leases, by class

The following tables present by class, the aging of the recorded investment in past due loans as of December 31, 2022 and 2021:

	December 31, 2022
(Dollars in thousands)	Accruing Loans 30 - 59 Days Past Due		Accruing Loans 60 - 89 Days Past Due		Accruing Loans 90+  Days Past Due		Nonaccrual Loans		Total Past Due and Nonaccrual		Loans and Leases Not Past Due		Total		Nonaccrual Loans with No ACL
Commercial, financial and agricultural:
SBA PPP	$	471	$	37	$	13	$	—	$	521	$	2,034	$	2,555	$	—
Other	546		131		26		297		1,000		542,947		543,947		—
Real estate:
Construction	—		—		—		—		—		166,723		166,723		—
Residential mortgage	303		—		559		3,808		4,670		1,936,329		1,940,999		3,808
Home equity	1,540		—		—		570		2,110		737,270		739,380		570
Commercial mortgage	160		—		—		—		160		1,362,915		1,363,075		—
Consumer	5,173		1,921		1,240		576		8,910		789,877		798,787		—
Total	$	8,193	$	2,089	$	1,838	$	5,251	$	17,371	$	5,538,095	$	5,555,466	$	4,378

	December 31, 2021
(Dollars in thousands)	Accruing Loans 30 - 59 Days Past Due		Accruing Loans 60 - 89 Days Past Due		Accruing Loans 90+  Days Past Due		Nonaccrual Loans		Total Past Due and Nonaccrual		Loans and Leases Not Past Due		Total		Nonaccrual Loans with No ACL
Commercial, financial and agricultural:
SBA PPP	$	—	$	—	$	—	$	—	$	—	$	91,327	$	91,327	$	—
Other	970		604		945		183		2,702		527,419		530,121		—
Real estate:
Construction	638		—		—		—		638		122,229		122,867		—
Residential mortgage	5,315		—		—		4,623		9,938		1,866,042		1,875,980		4,623
Home equity	234		—		44		786		1,064		636,185		637,249		786
Commercial mortgage	—		—		—		—		—		1,220,204		1,220,204		—
Consumer	2,444		712		374		289		3,819		620,082		623,901		—
Total	$	9,601	$	1,316	$	1,363	$	5,881	$	18,161	$	5,083,488	$	5,101,649	$	5,409

Schedule of information related to loans modifications in a TDR, by class

No loans were modified in a TDR during the year ended December 31, 2022. The following table presents by class, information related to loans modified in a TDR during the years ended December 31, 2021 and 2020:

	Year Ended December 31, 2021
(Dollars in thousands)	Number of Loans	Recorded Investment (as of period end)		Increase in the ACL
Real estate: Residential mortgage	1	$	48	$	—
Total	1	$	48	$	—
	Year Ended December 31, 2020
(Dollars in thousands)	Number of Loans	Recorded Investment (as of period end)		Increase in the ACL
Real estate: Residential mortgage	1	$	677	$	—
Real estate: Commercial mortgage	1	$	276	$	—
Consumer	11	$	207	$	—
Total	13	$	1,160	$	—

Schedule of recorded investment in the loans and leases, by class and credit indicator

The following table presents the amortized cost basis, net of deferred (fees) costs of the Company's loans by class, credit quality indicator and origination year as of December 31, 2022. Revolving loans converted to term as of and during the year ended December 31, 2022 were not material to the total loan portfolio.

	Amortized Cost of Term Loans by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Amortized Cost of Revolving Loans		Total
December 31, 2022
Commercial, financial and agricultural - SBA PPP:
Risk Rating
Pass	$	—	$	2,546	$	9	$	—	$	—	$	—	$	—	$	2,555
Subtotal	—		2,546		9		—		—		—		—		2,555
Commercial, financial and agricultural - Other:
Risk Rating
Pass	77,550		101,595		41,358		53,241		39,106		141,950		76,466		531,266
Special Mention	2,206		350		172		1,011		29		—		99		3,867
Substandard	188		176		833		256		116		7,215		30		8,814
Subtotal	79,944		102,121		42,363		54,508		39,251		149,165		76,595		543,947
Construction:
Risk Rating
Pass	25,663		61,027		23,384		2,387		14,309		18,048		15,044		159,862
Special Mention	—		417		—		—		898		—		—		1,315
Substandard	—		4,850		—		696		—		—		—		5,546
Subtotal	25,663		66,294		23,384		3,083		15,207		18,048		15,044		166,723
Residential mortgage:
Risk Rating
Pass	279,146		636,756		434,928		154,906		58,431		371,517		—		1,935,684
Substandard	—		—		948		—		503		3,864		—		5,315
Subtotal	279,146		636,756		435,876		154,906		58,934		375,381		—		1,940,999
Home equity:
Risk Rating
Pass	34,973		23,772		10,520		7,463		6,880		11,727		643,277		738,612
Special Mention	—		—		—		—		—		—		198		198
Substandard	—		—		—		—		78		453		39		570
Subtotal	34,973		23,772		10,520		7,463		6,958		12,180		643,514		739,380
Commercial mortgage:
Risk Rating
Pass	226,137		208,230		119,531		129,950		145,932		472,267		11,473		1,313,520
Special Mention	—		—		—		11,388		—		16,082		—		27,470
Substandard	—		10,149		—		1,700		2,133		8,103		—		22,085
Subtotal	226,137		218,379		119,531		143,038		148,065		496,452		11,473		1,363,075
Consumer:
Risk Rating
Pass	358,609		242,942		59,352		50,899		20,065		10,958		54,038		796,863
Special Mention	—		—		—		113		—		—		—		113
Substandard	1		261		91		126		42		790		—		1,311
Loss	—		—		—		—		—		500		—		500
Subtotal	358,610		243,203		59,443		51,138		20,107		12,248		54,038		798,787
Total loans, net of deferred fees and costs	$	1,004,473	$	1,293,071	$	691,126	$	414,136	$	288,522	$	1,063,474	$	800,664	$	5,555,466

	Amortized Cost of Term Loans by Origination Year
(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Amortized Cost of Revolving Loans		Total
December 31, 2021
Commercial, financial and agricultural - SBA PPP:
Risk Rating
Pass	$	84,254	$	7,073	$	—	$	—	$	—	$	—	$	—	$	91,327
Subtotal	84,254		7,073		—		—		—		—		—		91,327
Commercial, financial and agricultural - Other:
Risk Rating
Pass	122,729		68,021		56,531		52,375		31,817		93,957		79,131		504,561
Special Mention	1,441		1,278		2,443		96		8,671		354		—		14,283
Substandard	—		982		393		682		6,623		1,847		750		11,277
Subtotal	124,170		70,281		59,367		53,153		47,111		96,158		79,881		530,121
Construction:
Risk Rating
Pass	35,236		25,430		3,196		28,333		288		20,090		9,376		121,949
Substandard	—		—		—		918		—		—		—		918
Subtotal	35,236		25,430		3,196		29,251		288		20,090		9,376		122,867
Residential mortgage:
Risk Rating
Pass	670,011		478,891		180,687		75,820		92,394		372,539		42		1,870,384
Special Mention	—		973		—		—		—		—		—		973
Substandard	—		—		—		577		881		3,165		—		4,623
Subtotal	670,011		479,864		180,687		76,397		93,275		375,704		42		1,875,980
Home equity:
Risk Rating
Pass	26,479		13,008		10,329		10,593		480		7,743		567,600		636,232
Special Mention	—		—		—		—		—		—		187		187
Substandard	—		176		—		79		—		575		—		830
Subtotal	26,479		13,184		10,329		10,672		480		8,318		567,787		637,249
Commercial mortgage:
Risk Rating
Pass	229,108		126,169		146,584		126,014		153,041		387,751		9,472		1,178,139
Special Mention	—		—		3,106		3,219		283		9,455		—		16,063
Substandard	—		—		1,760		8,050		1,784		14,408		—		26,002
Subtotal	229,108		126,169		151,450		137,283		155,108		411,614		9,472		1,220,204
Consumer:
Risk Rating
Pass	308,326		96,066		91,194		41,995		20,719		9,446		55,311		623,057
Special Mention	—		—		181		—		10		7		—		198
Substandard	10		35		128		80		19		221		—		493
Loss	—		—		—		—		—		153		—		153
Subtotal	308,336		96,101		91,503		42,075		20,748		9,827		55,311		623,901
Total loans, net of deferred fees and costs	$	1,477,594	$	818,102	$	496,532	$	348,831	$	317,010	$	921,711	$	721,869	$	5,101,649

The following tables present the recorded investment in the Company's loans by class and credit indicator as of December 31, 2022 and 2021:

(Dollars in thousands)	Pass		Special Mention		Substandard		Loss		Gross Loans		Net Deferred (Fees) Costs		Total Loans
December 31, 2022
Commercial, financial and agricultural:
SBA PPP	$	2,654	$	—	$	—	$	—	$	2,654	$	(99)	$	2,555
Other	531,814		3,867		8,814		—		544,495		(548)		543,947
Real estate:
Construction	160,505		1,315		5,546		—		167,366		(643)		166,723
Residential mortgage	1,935,141		—		5,315		—		1,940,456		543		1,940,999
Home equity	736,618		198		570		—		737,386		1,994		739,380
Commercial mortgage	1,315,443		27,470		22,085		—		1,364,998		(1,923)		1,363,075
Consumer	797,029		113		1,315		500		798,957		(170)		798,787
Total	$	5,479,204	$	32,963	$	43,645	$	500	$	5,556,312	$	(846)	$	5,555,466

(Dollars in thousands)	Pass		Special Mention		Substandard		Loss		Gross Loans		Net Deferred (Fees) Costs		Total Loans
December 31, 2021
Commercial, financial and agricultural:
SBA PPP	$	94,850	$	—	$	—	$	—	$	94,850	$	(3,523)	$	91,327
Other	504,823		14,283		11,277		—		530,383		(262)		530,121
Real estate:
Construction	122,433		—		918		—		123,351		(484)		122,867
Residential mortgage	1,869,604		973		4,623		—		1,875,200		780		1,875,980
Home equity	634,704		187		830		—		635,721		1,528		637,249
Commercial mortgage	1,180,074		16,062		26,002		—		1,222,138		(1,934)		1,220,204
Consumer	623,271		181		510		153		624,115		(214)		623,901
Total	$	5,029,759	$	31,686	$	44,160	$	153	$	5,105,758	$	(4,109)	$	5,101,649

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ALLOWANCE FOR LOAN AND LEASE LOSSES (Tables)

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

Schedule of activity in the allowance, by class

The following tables present the activity in the ACL for loans by class for the years ended December 31, 2022, 2021 and 2020:

	Commercial, Financial and Agricultural				Real Estate
(Dollars in thousands)	SBA PPP		Other		Construction		Residential Mortgage		Home Equity		Commercial Mortgage		Consumer		Total
Year ended December 31, 2022
Beginning balance	$	77	$	10,314	$	3,908	$	12,463	$	4,509	$	18,411	$	18,415	$	68,097
Provision (credit) for credit losses on loans	(75)		(2,518)		(1,117)		(954)		(431)		(509)		5,892		288
Subtotal	2		7,796		2,791		11,509		4,078		17,902		24,307		68,385
Charge-offs	—		1,969		—		—		—		—		6,399		8,368
Recoveries	—		995		76		295		36		—		2,319		3,721
Net charge-offs (recoveries)	—		974		(76)		(295)		(36)		—		4,080		4,647
Ending balance	$	2	$	6,822	$	2,867	$	11,804	$	4,114	$	17,902	$	20,227	$	63,738

	Commercial, Financial and Agricultural				Real Estate
(Dollars in thousands)	SBA PPP		Other		Construction		Residential Mortgage		Home Equity		Commercial Mortgage		Consumer		Total
Year ended December 31, 2021
Beginning balance	$	304	$	18,717	$	4,277	$	16,484	$	5,449	$	22,163	$	15,875	$	83,269
Provision (credit) for credit losses on loans [1]	(227)		(7,684)		(1,528)		(4,379)		(949)		(3,825)		4,269		(14,323)
Subtotal	77		11,033		2,749		12,105		4,500		18,338		20,144		68,946
Charge-offs	—		1,723		—		—		—		—		4,402		6,125
Recoveries	—		1,004		1,159		358		9		73		2,673		5,276
Net charge-offs (recoveries)	—		719		(1,159)		(358)		(9)		(73)		1,729		849
Ending balance	$	77	$	10,314	$	3,908	$	12,463	$	4,509	$	18,411	$	18,415	$	68,097

	Commercial, Financial and Agricultural				Real Estate
(Dollars in thousands)	SBA PPP		Other		Construction		Residential Mortgage		Home Equity		Commercial Mortgage		Consumer		Total
Year ended December 31, 2020
Beginning balance	$	—	$	8,136	$	1,792	$	13,327	$	4,206	$	11,113	$	9,397	$	47,971
Impact of adoption of ASC 326	—		(627)		479		608		(1,614)		2,624		2,096		3,566
Balance after adoption of ASC 326	—		7,509		2,271		13,935		2,592		13,737		11,493		51,537
Provision for credit losses on loans [1]	304		13,077		1,875		2,383		2,824		8,485		9,982		38,930
Subtotal	304		20,586		4,146		16,318		5,416		22,222		21,475		90,467
Charge-offs	—		3,026		—		63		—		75		8,191		11,355
Recoveries	—		1,157		131		229		33		16		2,591		4,157
Net charge-offs	—		1,869		(131)		(166)		(33)		59		5,600		7,198
Ending balance	$	304	$	18,717	$	4,277	$	16,484	$	5,449	$	22,163	$	15,875	$	83,269
[1] In 2020, the Company recorded a reserve on accrued interest receivable for loans on active payment forbearance or deferral, which were granted to borrowers impacted by the COVID-19 pandemic. This reserve was recorded as a contra-asset against accrued interest receivable with the offset to provision for credit losses. Due to the significant decline in loans on active forbearance or deferral, the Company reversed the $0.2 million reserve during the second quarter of 2021 and no longer has a reserve on accrued interest receivable as of December 31, 2022 and 2021. The provision for credit losses presented in this table excludes the provision (credit) for credit losses on accrued interest receivable of $0.2 million.

Schedule of changes in the allowance for loan and lease losses for impaired loans

The following table presents the activity in the reserve for off-balance sheet credit exposures, included in other liabilities, under ASC 326 during the years ended December 31, 2022, 2021 and 2020.

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Balance, beginning of year	$	4,804	$	4,884	$	1,272
Impact of adoption of ASC 326	—		—		740
Balance after adoption of ASC 326	4,804		4,884		2,012
(Credit) provision for off-balance sheet credit exposures	(1,561)		(80)		2,872
Balance, end of year	$	3,243	$	4,804	$	4,884

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PREMISES AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2022

Property, Plant and Equipment [Abstract]

Schedule of premises and equipment

Premises and equipment consisted of the following as of December 31, 2022 and 2021:

	December 31,
(Dollars in thousands)	2022		2021
Land	$	23,150	$	14,184
Office buildings and improvements	145,793		141,628
Furniture, fixtures and equipment	37,194		35,515
Gross premises and equipment	206,137		191,327
Accumulated depreciation and amortization	(114,503)		(110,973)
Net premises and equipment	$	91,634	$	80,354

Schedule of operating expenses to which depreciation and amortization of premises and equipment were charged

Depreciation and amortization of premises and equipment were charged to the following operating expenses:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Net occupancy	$	4,720	$	4,570	$	3,616
Equipment	2,145		2,414		2,607
Total	$	6,865	$	6,984	$	6,223

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INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES (Tables)

12 Months Ended

Dec. 31, 2022

Investments in and Advances to Affiliates, Schedule of Investments [Abstract]

Schedule of Investments in and Advances to Affiliates, Schedule of Investments

Investments in unconsolidated entities as of December 31, 2022 and 2021 consisted of the following components:

	December 31,
(Dollars in thousands)	2022		2021
Investments in low income housing tax credit partnerships	$	40,939	$	25,916
Investments in common securities of statutory trusts	1,547		1,547
Investments in affiliates	110		162
Other	4,045		2,054
Total	$	46,641	$	29,679

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

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Proportional amortization method:
Amortization expense recognized in income tax expense	$	2,566	$	2,174	$	1,391
Federal and state tax credits recognized in income tax expense	2,938		2,373		1,599

Future Commitments

The expected payments for the unfunded commitments related to the Company's investments in unconsolidated entities as of December 31, 2022 are as follows:

(Dollars in thousands)	LIHTC		Other
Year Ending December 31:	Partnerships		Partnerships		Total
2023	$	9,693	$	1,303	$	10,996
2024	9,280		—		9,280
2025	4,248		—		4,248
2026	26		—		26
2027	26		—		26
Thereafter	333		—		333
Total commitments	$	23,606	$	1,303	$	24,909

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MORTGAGE SERVICING RIGHTS (Tables)

12 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of changes in other intangible assets

The following table presents changes in our mortgage servicing rights for the periods presented:

(Dollars in thousands)	Mortgage Servicing Rights
Balance as of December 31, 2020	$	11,865
Additions	1,341
Amortization	(3,468)
Balance as of December 31, 2021	9,738
Additions	631
Amortization	(1,295)
Balance as of December 31, 2022	$	9,074

Schedule of gross carrying value and accumulated amortization related to intangible assets

The gross carrying value, accumulated amortization, and net carrying value related to our mortgage servicing rights as of December 31, 2022 and 2021 are presented below:

	December 31, 2022						December 31, 2021
(Dollars in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Mortgage servicing rights	$	69,413	$	(60,339)	$	9,074	$	72,250	$	(62,512)	$	9,738
Total	$	69,413	$	(60,339)	$	9,074	$	72,250	$	(62,512)	$	9,738

Schedule of estimated amortization expense

Based on our mortgage servicing rights held as of December 31, 2022, estimated amortization expense for the next five succeeding fiscal years and all years thereafter are as follows:

(Dollars in thousands)
Year Ending December 31:
2023	$	994
2024	950
2025	844
2026	749
2027	656
Thereafter	4,881
Total	$	9,074

Schedule of fair market value and key assumptions used in determining the fair market value of our mortgage servicing rights

The following table presents the fair market value and key assumptions used in determining the fair market value of our mortgage servicing rights:

	Year Ended December 31,
(Dollars in thousands)	2022			2021
Fair market value, beginning of period	$	10,504		$	12,003
Fair market value, end of period	12,061			10,504
Weighted-average discount rate	9.5		%	9.5		%
Weighted-average prepayment speed assumption	10.4		%	19.0		%

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DERIVATIVES (Tables)

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of the location of all assets and liabilities associated with derivative instruments within the consolidated balance sheet

The following table presents the location of all assets and liabilities associated with our derivative instruments within the Company's consolidated balance sheet: 

		Asset Derivatives				Liability Derivatives
Derivatives Not Designated as	Balance Sheet	Fair Value at		Fair Value at		Fair Value at		Fair Value at
Hedging Instruments	Location	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
		(Dollars in thousands)
Interest rate lock and forward sale commitments	Other assets / other liabilities	$	10	$	5	$	2	$	20
Risk participation agreements	Other assets / other liabilities	—		—		—		16
Back-to-back swap agreements	Other assets / other liabilities	4,611		435		4,611		435

		Asset Derivatives				Liability Derivatives
Derivatives Designated as	Balance Sheet	Fair Value at		Fair Value at		Fair Value at		Fair Value at
Hedging Instruments	Location	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
		(Dollars in thousands)
Interest rate swap	Other assets / other liabilities	$	5,986	$	—	$	—	$	—

Schedule of the impact of derivative instruments and their location within the consolidated statements of income

The following table presents the impact of derivative instruments and their location within the Company's consolidated statements of income for the periods presented: 

Derivatives Not in Cash Flow Hedging Relationship	Location of Gain (Loss) Recognized in Earnings on Derivatives	Amount of Gain (Loss) Recognized in Earnings on Derivatives
	(Dollars in thousands)
Year ended December 31, 2022
Interest rate lock and forward sale commitments	Mortgage banking income	$	8
Loans held for sale	Other income	(3)
Risk participation agreements	Other service charges and fees	16
Year ended December 31, 2021
Interest rate lock and forward sale commitments	Mortgage banking income	98
Risk participation agreements	Other service charges and fees	32
Back-to-back swap agreements	Other service charges and fees	600
Year ended December 31, 2020
Interest rate lock and forward sale commitments	Mortgage banking income	(76)
Risk participation agreements	Other service charges and fees	1,323

Derivatives in Cash Flow Hedging Relationship	Location of Gain (Loss) Recognized in Earnings on Derivatives	Amount of Gain (Loss) Recognized in Earnings on Derivatives
	(Dollars in thousands)
Year ended December 31, 2022
Interest rate swap	Interest income	$	(340)

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DEPOSITS (Tables)

12 Months Ended

Dec. 31, 2022

Deposits [Abstract]

Schedule of maturities of time deposits of $100,000 or more

Contractual maturities of total time deposits as of December 31, 2022 were as follows:

(Dollars in thousands)
Year Ending December 31:
2023	$	912,198
2024	52,870
2025	12,048
2026	6,527
2027	7,186
Thereafter	376
Total	$	991,205

Contractual maturities of time deposits of $250,000 or more as of December 31, 2022 were as follows:

(Dollars in thousands)
Three months or less	$	370,239
Over three months through six months	97,913
Over six months through twelve months	188,943
2024	15,185
2025	2,326
2026	1,540
2027	2,411
Thereafter	—
Total	$	678,557

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SHORT-TERM BORROWINGS (Tables)

12 Months Ended

Dec. 31, 2022

Short-Term Debt [Abstract]

Schedule of short-term borrowings

A summary of the bank's short-term borrowings as of December 31, 2022, 2021 and 2020 is as follows:

	Year Ended December 31,
(Dollars in thousands)	2022			2021			2020
Amount outstanding at December 31	$	5,000		$	—		$	22,000
Average amount outstanding during year	37,210			607			89,904
Highest month-end balance during year	140,000			6,500			222,000
Weighted-average interest rate on balances outstanding at December 31	4.60		%	—		%	0.29		%
Weighted-average interest rate during year	2.84		%	0.30		%	0.80		%

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LONG-TERM DEBT (Tables)

12 Months Ended

Dec. 31, 2022

Long-Term Debt, Unclassified [Abstract]

Schedule of long-term debt, based on original maturity

	December 31,
(Dollars in thousands)	2022		2021
Subordinated debentures	$	51,547	$	51,547
Subordinated notes, net of issuance costs	54,312		54,069
Total	$	105,859	$	105,616

As of December 31, 2022 and 2021, the Company had the following subordinated notes outstanding:

(Dollars in thousands)	December 31, 2022 and 2021
Name	Amount of Subordinated Notes		Interest Rate
October 2020 Private Placement	$	55,000	4.75% for the first five years. Resets quarterly thereafter to the then current three-month SOFR.
Total	$	55,000

Schedule of future principal payments on long-term debt based on final maturity

At December 31, 2022, future principal payments on long-term debt based on redemption date or final maturity are as follows (dollars in thousands):

(Dollars in thousands)
Year Ending December 31:
2023	$	—
2024	—
2025	—
2026	—
2027	—
Thereafter	106,547
Total	$	106,547

Schedule of Subordinated Borrowing

As of December 31, 2022 and 2021, the Company had the following junior subordinated debentures outstanding:

(Dollars in thousands)	December 31, 2022 and 2021
Name of Trust	Amount of Subordinated Debentures		Interest Rate
Trust IV	$	30,928	Three month LIBOR + 2.45%
Trust V	20,619		Three month LIBOR + 1.87%
Total	$	51,547

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REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables)

12 Months Ended

Dec. 31, 2022

Revenue from Contract with Customer [Abstract]

Other operating income segregated by revenue streams

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

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Other operating income:
In-scope of ASC 606
Mortgage banking income	$	1,060	$	1,993	$	1,128
Service charges on deposit accounts	8,197		6,358		$	6,234
Other service charges and fees	16,581		15,281		11,621
Income on fiduciary activities	4,565		5,075		4,829
In-scope other operating income	30,403		28,707		23,812
Out-of-scope other operating income	17,516		14,353		21,386
Total other operating income	$	47,919	$	43,060	$	45,198

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MORTGAGE BANKING INCOME (Tables)

12 Months Ended

Dec. 31, 2022

Other Income and Expenses [Abstract]

Mortgage Banking Activities

Noninterest income from the Company's mortgage banking activities includes the following components for the periods presented:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Mortgage banking income:
Net loan servicing fees	$	2,259	$	2,733	$	2,754
Amortization of mortgage servicing rights	(1,295)		(3,468)		(6,167)
Net gain on sale of residential mortgage loans	1,778		6,376		16,043
Unrealized gain (loss) on interest rate locks	8		98		(76)
Loan placement fees	1,060		1,993		1,128
Total mortgage banking income	$	3,810	$	7,732	$	13,682

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SHARE-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Summary of the effects of share-based compensation to options and awards granted under the Company's equity incentive plans

The following table summarizes the effects of share-based compensation for options and awards granted under the Company's equity incentive plans for each of the periods presented:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Salaries and employee benefits	$	4,567	$	4,580	$	3,822
Directors stock awards	350		91		165
Income tax benefit	(1,461)		(1,449)		(809)
Net share-based compensation effect	$	3,456	$	3,222	$	3,178

Summary of option activity for stock option plans

The following is a summary of option activity for our stock option plans for the year ended December 31, 2022:

	Number of Units	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Stock options outstanding as of January 1, 2022	47,440	$	14.32
Changes during the year:
Granted	—	—
Exercised	(47,440)	14.32			$	706
Expired	—	—
Forfeited	—	—
Stock options outstanding as of December 31, 2022	—	—		0.0	—
Vested and exercisable as of December 31, 2022	—			0.0	—

Schedule of activity of restricted stock awards and units

The table below presents the activity of RSUs and PSUs for each of the periods presented:

	Number of Units	Weighted Average Grant Date Fair Value		Fair Value of RSUs and PSUs That Vested During The Year (in thousands)
Unvested as of December 31, 2019	366,467	$	28.89
Changes during the year:
Granted	322,180	18.11
Forfeited	(28,058)	23.79
Vested	(128,215)	29.48		$	3,780
Unvested as of December 31, 2020	532,374	22.49
Changes during the year:
Granted	221,774	21.93
Forfeited	(75,850)	21.95
Vested	(192,959)	23.42		5,077
Unvested as of December 31, 2021	485,339	21.95
Changes during the year:
Granted	99,887	28.99
Forfeited	(53,980)	25.66
Vested	(178,781)	21.91		4,787
Unvested as of December 31, 2022	352,465	23.40

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PENSION PLANS (Tables)

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

Schedule of information pertaining to the defined benefit retirement plan

The following tables set forth information pertaining to the defined benefit retirement plan:

	Year Ended December 31,
(Dollars in thousands)	2022		2021
Change in benefit obligation:
Benefit obligation at beginning of year	$	20,420	$	21,919
Interest cost	212		485
Actuarial gains	(1,766)		(427)
Benefits paid	(5,398)		(1,557)
Annuity purchase	(13,468)		—
Benefit obligation at end of the year	—		20,420
Change in plan assets, at fair value:
Fair value of plan assets at beginning of year	20,785		21,153
Actual return on plan assets	(1,969)		1,189
Employer contributions	50		—
Benefits paid	(5,398)		(1,557)
Annuity purchase	(13,468)		—
Fair value of plan assets at end of year	—		20,785
Funded status at end of year	$	—	$	365
Amounts recognized in AOCI:
Net actuarial losses	$	—	$	(4,699)
Benefit obligation actuarial assumptions:
Weighted-average discount rate	N/A		2.4		%

	Year Ended December 31,
(Dollars in thousands)	2022			2021			2020
Components of net periodic benefit cost:
Interest cost	$	212		$	485		$	641
Expected return on plan assets	(207)			(549)			(920)
Amortization of net actuarial losses	225			701			909
Settlement	4,884			—			—
Net periodic benefit cost	$	5,114		$	637		$	630
Net periodic cost actuarial assumptions:
Weighted-average discount rate	2.4		%	2.3		%	3.1		%
Expected long-term rate of return on plan assets	2.3		%	2.7		%	4.5		%

The following tables set forth information pertaining to the SERP:

	Year Ended December 31,
(Dollars in thousands)	2022			2021
Change in benefit obligation
Benefit obligation at beginning of year	$	12,297		$	12,740
Interest cost	301			264
Actuarial gains	(2,960)			(398)
Benefits paid	(418)			(309)
Benefit obligation at end of year	9,220			12,297
Change in plan assets
Fair value of plan assets at beginning of year	—			—
Employer contributions	418			309
Benefits paid	(418)			(309)
Fair value of plan assets at end of year	—			—
Funded status at end of year	$	(9,220)		$	(12,297)
Amounts recognized in AOCI
Net transition obligation	$	(7)		$	(26)
Net actuarial losses	701			(2,337)
Total amounts recognized in AOCI	$	694		$	(2,363)
Benefit obligation actuarial assumptions
Weighted-average discount rate	5.0		%	2.5		%

	Year Ended December 31,
(Dollars in thousands)	2022			2021			2020
Components of net periodic benefit cost
Interest cost	$	301		$	264		$	341
Amortization of net actuarial (gains) losses	79			335			251
Amortization of net transition obligation	18			18			18
Amortization of prior service cost	—			—			14
Net periodic benefit cost	$	398		$	617		$	624
Net periodic cost actuarial assumptions
Weighted-average discount rate	2.7		%	2.1		%	3.1		%

Schedule of asset allocations by asset category

The defined benefit retirement plan assets as of December 31, 2021 consisted of debt securities and money market funds. The asset allocations by asset category were as follows:

	December 31, 2021
Debt securities	85.9	%
Money market funds	14.1
Total	100.0	%

Schedule of fair values of the defined benefit retirement plan by asset category

The fair values of the defined benefit retirement plan as of December 31, 2021 by asset category were as follows: 

(Dollars in thousands)	Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
December 31, 2021
Money market funds	$	2,938	$	—	$	—	$	2,938
Exchange traded funds	10,712		—		—		10,712
Government obligations	—		1,899		—		1,899
Corporate bonds and debentures	—		5,236		—		5,236
Total	$	13,650	$	7,135	$	—	$	20,785

Schedule of estimated future benefit payments

Estimated future benefit payments reflecting expected future service for the SERP in each of the next five years, in the aggregate for the five years and thereafter are as follows:

(Dollars in thousands)
Year Ending December 31:
2023	$	573
2024	570
2025	566
2026	561
2027	556
2028-2032	4,817
Thereafter	1,577
Total	$	9,220

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OPERATING LEASES (Tables)

12 Months Ended

Dec. 31, 2022

Leases, Operating [Abstract]

Schedule of Lease Cost

Total lease cost, cash flow information, weighted-average remaining lease term and weighted-average discount rate is summarized below for the periods indicated:

	Year Ended December 31,
(Dollars in thousands)	2022			2021
Lease cost:
Operating lease cost	$	5,495		$	6,397
Variable lease cost	3,278			2,476
Less: sublease income	(48)			(78)
Total lease cost	$	8,725		8,795
Other information:
Operating cash flows from operating leases	$	(5,896)		$	(6,533)
Weighted-average remaining lease term - operating leases	11.22 years			11.91 years
Weighted-average discount rate - operating leases	3.95		%	3.93		%

Lessee, Operating Lease, Liability, Maturity

The following is a schedule of annual undiscounted cash flows for our operating leases and a reconciliation of those cash flows to the operating lease liabilities for the next five succeeding fiscal years and all years thereafter:

(Dollars in thousands)
Year Ending December 31,	Undiscounted Cash Flows		Lease Liability Expense		Lease Liability Reduction
2023	$	5,100	$	1,328	$	3,772
2024	4,438		1,202		3,236
2025	4,152		1,078		3,074
2026	4,089		958		3,131
2027	4,080		835		3,245
Thereafter	23,049		3,618		19,431
Total	$	44,908	$	9,019	$	35,889

Operating Lease, Lease Income

The following represents lease income related to these leases that was recognized for the periods indicated:

	Year Ended December 31,
(Dollars in thousands)	2022		2021
Total rental income recognized	$	2,228	2,094

Schedule of future minimum rental income for noncancellable operating leases that had initial lease terms in excess of one year

Based on the Company's leases as lessor as of December 31, 2022, estimated lease payments for the next five succeeding fiscal years and all years thereafter are as follows:

(Dollars in thousands)
Year Ending December 31,
2023	$	1,001
2024	835
2025	675
2026	555
2027	533
Thereafter	2,300
Total	$	5,899

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Schedule of components of income tax expense (benefit)

Components of income tax expense (benefit) for the years ended December 31, 2022, 2021 and 2020 were as follows:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Current expense:
Federal	$	996	$	11,304	$	22,014
State	(1,965)		3,626		2,833
Total current	(969)		14,930		24,847
Deferred expense:
Federal	18,854		8,654		(12,952)
State	6,956		2,174		(135)
Total deferred	25,810		10,828		(13,087)
Provision for income taxes	$	24,841	$	25,758	$	11,760

Schedule of the reasons of difference between the income tax expense (benefit) and the expected tax expense

Income tax expense (benefit) for the periods presented differed from the "expected" tax expense (computed by applying the U.S. federal corporate tax rate of 21% for the years ended December 31, 2022, 2021 and 2020, to income (loss) before income taxes) for the following reasons:

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Computed "expected" tax expense (benefit)	$	20,741	$	22,187	$	10,297
Increase (decrease) in taxes resulting from:
Tax-exempt interest income	(692)		(526)		(528)
Other tax-exempt income	(392)		(734)		(799)
Low-income housing tax credits	(530)		(365)		(332)
State income taxes, net of Federal income tax effect, excluding impact of deferred tax valuation allowance	4,982		5,377		2,590
Change in the beginning-of-the-year balance of the valuation allowance for deferred tax assets allocated to income tax expense	39		(39)		(22)
Other, net	693		(142)		554
Total	$	24,841	$	25,758	$	11,760

Schedule of the tax effects of temporary differences giving rise to significant portions of the deferred tax assets and deferred tax liabilities

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:

	December 31,
(Dollars in thousands)	2022		2021
Deferred tax assets
Lease liability	$	9,598	$	10,891
Allowance for credit losses	13,534		14,382
Accrued expenses	3,737		3,616
Employee retirement benefits	1,941		2,547
Federal net operating loss carryforwards	16,363		—
State net operating loss carryforwards	7,583		3,091
Restricted stock and non-qualified stock options	388		611
Premises and equipment	4,717		4,678
Other	9,504		6,333
Total deferred tax assets	67,365		46,149
Deferred tax liabilities
Right-of-use lease asset	9,356		10,546
Intangible assets	2,427		2,604
Other	3,647		3,808
Total deferred tax liabilities	15,430		16,958
Less: Deferred tax valuation allowance	3,398		3,359
Net deferred tax assets	$	48,537	$	25,832

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

12 Months Ended

Dec. 31, 2022

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of components of other comprehensive income (loss)

The following table presents the components of other comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020, by component:

(Dollars in thousands)	Before Tax		Tax Effect		Net of Tax
Year ended December 31, 2022
Net change in fair value of investment securities:
Net unrealized losses on investment securities arising during the period	$	(204,250)	$	(54,109)	$	(150,141)
Less: Amortization of unrealized losses on investment securities transferred to HTM	6,218		1,520		4,698
Net change in fair value of investment securities	(198,032)		(52,589)		(145,443)
Net change in fair value of derivative:
Net unrealized gains arising during the period	6,326		1,681		4,645
Net change in fair value of derivative	6,326		1,681		4,645
Defined benefit retirement plan and SERPs:
Net actuarial gains arising during the period	2,007		537		1,470
Amortization of net actuarial losses	304		81		223
Amortization of net transition obligation	18		4		14
Settlement	4,884		1,817		3,067
Defined benefit retirement plan and SERPs	7,213		2,439		4,774
Other comprehensive loss	$	(184,493)	$	(48,469)	$	(136,024)

(Dollars in thousands)	Before Tax		Tax Effect		Net of Tax
Year ended December 31, 2021
Net change in fair value of investment securities:
Net unrealized losses on investment securities arising during the period	$	(41,237)	$	(11,030)	$	(30,207)
Less: Reclassification adjustment for gains realized in net income	(150)		(40)		(110)
Net change in fair value of investment securities	(41,387)		(11,070)		(30,317)
Defined benefit retirement plan and SERPs:
Net actuarial gains arising during the period	2,014		544		1,470
Amortization of net actuarial losses	1,036		291		745
Amortization of net transition obligation	18		4		14
Defined benefit retirement plan and SERPs	3,068		839		2,229
Other comprehensive loss	$	(38,319)	$	(10,231)	$	(28,088)

(Dollars in thousands)	Before Tax		Tax Effect		Net of Tax
Year ended December 31, 2020
Net change in fair value of investment securities:
Net unrealized gains on investment securities arising during the period	$	15,939	$	4,260	$	11,679
Less: Reclassification adjustment for losses realized in net income	201		54		147
Net change in fair value of investment securities	16,140		4,314		11,826
Defined benefit retirement plan and SERPs:
Net actuarial losses arising during the period	(1,488)		(508)		(980)
Amortization of net actuarial losses	1,160		310		850
Amortization of net transition obligation	18		5		13
Amortization of prior service cost	14		4		10
Defined benefit retirement plan and SERPs	(296)		(189)		(107)
Other comprehensive income	$	15,844	$	4,125	$	11,719

Schedule of changes in each component of AOCI, net of tax

The following table presents the changes in each component of AOCI, net of tax, for the years ended December 31, 2022, 2021 and 2020:

(Dollars in thousands)	Investment Securities		Derivatives		Defined Benefit Plans		AOCI
Year ended December 31, 2022
Balance at beginning of period	$	(3,666)	$	—	$	(4,294)	$	(7,960)
Other comprehensive (loss) income before reclassifications	(150,141)		4,645		1,470		(144,026)
Amounts reclassified from AOCI	4,698		—		3,304		8,002
Net other comprehensive income (loss)	(145,443)		4,645		4,774		(136,024)
Balance at end of period	$	(149,109)	$	4,645	$	480	$	(143,984)

(Dollars in thousands)	Investment Securities		Defined Benefit Plans		AOCI
Year ended December 31, 2021
Balance at beginning of period	$	26,651	$	(6,523)	$	20,128
Other comprehensive (loss) income before reclassifications	(30,207)		1,470		(28,737)
Amounts reclassified from AOCI	(110)		759		649
Net other comprehensive income (loss)	(30,317)		2,229		(28,088)
Balance at end of period	$	(3,666)	$	(4,294)	$	(7,960)

(Dollars in thousands)	Investment Securities		Defined Benefit Plans		AOCI
Year ended December 31, 2020
Balance at beginning of period	$	14,825	$	(6,416)	$	8,409
Other comprehensive income (loss) before reclassifications	11,679		(980)		10,699
Amounts reclassified from AOCI	147		873		1,020
Total other comprehensive income (loss)	11,826		(107)		11,719
Balance at end of period	$	26,651	$	(6,523)	$	20,128

Schedule of amounts reclassified out of each component of AOCI

The following table presents the amounts reclassified out of each component of AOCI for the years ended December 31, 2022, 2021 and 2020:

	Amount Reclassified from AOCI						Affected Line Item in the
	Year ended December 31,						Statement Where Net
Details about AOCI Components	2022		2021		2020		Income is Presented
	(Dollars in thousands)
Sale of available-for-sale investment securities:
Realized gains (losses) on available-for-sale investment securities	$	—	$	150	$	(201)	Net gains (losses) on sales of investment securities
Tax effect	—		(40)		54		Income tax benefit (expense)
Net of tax	$	—	$	110	$	(147)
Amortization of unrealized losses on investment securities transferred to HTM	$	(6,218)	$	—	$	—	Interest and dividends on investment securities
Tax effect	1,520		—		—		Income tax expense
Net of tax	$	(4,698)	$	—	$	—
Defined benefit plan items:
Amortization of net actuarial losses	$	(304)	$	(1,036)	$	(1,160)	Other operating expense - other (1)
Amortization of net transition obligation	(18)		(18)		(18)		Other operating expense - other (1)
Amortization of prior service cost	—		—		(14)		Other operating expense - other (1)
Settlement	(4,884)		—		—		Other operating expense - other (1)
Total before tax	(5,206)		(1,054)		(1,192)
Tax effect	1,902		295		319		Income tax expense
Net of tax	$	(3,304)	$	(759)	$	(873)
Total reclassifications, net of tax	$	(8,002)	$	(649)	$	(1,020)

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EARNINGS PER SHARE (Tables)

12 Months Ended

Dec. 31, 2022

Earnings Per Share [Abstract]

Schedule of information used to compute basic and diluted earnings per share

The table below presents the information used to compute basic and diluted earnings per share for the years ended December 31, 2022, 2021 and 2020:

	Year Ended December 31,
(In thousands, except per share data)	2022		2021		2020
Net income	$	73,928	$	79,894	$	37,273
Weighted-average shares outstanding for basic earnings per share	27,398,445		28,003,744		28,074,543
Add: Dilutive effect of employee stock options and awards	169,335		253,579		106,033
Weighted-average shares outstanding for diluted earnings per share	27,567,780		28,257,323		28,180,576
Basic earnings per share	$	2.70	$	2.85	$	1.33
Diluted earnings per share	$	2.68	$	2.83	$	1.32

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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (Tables)

12 Months Ended

Dec. 31, 2022

Investments, All Other Investments [Abstract]

Schedule of financial instruments with off-balance sheet risk

At December 31, 2022 and 2021, financial instruments with off-balance sheet risk were as follows:

	December 31,
(Dollars in thousands)	2022		2021
Notional amount of:
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	1,328,791	$	1,266,596
Standby letters of credit and financial guarantees written	5,367		6,634
Notional amount of:
Financial instruments whose contract amounts exceed the amount of credit risk:
Back-to-back swap agreements:
Assets	32,335		33,112
Liabilities	32,335		33,112
Forward interest rate contracts	1,110		3,525
Risk participation agreements	36,835		37,531
Interest rate swap agreements	115,545		—

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FAIR VALUE OF ASSETS AND LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Schedule of carrying amount and estimated fair value of financial instruments

					Fair Value Measurement Using
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022
Financial assets:
Cash and due from financial institutions	$	97,150	$	97,150	$	97,150	$	—	$	—
Interest-bearing deposits in other financial institutions	14,894		14,894		14,894		—		—
Investment securities	1,336,677		1,268,574		—		1,261,306		7,268
Loans held for sale	1,105		1,105		—		1,105		—
Loans, net of ACL	5,491,728		5,043,436		—		—		5,043,436
Accrued interest receivable	20,345		20,345		20,345		—		—
Financial liabilities:
Deposits:
Noninterest-bearing deposits	2,092,823		2,092,823		2,092,823		—		—
Interest-bearing demand and savings deposits	3,652,195		3,652,195		3,652,195		—		—
Time deposits	991,205		975,086		—		—		975,086
FHLB advances and other short-term borrowings	5,000		5,000		—		5,000		—
Long-term debt	105,859		93,729		—		—		93,729
Accrued interest payable (included in other liabilities)	4,739		4,739		4,739		—		—

							Fair Value Measurement Using
(Dollars in thousands)	Notional Amount		Carrying Amount		Estimated Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022
Off-balance sheet financial instruments:
Commitments to extend credit	$	1,328,791	$	—	$	1,270	$	—	$	1,270	$	—
Standby letters of credit and financial guarantees written	5,367		—		80		—		80		—
Derivatives:
Back-to-back swap agreements:
Assets	32,335		4,611		4,611		—		—		4,611
Liabilities	(32,335)		(4,611)		(4,611)		—		—		(4,611)
Forward sale commitments	1,110		8		8		—		8		—
Risk participation agreements	36,835		—		—		—		—		—
Interest rate swap agreements	115,545		5,986		5,986		—		—		5,986

					Fair Value Measurement Using
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2021
Financial assets:
Cash and due from financial institutions	$	81,506	$	81,506	$	81,506	$	—	$	—
Interest-bearing deposits in other financial institutions	247,401		247,401		247,401		—		—
Investment securities	1,631,699		1,631,699		—		1,623,080		8,619
Loans held for sale	3,531		3,531		—		3,531		—
Loans, net of ACL	5,033,552		4,741,379		—		—		4,741,379
Accrued interest receivable	16,709		16,709		16,709		—		—
Financial liabilities:
Deposits:
Noninterest-bearing deposits	2,291,246		2,291,246		2,291,246		—		—
Interest-bearing demand and savings deposits	3,641,180		3,641,180		3,641,180		—		—
Time deposits	706,732		704,645		—		—		704,645
Long-term debt	105,616		94,558		—		—		94,558
Accrued interest payable (included in other liabilities)	1,122		1,122		1,122		—		—

							Fair Value Measurement Using
(Dollars in thousands)	Notional Amount		Carrying Amount		Estimated Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2021
Off-balance sheet financial instruments:
Commitments to extend credit	$	1,266,596	$	—	$	1,347	$	—	$	1,347	$	—
Standby letters of credit and financial guarantees written	6,634		—		100		—		100		—
Derivatives:
Back-to-back swap agreements:
Assets	33,112		435		435		—		—		435
Liabilities	33,112		(435)		(435)		—		—		(435)
Forward sale commitments	3,525		1		1		—		1		—
Risk participation agreements	37,531		(16)		(16)		—		—		(16)

Schedule of balances of assets and liabilities measured at fair value on a recurring basis

The following table below presents the fair value of assets and liabilities measured on a recurring basis:

			Fair Value at Reporting Date Using
(Dollars in thousands)	Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022
Available-for-sale investment securities:
Debt securities:
States and political subdivisions	$	135,752	$	—	$	129,168	$	6,584
Corporate securities	30,211		—		30,211		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	25,715		—		25,715		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	423,803		—		423,803		—
Residential - Non-government sponsored entities ("Non-GSEs")	8,662		—		7,978		684
Commercial - U.S. GSEs and agencies	46,144		—		46,144		—
Commercial - Non-GSEs	1,507		—		1,507		—
Total investment securities	671,794		—		664,526		7,268
Derivatives:
Forward sale commitments	8		—		8		—
Interest rate swap agreements	5,986		—		—		5,986
Total derivatives	5,994		—		8		5,986
Total	$	677,788	$	—	$	664,534	$	13,254

			Fair Value at Reporting Date Using
(Dollars in thousands)	Fair Value		Quoted Prices in Active  Markets for  Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2021
Available-for-sale investment securities:
Debt securities:
States and political subdivisions	$	236,828	$	—	$	229,147	$	7,681
Corporate securities	40,646		—		40,646		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	35,334		—		35,334		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	1,198,816		—		1,198,816		—
Residential - Non-government sponsored entities ("Non-GSEs")	12,213		—		11,275		938
Commercial - U.S. GSEs and agencies	65,849		—		65,849		—
Commercial - Non-GSEs	42,013		—		42,013		—
Total investment securities	1,631,699		—		1,623,080		8,619
Derivatives:
Interest rate lock commitments	1		—		1		—
Forward sale commitments	(16)		—		—		(16)
Total derivatives	(15)		—		1		(16)
Total	$	1,631,684	$	—	$	1,623,081	$	8,603

Schedule of changes in Level 3 assets and liabilities measured at fair value on a recurring basis

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:

	Available-For-Sale Debt Securities:
(Dollars in thousands)	States and Political Subdivisions		Residential - Non-Government Agencies		Total
Balance as of December 31, 2020	$	11,337	$	989	$	12,326
Principal payments received	(2,841)		(22)		(2,863)
Unrealized net loss included in other comprehensive loss	(815)		(29)		(844)
Balance as of December 31, 2021	7,681		938		8,619
Principal payments received	(212)		(23)		(235)
Unrealized net loss included in other comprehensive loss	(885)		(231)		(1,116)
Balance as of December 31, 2022	$	6,584	$	684	$	7,268

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PARENT COMPANY AND REGULATORY RESTRICTIONS (Tables)

12 Months Ended

Dec. 31, 2022

Condensed Financial Information Disclosure [Abstract]

Schedule of actual and required capital ratios as well as the minimum capital adequacy requirements applicable generally to all financial institutions

The following table sets forth actual and required capital and capital ratios for the Company and the bank, as well as the minimum capital adequacy requirements applicable generally to all financial institutions as of the dates indicated.

	Actual				Minimum required for capital adequacy purposes				Minimum required to be well-capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio (1)		Amount		Ratio
Company
As of December 31, 2022
Tier 1 capital to avg. assets (leverage ratio)	$	642,302	8.5	%	$	301,053	4.0	%			N/A
Tier 1 capital to risk-weighted assets	642,302		11.3		340,151		6.0				N/A
Total capital to risk-weighted assets	764,283		13.5		453,535		8.0				N/A
Common equity tier 1 ("CET1") capital to risk-weighted assets	592,302		10.5		255,113		4.5				N/A
As of December 31, 2021
Tier 1 capital to avg. assets (leverage ratio)	622,130		8.5		293,382		4.0				N/A
Tier 1 capital to risk-weighted assets	622,130		12.2		307,215		6.0				N/A
Total capital to risk-weighted assets	741,291		14.5		409,620		8.0				N/A
CET1 capital to risk-weighted assets	572,130		11.2		230,411		4.5				N/A
Central Pacific Bank
As of December 31, 2022
Tier 1 capital to avg. assets (leverage ratio)	$	675,331	9.0	%	$	300,584	4.0	%	$	375,730	5.0	%
Tier 1 capital to risk-weighted assets	675,331		11.9		339,422		6.0		452,563		8.0
Total capital to risk-weighted assets	742,312		13.1		452,563		8.0		565,704		10.0
CET1 capital to risk-weighted assets	675,331		11.9		254,567		4.5		367,708		6.5
As of December 31, 2021
Tier 1 capital to avg. assets (leverage ratio)	652,987		8.9		292,877		4.0		366,096		5.0
Tier 1 capital to risk-weighted assets	652,987		12.8		306,497		6.0		408,663		8.0
Total capital to risk-weighted assets	717,000		14.0		408,663		8.0		510,828		10.0
CET1 capital to risk-weighted assets	652,987		12.8		229,873		4.5		332,038		6.5
(1) Under the Basel III Capital Rules, the Company and the bank must also maintain the required Capital Conservation Buffer ("CCB") to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. The CCB is calculated as a ratio of CET1 capital to risk-weighted assets, and effectively increases the required minimum risk-based capital ratios. The CCB requirement was phased in over a three-year period that began on January 1, 2016. The phase-in period ended on January 1, 2019, and the CCB is now at its fully phased-in level of 2.5%.

Schedule of condensed balance sheets

	December 31,
(Dollars in thousands)	2022		2021
Assets
Cash and cash equivalents	$	16,915	$	20,090
Investment in subsidiary bank	534,817		639,050
Other assets	14,442		12,029
Total assets	$	566,174	$	671,169
Liabilities and Equity
Long-term debt	$	105,859	$	105,616
Other liabilities	7,444		7,334
Total liabilities	113,303		112,950
Shareholders’ equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding none at December 31, 2022 and 2021	—		—
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding 27,025,070 and 27,714,071 shares at December 31, 2022 and 2021, respectively	408,071		433,263
Additional paid-in capital	101,346		98,073
Retained earnings	87,438		34,843
Accumulated other comprehensive loss	(143,984)		(7,960)
Total shareholders’ equity	452,871		558,219
Total equity	452,871		558,219
Total liabilities and equity	$	566,174	$	671,169

Schedule of condensed statements of operations

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Income:
Dividends from subsidiary bank	$	47,427	$	54,016	$	24,015
Interest income:
Interest income from subsidiary bank	3		3		4
Other income	64		43		52
Total income	47,494		54,062		24,071
Expense:
Interest expense on long-term debt	4,930		4,097		2,095
Other expenses	2,317		3,504		1,293
Total expenses	7,247		7,601		3,388
Income before income taxes and equity in undistributed income of subsidiaries	40,247		46,461		20,683
Income tax expense (benefit)	(1,917)		(1,968)		(690)
Income before equity in undistributed income of subsidiaries	42,164		48,429		21,373
Equity in undistributed income of subsidiary bank	31,764		31,465		15,900
Net income	$	73,928	$	79,894	$	37,273

Schedule of condensed statements of cash flows

	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Cash flows from operating activities:
Net income	$	73,928	$	79,894	$	37,273
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax expense (benefit)	(26)		70		2,552
Equity in undistributed income of subsidiary bank	(31,764)		(31,465)		(15,900)
Share-based compensation expense	3,273		3,231		3,231
Net change in other assets and liabilities	(20)		(85)		(3,010)
Net cash provided by operating activities	45,391		51,645		24,146
Cash flows from investing activities:
Contributions to subsidiary bank	—		—		(46,750)
Proceeds from sale of investment securities	—		1,653		—
Net cash provided by (used in) investing activities	—		1,653		(46,750)
Cash flows from financing activities:
Net proceeds from issuance of common stock and stock option exercises	679		1,236		—
Net proceeds from subordinated debt	—		—		53,838
Repurchases of common stock	(20,740)		(18,669)		(4,749)
Cash dividends paid on common stock	(28,505)		(26,959)		(25,935)
Net cash (used in) provided by financing activities	(48,566)		(44,392)		23,154
Net (decrease) increase in cash and cash equivalents	(3,175)		8,906		550
Cash and cash equivalents at beginning of year	20,090		11,184		10,634
Cash and cash equivalents at end of year	$	16,915	$	20,090	$	11,184

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Premises and Equipment) (Details) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($) branch machine loan	Dec. 31, 2021 USD ($)	Jan. 31, 2020
Accounting Policies [Line Items]
Investments in unconsolidated subsidiaries accounted for under the equity methods		$ 100	$ 200
Proportional amortization investments		40,900	25,900
Investments in unconsolidated subsidiaries accounted for under the cost methods		$ 5,600	3,600
Debt Securities, Available-for-Sale, Accrued Interest, after Allowance for Credit Loss, Statement of Financial Position [Extensible Enumeration]		Accrued interest receivable
Available for sale accrued interest receivable		$ 3,100	4,600
Debt Securities, Held-to-Maturity, Accrued Interest, after Allowance for Credit Loss, Statement of Financial Position [Extensible Enumeration]		Accrued interest receivable
Held-to-maturity accrued interest receivable		$ 1,300
Number of types of loans held for sale | loan		2
Financing Receivable, Accrued Interest, after Allowance for Credit Loss, Statement of Financial Position [Extensible Enumeration]		Accrued interest receivable
Accrued interest receivable on loans		$ 16,000	12,100
Non-controlling interest		$ 0	48
Minimum | Office buildings and improvements
Accounting Policies [Line Items]
Useful life		5 years
Minimum | Equipment
Accounting Policies [Line Items]
Useful life		1 year
Maximum | Office buildings and improvements
Accounting Policies [Line Items]
Useful life		39 years
Maximum | Equipment
Accounting Policies [Line Items]
Useful life		7 years
Oahu HomeLoans, LLC
Accounting Policies [Line Items]
Ownership interest				50.00%
Island Pacific HomeLoans, LLC
Accounting Policies [Line Items]
Ownership interest		50.00%
Gentry Home Loans LLC
Accounting Policies [Line Items]
Ownership interest		50.00%
Haseko Home Loans LLC
Accounting Policies [Line Items]
Ownership interest		50.00%
Swell Financial, Inc.
Accounting Policies [Line Items]
Investments in unconsolidated subsidiaries accounted for under the equity methods	$ 2,000
Other intangible assets and services provided for common stock	1,500
Payments for repurchase of convertible preferred stock	$ 500
JAM FINTOP Banktech Fund, L.P.
Accounting Policies [Line Items]
Investments in unconsolidated subsidiaries accounted for under the equity methods			$ 2,000
Central Bank
Accounting Policies [Line Items]
Number of branches | branch		27
Number of ATMs | machine		64

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INVESTMENT SECURITIES (Available for Sale and Held to Maturity Investment Securities) (Details) - USD ($)	Dec. 31, 2022	May 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Held-to-Maturity:
Amortized Cost	$ 664,883,000			$ 0
Gross Unrecognized Gains	0
Gross Unrecognized Losses	(68,103,000)
Fair Value	596,780,000	$ 343,700,000	$ 329,500,000	0
ACL	0
Available-for-Sale:
Amortized Cost	801,370,000			1,646,508,000
Gross Unrecognized Gains	6,000			9,924,000
Gross Unrecognized Losses	(129,582,000)			(24,733,000)
Fair Value	671,794,000			1,631,699,000
ACL	0			0
States and political subdivisions
Held-to-Maturity:
Amortized Cost	41,840,000
Gross Unrecognized Gains	0
Gross Unrecognized Losses	(4,727,000)
Fair Value	37,113,000
ACL	0
Available-for-Sale:
Amortized Cost	172,427,000			235,521,000
Gross Unrecognized Gains	6,000			3,156,000
Gross Unrecognized Losses	(36,681,000)			(1,849,000)
Fair Value	135,752,000			236,828,000
ACL	0			0
Residential - U.S. Government-sponsored entities ("GSEs")
Held-to-Maturity:
Amortized Cost	623,043,000
Gross Unrecognized Gains	0
Gross Unrecognized Losses	(63,376,000)
Fair Value	559,667,000
ACL	0
Available-for-Sale:
Amortized Cost	498,989,000			1,213,910,000
Gross Unrecognized Gains	0			4,899,000
Gross Unrecognized Losses	(75,186,000)			(19,993,000)
Fair Value	423,803,000			1,198,816,000
ACL	0			0
Corporate securities
Available-for-Sale:
Amortized Cost	36,206,000			41,687,000
Gross Unrecognized Gains	0			24,000
Gross Unrecognized Losses	(5,995,000)			(1,065,000)
Fair Value	30,211,000			40,646,000
ACL	0			0
U.S. Treasury obligations and direct obligations of U.S Government agencies
Available-for-Sale:
Amortized Cost	28,032,000			35,833,000
Gross Unrecognized Gains	0			69,000
Gross Unrecognized Losses	(2,317,000)			(568,000)
Fair Value	25,715,000			35,334,000
ACL	0			0
Residential - Non-Government Agencies
Available-for-Sale:
Amortized Cost	9,829,000			11,942,000
Gross Unrecognized Gains	0			335,000
Gross Unrecognized Losses	(1,167,000)			(64,000)
Fair Value	8,662,000			12,213,000
ACL	0			0
Commercial - U.S. GSEs and agencies
Available-for-Sale:
Amortized Cost	54,346,000			66,287,000
Gross Unrecognized Gains	0			756,000
Gross Unrecognized Losses	(8,202,000)			(1,194,000)
Fair Value	46,144,000			65,849,000
ACL	0			0
Commercial - Non-GSEs
Available-for-Sale:
Amortized Cost	1,541,000			41,328,000
Gross Unrecognized Gains	0			685,000
Gross Unrecognized Losses	(34,000)			0
Fair Value	1,507,000			42,013,000
ACL	$ 0			$ 0

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INVESTMENT SECURITIES (Amortized Cost and Estimated Fair Value of Investment Securities) (Details) - USD ($)	Dec. 31, 2022	May 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Amortized Cost
Due in one year or less	$ 0
Due after one year through five years	0
Due after five years through ten years	0
Due after ten years	41,840,000
Amortized Cost	664,883,000			$ 0
Fair Value
Due in one year or less	0
Due after one year through five years	0
Due after five years through ten years	0
Due after ten years	37,113,000
Fair Value	$ 596,780,000	$ 343,700,000	$ 329,500,000	0
Weighted Average Yield
Due in one year or less (in percent)	0.00%
Due after one year through five years (in percent)	0.00%
Due after give years through ten years (in percent)	0.00%
Due after ten years (in percent)	2.26%
Weighted Average Yield	1.95%
Amortized Cost
Due in one year or less	$ 5,774,000
Due after one year through five years	15,816,000
Due after five years through ten years	79,803,000
Due after ten years	135,272,000
Amortized Cost	801,370,000			1,646,508,000
Fair Value
Due in one year or less	5,751,000
Due after one year through five years	15,458,000
Due after five years through ten years	70,558,000
Due after ten years	99,911,000
Fair Value	$ 671,794,000			1,631,699,000
Weighted Average Yield
Due in one year or less (in percent)	2.91%
Due after one year through five years (in percent)	3.75%
Due after five years through ten years (in percent)	2.60%
Due after ten years (in percent)	2.43%
Weighted Average Yield	2.24%
Total Investment Securities, Amortized Cost	$ 1,466,253,000
Total Investment Securities, Fair Value	$ 1,268,574,000
Total Investment Securities, Weighted Average Yield	0.0210
Residential - U.S. Government-sponsored entities ("GSEs")
Amortized Cost
Without single maturity date	$ 623,043,000
Amortized Cost	623,043,000
Fair Value
Without single maturity date	559,667,000
Fair Value	$ 559,667,000
Weighted Average Yield
Without single maturity date (in percent)	1.93%
Amortized Cost
Without single maturity date	$ 498,989,000
Amortized Cost	498,989,000			1,213,910,000
Fair Value
Without single maturity date	423,803,000
Fair Value	$ 423,803,000			1,198,816,000
Weighted Average Yield
Without single maturity date (in percent)	2.03%
Residential - Non-Government Agencies
Amortized Cost
Without single maturity date	$ 9,829,000
Amortized Cost	9,829,000			11,942,000
Fair Value
Without single maturity date	8,662,000
Fair Value	$ 8,662,000			12,213,000
Weighted Average Yield
Without single maturity date (in percent)	3.33%
Commercial - U.S. GSEs and agencies
Amortized Cost
Without single maturity date	$ 54,346,000
Amortized Cost	54,346,000			66,287,000
Fair Value
Without single maturity date	46,144,000
Fair Value	$ 46,144,000			65,849,000
Weighted Average Yield
Without single maturity date (in percent)	2.35%
Commercial - Non-GSEs
Amortized Cost
Without single maturity date	$ 1,541,000
Amortized Cost	1,541,000			41,328,000
Fair Value
Without single maturity date	1,507,000
Fair Value	$ 1,507,000			$ 42,013,000
Weighted Average Yield
Without single maturity date (in percent)	4.10%

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INVESTMENT SECURITIES (Narrative) (Details)	1 Months Ended		12 Months Ended
	May 31, 2022 USD ($) investment	Mar. 31, 2022 USD ($) investment	Dec. 31, 2022 USD ($) security	Dec. 31, 2021 USD ($) security	Dec. 31, 2020 USD ($)	Jun. 30, 2022 USD ($) shares
EQUITY
Investment securities classified from available-for-sale to held-to-maturity | investment	40	41
Investment securities, amortized cost basis	$ 400,900,000	$ 361,800,000
Fair Value	343,700,000	329,500,000	$ 596,780,000	$ 0
Net unrealized loss from transfer of securities	$ 57,200,000	$ 32,300,000
Proceeds from sales of available-for-sale and equity investment securities				279,500,000	$ 180,100,000
Net gains (losses) on sales of investment securities			$ 8,506,000	150,000	(201,000)
Gross realized gains				3,400,000	700,000
Gross realized losses				3,200,000	$ 900,000
Proceeds from sale of equity method i investment securities				$ 1,700,000
Number of investment securities in an unrealized loss position | security			243	153
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding 27,025,070 and 27,714,071 shares at December 31, 2022 and 2021, respectively			$ 408,071,000	$ 426,091,000
Common Class B | Visa
EQUITY
Shares owned (in shares) | shares						34,631
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding 27,025,070 and 27,714,071 shares at December 31, 2022 and 2021, respectively						$ 8,500,000
Collateralized Mortgage-Backed Securities | Asset Pledged as Collateral without Right
EQUITY
Available-for-sale debt securities, at fair value			$ 607,700,000	$ 455,800,000

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INVESTMENT SECURITIES (Investment Securities at an Unrealized Loss Position) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Held-to-Maturity:
Less Than 12 Months, Fair Value	$ 596,780
Less Than 12 Months, Unrecognized Losses	(68,103)
12 Month or Longer, Fair Value	0
12 Month or Longer, Unrecognized Losses	0
Total Fair Value	596,780
Total Unrecognized Losses	(68,103)
Available-for-Sale:
Less than 12 months, Fair Value	240,949	$ 1,036,979
Less Than 12 Months, Unrecognized Losses	(21,134)	(17,990)
12 Month or Longer, Fair Value	425,202	175,681
12 Month or Longer, Unrecognized Losses	(108,448)	(6,743)
Total Fair Value	666,151	1,212,660
Total Unrecognized Losses	129,582	24,733
States and political subdivisions
Held-to-Maturity:
Less Than 12 Months, Fair Value	37,113
Less Than 12 Months, Unrecognized Losses	(4,727)
12 Month or Longer, Fair Value	0
12 Month or Longer, Unrecognized Losses	0
Total Fair Value	37,113
Total Unrecognized Losses	(4,727)
Available-for-Sale:
Less than 12 months, Fair Value	52,244	79,360
Less Than 12 Months, Unrecognized Losses	(4,807)	(1,252)
12 Month or Longer, Fair Value	78,389	10,864
12 Month or Longer, Unrecognized Losses	(31,874)	(597)
Total Fair Value	130,633	90,224
Total Unrecognized Losses	36,681	1,849
Corporate securities
Available-for-Sale:
Less than 12 months, Fair Value	0	8,633
Less Than 12 Months, Unrecognized Losses	0	(235)
12 Month or Longer, Fair Value	30,211	21,960
12 Month or Longer, Unrecognized Losses	(5,995)	(830)
Total Fair Value	30,211	30,593
Total Unrecognized Losses	5,995	1,065
U.S. Treasury obligations and direct obligations of U.S Government agencies
Available-for-Sale:
Less than 12 months, Fair Value	9,651	16,103
Less Than 12 Months, Unrecognized Losses	(245)	(415)
12 Month or Longer, Fair Value	15,541	10,891
12 Month or Longer, Unrecognized Losses	(2,072)	(153)
Total Fair Value	25,192	26,994
Total Unrecognized Losses	2,317	568
Residential - U.S. Government-sponsored entities ("GSEs")
Held-to-Maturity:
Less Than 12 Months, Fair Value	559,667
Less Than 12 Months, Unrecognized Losses	(63,376)
12 Month or Longer, Fair Value	0
12 Month or Longer, Unrecognized Losses	0
Total Fair Value	559,667
Total Unrecognized Losses	(63,376)
Available-for-Sale:
Less than 12 months, Fair Value	149,624	926,570
Less Than 12 Months, Unrecognized Losses	(13,990)	(15,883)
12 Month or Longer, Fair Value	274,179	114,747
12 Month or Longer, Unrecognized Losses	(61,196)	(4,110)
Total Fair Value	423,803	1,041,317
Total Unrecognized Losses	75,186	19,993
Residential - Non-GSEs
Available-for-Sale:
Less than 12 months, Fair Value	2,890	0
Less Than 12 Months, Unrecognized Losses	(334)	0
12 Month or Longer, Fair Value	5,772	938
12 Month or Longer, Unrecognized Losses	(833)	(64)
Total Fair Value	8,662	938
Total Unrecognized Losses	1,167	64
Commercial - Non-GSEs
Available-for-Sale:
Less than 12 months, Fair Value	25,034	6,313
Less Than 12 Months, Unrecognized Losses	(1,724)	(205)
12 Month or Longer, Fair Value	21,110	16,281
12 Month or Longer, Unrecognized Losses	(6,478)	(989)
Total Fair Value	46,144	22,594
Total Unrecognized Losses	8,202	$ 1,194
Commercial - Non-GSEs
Available-for-Sale:
Less than 12 months, Fair Value	1,506
Less Than 12 Months, Unrecognized Losses	(34)
12 Month or Longer, Fair Value	0
12 Month or Longer, Unrecognized Losses	0
Total Fair Value	1,506
Total Unrecognized Losses	$ 34

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LOANS AND LEASES (Loans and Leases) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
LOANS AND LEASES
Loans and leases, gross	$ 5,556,312	$ 5,105,758
Net deferred costs	(846)	(4,109)
Total loans, net of deferred fees and costs	5,555,466	5,101,649
Allowance for credit losses	(63,738)	(68,097)
Loans, net of allowance for credit losses	5,491,728	5,033,552
Commercial, financial and agricultural:
LOANS AND LEASES
Loans and leases, gross		530,383
Net deferred costs		(262)
Total loans, net of deferred fees and costs		530,121
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP")
LOANS AND LEASES
Loans and leases, gross	2,654	94,850
Net deferred costs	(99)	(3,523)
Total loans, net of deferred fees and costs	2,555	91,327
Commercial, financial and agricultural: | Other
LOANS AND LEASES
Loans and leases, gross	544,495	530,383
Net deferred costs	(548)
Total loans, net of deferred fees and costs	543,947
Real estate: | Construction
LOANS AND LEASES
Loans and leases, gross	167,366	123,351
Net deferred costs	(643)	(484)
Total loans, net of deferred fees and costs	166,723	122,867
Real estate: | Residential mortgage
LOANS AND LEASES
Loans and leases, gross	1,940,456	1,875,200
Net deferred costs	543	780
Total loans, net of deferred fees and costs	1,940,999	1,875,980
Real estate: | Home equity
LOANS AND LEASES
Loans and leases, gross	737,386	635,721
Net deferred costs	1,994	1,528
Total loans, net of deferred fees and costs	739,380	637,249
Real estate: | Commercial mortgage
LOANS AND LEASES
Loans and leases, gross	1,364,998	1,222,138
Net deferred costs	(1,923)	(1,934)
Total loans, net of deferred fees and costs	1,363,075	1,220,204
Consumer | Consumer
LOANS AND LEASES
Loans and leases, gross	798,957	624,115
Net deferred costs	(170)	(214)
Total loans, net of deferred fees and costs	$ 798,787	$ 623,901

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LOANS AND LEASES (Narrative) (Details)		12 Months Ended
	Mar. 27, 2020	Dec. 31, 2022 USD ($) loan	Dec. 31, 2021 USD ($) segment loan	Dec. 31, 2020 USD ($) loan	Aug. 31, 2020 USD ($) segment
LOANS AND LEASES
Debt instrument, interest rate, stated percentage	1.00%
Number of loans issued by financial institutions through the SBA | segment			4,600		7,200
Loans issued by financial institutions through the SBA			$ 320,900,000		$ 558,900,000
Processing fees from loans issued by financial institutions through the SBA			18,400,000		$ 21,200,000
Payment For (Proceeds From) Loans And Leases, Payment Of PPP Loans Forgiven		$ 877,100,000
Loans and leases		5,556,312,000	5,105,758,000
Loans and Leases Receivable, Deferred Income		846,000	4,109,000
Net transfer of portfolio loans to loans held for sale		0	0	$ 6,565,000
Related party balance		$ 37,400,000	36,400,000
Mortgage loans foreclosure, number | loan		0
Additional interest income that would have been recognized, had nonaccrual loans been accruing interest throughout		$ 1,600,000	800,000	400,000
Interest income, accrual		200,000	300,000	200,000
Interest income collected and recognized on charged-off loans		$ 300,000	$ 300,000	$ 200,000
Number of loans modified as a TDR | loan		0	0	0
Accruing Loans 90+  Days Past Due
LOANS AND LEASES
Amount of TDRs still accruing interest		$ 0	$ 0
Nonperforming Financial Instruments
LOANS AND LEASES
Amount of TDRs still accruing interest		2,800,000	4,900,000
Commercial Financial And Agricultural Portfolio Segment [Member]
LOANS AND LEASES
Loans and leases			530,383,000
Loans and Leases Receivable, Deferred Income			262,000
Commercial Financial And Agricultural Portfolio Segment [Member] | Small Business Administration Paycheck Protection Program ("SBA PPP")
LOANS AND LEASES
Loans and leases		2,654,000	94,850,000
Loans and Leases Receivable, Deferred Income		99,000	3,523,000
Real estate: | Residential mortgage
LOANS AND LEASES
Loans and leases		1,940,456,000	1,875,200,000
Loans and Leases Receivable, Deferred Income		(543,000)	(780,000)
Loans in foreclosure		$ 100,000	$ 700,000
Residential portfolio segment | HAWAII | Nonperforming Financial Instruments
LOANS AND LEASES
Number of TDRs included in nonperforming assets | loan		5	4
Combined principal balance of troubled debt restructurings included in nonperforming assets		$ 1,100,000	$ 400,000
Minimum
LOANS AND LEASES
Debt instrument, term	2 years
Debt issuance costs, percent	1.00%
Maximum
LOANS AND LEASES
Debt instrument, term	5 years
Debt issuance costs, percent	5.00%

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LOANS AND LEASES (Purchases) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Loans and Leases Receivable Disclosure [Line Items]
Outstanding balance	$ 330,783	$ 271,245
Purchase (discount) premium	(7,381)	(4,533)
Purchase price	323,402	266,712
Consumer
Loans and Leases Receivable Disclosure [Line Items]
Outstanding balance	229,283	199,813
Purchase (discount) premium	(12,119)	(9,613)
Purchase price	217,164	190,200
Consumer - Automobile
Loans and Leases Receivable Disclosure [Line Items]
Outstanding balance	101,500	71,432
Purchase (discount) premium	4,738	5,080
Purchase price	$ 106,238	$ 76,512

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LOANS AND LEASES (Allowance for Loan and Lease Losses) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
LOANS AND LEASES
Collateral-Dependent Financing Receivable	$ 6,223	$ 9,177
Allocated ACL	0	0
Secured by 1-4 Family Residential Properties
LOANS AND LEASES
Collateral-Dependent Financing Receivable	6,223	9,177
Secured by Nonfarm Nonresidential Properties
LOANS AND LEASES
Collateral-Dependent Financing Receivable	0	0
Secured by Real Estate and Business Assets
LOANS AND LEASES
Collateral-Dependent Financing Receivable	0	0
Real Estate | Home equity
LOANS AND LEASES
Collateral-Dependent Financing Receivable	570	786
Allocated ACL	0	0
Real Estate | Home equity | Secured by 1-4 Family Residential Properties
LOANS AND LEASES
Collateral-Dependent Financing Receivable	570	786
Real Estate | Home equity | Secured by Nonfarm Nonresidential Properties
LOANS AND LEASES
Collateral-Dependent Financing Receivable	0	0
Real Estate | Home equity | Secured by Real Estate and Business Assets
LOANS AND LEASES
Collateral-Dependent Financing Receivable	0	0
Real Estate | Residential mortgage:
LOANS AND LEASES
Collateral-Dependent Financing Receivable	5,653	8,391
Allocated ACL	0	0
Real Estate | Residential mortgage: | Secured by 1-4 Family Residential Properties
LOANS AND LEASES
Collateral-Dependent Financing Receivable	5,653	8,391
Real Estate | Residential mortgage: | Secured by Nonfarm Nonresidential Properties
LOANS AND LEASES
Collateral-Dependent Financing Receivable	0	0
Real Estate | Residential mortgage: | Secured by Real Estate and Business Assets
LOANS AND LEASES
Collateral-Dependent Financing Receivable	$ 0	$ 0

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LOANS AND LEASES (Aging of Recorded Investment) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	$ 5,555,466	$ 5,101,649
Nonaccrual Loans	5,251	5,881
Total Past Due and Nonaccrual	17,371	18,161
Nonaccrual Loans with No ACL	4,378	5,409
Accruing Loans 30 - 59 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	8,193	9,601
Accruing Loans 60 - 89 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	2,089	1,316
Accruing Loans 90+  Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	1,838	1,363
Financial Asset, Not Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	5,538,095	5,083,488
Commercial, financial and agricultural:
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Nonaccrual Loans		183
Total Past Due and Nonaccrual		2,702
Nonaccrual Loans with No ACL		0
Commercial, financial and agricultural: | Accruing Loans 30 - 59 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due		970
Commercial, financial and agricultural: | Accruing Loans 60 - 89 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due		604
Commercial, financial and agricultural: | Accruing Loans 90+  Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due		945
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP")
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	2,555	91,327
Nonaccrual Loans	0	0
Total Past Due and Nonaccrual	521	0
Nonaccrual Loans with No ACL	0	0
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP") | Accruing Loans 30 - 59 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	471	0
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP") | Accruing Loans 60 - 89 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	37	0
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP") | Accruing Loans 90+  Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	13	0
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP") | Financial Asset, Not Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	2,034	91,327
Commercial, financial and agricultural: | Other
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	543,947	530,121
Nonaccrual Loans	297
Total Past Due and Nonaccrual	1,000
Nonaccrual Loans with No ACL	0
Commercial, financial and agricultural: | Other | Accruing Loans 30 - 59 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	546
Commercial, financial and agricultural: | Other | Accruing Loans 60 - 89 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	131
Commercial, financial and agricultural: | Other | Accruing Loans 90+  Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	26
Commercial, financial and agricultural: | Other | Financial Asset, Not Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	542,947	527,419
Real estate: | Construction
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	166,723	122,867
Nonaccrual Loans	0	0
Total Past Due and Nonaccrual	0	638
Nonaccrual Loans with No ACL	0	0
Real estate: | Construction | Accruing Loans 30 - 59 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	0	638
Real estate: | Construction | Accruing Loans 60 - 89 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	0	0
Real estate: | Construction | Accruing Loans 90+  Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	0	0
Real estate: | Construction | Financial Asset, Not Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	166,723	122,229
Real estate: | Residential mortgage
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	1,940,999	1,875,980
Nonaccrual Loans	3,808	4,623
Total Past Due and Nonaccrual	4,670	9,938
Nonaccrual Loans with No ACL	3,808	4,623
Real estate: | Residential mortgage | Accruing Loans 30 - 59 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	303	5,315
Real estate: | Residential mortgage | Accruing Loans 60 - 89 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	0	0
Real estate: | Residential mortgage | Accruing Loans 90+  Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	559	0
Real estate: | Residential mortgage | Financial Asset, Not Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	1,936,329	1,866,042
Real estate: | Home equity
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	739,380	637,249
Nonaccrual Loans	570	786
Total Past Due and Nonaccrual	2,110	1,064
Nonaccrual Loans with No ACL	570	786
Real estate: | Home equity | Accruing Loans 30 - 59 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	1,540	234
Real estate: | Home equity | Accruing Loans 60 - 89 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	0	0
Real estate: | Home equity | Accruing Loans 90+  Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	0	44
Real estate: | Home equity | Financial Asset, Not Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	737,270	636,185
Real estate: | Commercial mortgage
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	1,363,075	1,220,204
Nonaccrual Loans	0	0
Total Past Due and Nonaccrual	160	0
Nonaccrual Loans with No ACL	0	0
Real estate: | Commercial mortgage | Accruing Loans 30 - 59 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	160	0
Real estate: | Commercial mortgage | Accruing Loans 60 - 89 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	0	0
Real estate: | Commercial mortgage | Accruing Loans 90+  Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	0	0
Real estate: | Commercial mortgage | Financial Asset, Not Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	1,362,915	1,220,204
Consumer | Consumer
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	798,787	623,901
Nonaccrual Loans	576	289
Total Past Due and Nonaccrual	8,910	3,819
Nonaccrual Loans with No ACL	0	0
Consumer | Consumer | Accruing Loans 30 - 59 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	5,173	2,444
Consumer | Consumer | Accruing Loans 60 - 89 Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	1,921	712
Consumer | Consumer | Accruing Loans 90+  Days Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	1,240	374
Consumer | Consumer | Financial Asset, Not Past Due
Aging Analysis of Accruing and Non-Accruing Loans and Leases
Loans Past Due	$ 789,877	$ 620,082

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LOANS AND LEASES (Modifications) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($) contract	Dec. 31, 2020 USD ($) contract
Information related to loans modified in a TDR
Number of Loans | contract	1	13
Recorded Investment	$ 48	$ 1,160
Increase in the ACL	$ 0	$ 0
Real estate: | Residential mortgage
Information related to loans modified in a TDR
Number of Loans | contract	1	1
Recorded Investment	$ 48	$ 677
Increase in the ACL	$ 0	$ 0
Real estate: | Commercial Mortgage
Information related to loans modified in a TDR
Number of Loans | contract		1
Recorded Investment		$ 276
Increase in the ACL		$ 0
Consumer
Information related to loans modified in a TDR
Number of Loans | contract		11
Recorded Investment		$ 207
Increase in the ACL		$ 0

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LOANS AND LEASES (Class and Credit Indicator) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	$ 1,004,473	$ 1,477,594
Fiscal year before current fiscal year	1,293,071	818,102
Two years before current fiscal year	691,126	496,532
Three years before current fiscal year	414,136	348,831
Four years before current fiscal year	288,522	317,010
Five years before current fiscal year	1,063,474	921,711
Amortized Cost of Revolving Loans	800,664	721,869
Total	5,555,466	5,101,649
Loans and leases, gross	5,556,312	5,105,758
Net deferred costs (income)	(846)	(4,109)
Total loans, net of deferred fees and costs	5,555,466	5,101,649
Pass
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	5,479,204	5,029,759
Special Mention
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	32,963	31,686
Substandard
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	43,645	44,160
Loss
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	500	153
Commercial, financial and agricultural:
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross		530,383
Net deferred costs (income)		(262)
Total loans, net of deferred fees and costs		530,121
Commercial, financial and agricultural: | Pass
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross		504,823
Commercial, financial and agricultural: | Special Mention
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross		14,283
Commercial, financial and agricultural: | Substandard
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross		11,277
Commercial, financial and agricultural: | Loss
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross		0
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP")
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	0	84,254
Fiscal year before current fiscal year	2,546	7,073
Two years before current fiscal year	9	0
Three years before current fiscal year	0	0
Four years before current fiscal year	0	0
Five years before current fiscal year	0	0
Amortized Cost of Revolving Loans	0	0
Total	2,555	91,327
Loans and leases, gross	2,654	94,850
Net deferred costs (income)	(99)	(3,523)
Total loans, net of deferred fees and costs	2,555	91,327
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP") | Pass
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	0	84,254
Fiscal year before current fiscal year	2,546	7,073
Two years before current fiscal year	9	0
Three years before current fiscal year	0	0
Four years before current fiscal year	0	0
Five years before current fiscal year	0	0
Amortized Cost of Revolving Loans	0	0
Total	2,555	91,327
Loans and leases, gross	2,654	94,850
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP") | Special Mention
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	0	0
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP") | Substandard
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	0	0
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP") | Loss
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	0	0
Commercial, financial and agricultural: | Other
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	79,944	124,170
Fiscal year before current fiscal year	102,121	70,281
Two years before current fiscal year	42,363	59,367
Three years before current fiscal year	54,508	53,153
Four years before current fiscal year	39,251	47,111
Five years before current fiscal year	149,165	96,158
Amortized Cost of Revolving Loans	76,595	79,881
Total	543,947	530,121
Loans and leases, gross	544,495	530,383
Net deferred costs (income)	(548)
Total loans, net of deferred fees and costs	543,947
Commercial, financial and agricultural: | Other | Pass
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	77,550	122,729
Fiscal year before current fiscal year	101,595	68,021
Two years before current fiscal year	41,358	56,531
Three years before current fiscal year	53,241	52,375
Four years before current fiscal year	39,106	31,817
Five years before current fiscal year	141,950	93,957
Amortized Cost of Revolving Loans	76,466	79,131
Total	531,266	504,561
Loans and leases, gross	531,814
Commercial, financial and agricultural: | Other | Special Mention
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	2,206	1,441
Fiscal year before current fiscal year	350	1,278
Two years before current fiscal year	172	2,443
Three years before current fiscal year	1,011	96
Four years before current fiscal year	29	8,671
Five years before current fiscal year	0	354
Amortized Cost of Revolving Loans	99	0
Total	3,867	14,283
Loans and leases, gross	3,867
Commercial, financial and agricultural: | Other | Substandard
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	188	0
Fiscal year before current fiscal year	176	982
Two years before current fiscal year	833	393
Three years before current fiscal year	256	682
Four years before current fiscal year	116	6,623
Five years before current fiscal year	7,215	1,847
Amortized Cost of Revolving Loans	30	750
Total	8,814	11,277
Loans and leases, gross	8,814
Commercial, financial and agricultural: | Other | Loss
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	0
Real estate: | Construction
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	25,663	35,236
Fiscal year before current fiscal year	66,294	25,430
Two years before current fiscal year	23,384	3,196
Three years before current fiscal year	3,083	29,251
Four years before current fiscal year	15,207	288
Five years before current fiscal year	18,048	20,090
Amortized Cost of Revolving Loans	15,044	9,376
Total	166,723	122,867
Loans and leases, gross	167,366	123,351
Net deferred costs (income)	(643)	(484)
Total loans, net of deferred fees and costs	166,723	122,867
Real estate: | Construction | Pass
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	25,663	35,236
Fiscal year before current fiscal year	61,027	25,430
Two years before current fiscal year	23,384	3,196
Three years before current fiscal year	2,387	28,333
Four years before current fiscal year	14,309	288
Five years before current fiscal year	18,048	20,090
Amortized Cost of Revolving Loans	15,044	9,376
Total	159,862	121,949
Loans and leases, gross	160,505	122,433
Real estate: | Construction | Special Mention
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	0
Fiscal year before current fiscal year	417
Two years before current fiscal year	0
Three years before current fiscal year	0
Four years before current fiscal year	898
Five years before current fiscal year	0
Amortized Cost of Revolving Loans	0
Total	1,315
Loans and leases, gross	1,315	0
Real estate: | Construction | Substandard
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	0	0
Fiscal year before current fiscal year	4,850	0
Two years before current fiscal year	0	0
Three years before current fiscal year	696	918
Four years before current fiscal year	0	0
Five years before current fiscal year	0	0
Amortized Cost of Revolving Loans	0	0
Total	5,546	918
Loans and leases, gross	5,546	918
Real estate: | Construction | Loss
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	0	0
Real estate: | Residential mortgage
Recorded investment in the loans and leases, by class and credit indicator
Total	1,940,999	1,875,980
Loans and leases, gross	1,940,456	1,875,200
Net deferred costs (income)	543	780
Total loans, net of deferred fees and costs	1,940,999	1,875,980
Real estate: | Residential mortgage | Pass
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	1,935,141	1,869,604
Real estate: | Residential mortgage | Special Mention
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	0	973
Real estate: | Residential mortgage | Substandard
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	5,315	4,623
Real estate: | Residential mortgage | Loss
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	0	0
Real estate: | Home equity
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	34,973	26,479
Fiscal year before current fiscal year	23,772	13,184
Two years before current fiscal year	10,520	10,329
Three years before current fiscal year	7,463	10,672
Four years before current fiscal year	6,958	480
Five years before current fiscal year	12,180	8,318
Amortized Cost of Revolving Loans	643,514	567,787
Total	739,380	637,249
Loans and leases, gross	737,386	635,721
Net deferred costs (income)	1,994	1,528
Total loans, net of deferred fees and costs	739,380	637,249
Real estate: | Home equity | Pass
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	34,973	26,479
Fiscal year before current fiscal year	23,772	13,008
Two years before current fiscal year	10,520	10,329
Three years before current fiscal year	7,463	10,593
Four years before current fiscal year	6,880	480
Five years before current fiscal year	11,727	7,743
Amortized Cost of Revolving Loans	643,277	567,600
Total	738,612	636,232
Loans and leases, gross	736,618	634,704
Real estate: | Home equity | Special Mention
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	0	0
Fiscal year before current fiscal year	0	0
Two years before current fiscal year	0	0
Three years before current fiscal year	0	0
Four years before current fiscal year	0	0
Five years before current fiscal year	0	0
Amortized Cost of Revolving Loans	198	187
Total	198	187
Loans and leases, gross	198	187
Real estate: | Home equity | Substandard
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	0	0
Fiscal year before current fiscal year	0	176
Two years before current fiscal year	0	0
Three years before current fiscal year	0	79
Four years before current fiscal year	78	0
Five years before current fiscal year	453	575
Amortized Cost of Revolving Loans	39	0
Total	570	830
Loans and leases, gross	570	830
Real estate: | Home equity | Loss
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	0	0
Real estate: | Commercial mortgage
Recorded investment in the loans and leases, by class and credit indicator
Total	1,363,075	1,220,204
Loans and leases, gross	1,364,998	1,222,138
Net deferred costs (income)	(1,923)	(1,934)
Total loans, net of deferred fees and costs	1,363,075	1,220,204
Real estate: | Commercial mortgage | Pass
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	1,315,443	1,180,074
Real estate: | Commercial mortgage | Special Mention
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	27,470	16,062
Real estate: | Commercial mortgage | Substandard
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	22,085	26,002
Real estate: | Commercial mortgage | Loss
Recorded investment in the loans and leases, by class and credit indicator
Loans and leases, gross	0	0
Real estate: | Residential mortgage:
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	279,146	670,011
Fiscal year before current fiscal year	636,756	479,864
Two years before current fiscal year	435,876	180,687
Three years before current fiscal year	154,906	76,397
Four years before current fiscal year	58,934	93,275
Five years before current fiscal year	375,381	375,704
Amortized Cost of Revolving Loans	0	42
Total	1,940,999	1,875,980
Real estate: | Residential mortgage: | Pass
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	279,146	670,011
Fiscal year before current fiscal year	636,756	478,891
Two years before current fiscal year	434,928	180,687
Three years before current fiscal year	154,906	75,820
Four years before current fiscal year	58,431	92,394
Five years before current fiscal year	371,517	372,539
Amortized Cost of Revolving Loans	0	42
Total	1,935,684	1,870,384
Real estate: | Residential mortgage: | Special Mention
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year		0
Fiscal year before current fiscal year		973
Two years before current fiscal year		0
Three years before current fiscal year		0
Four years before current fiscal year		0
Five years before current fiscal year		0
Amortized Cost of Revolving Loans		0
Total		973
Real estate: | Residential mortgage: | Substandard
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	0	0
Fiscal year before current fiscal year	0	0
Two years before current fiscal year	948	0
Three years before current fiscal year	0	577
Four years before current fiscal year	503	881
Five years before current fiscal year	3,864	3,165
Amortized Cost of Revolving Loans	0	0
Total	5,315	4,623
Real estate: | Commercial mortgage:
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	226,137	229,108
Fiscal year before current fiscal year	218,379	126,169
Two years before current fiscal year	119,531	151,450
Three years before current fiscal year	143,038	137,283
Four years before current fiscal year	148,065	155,108
Five years before current fiscal year	496,452	411,614
Amortized Cost of Revolving Loans	11,473	9,472
Total	1,363,075	1,220,204
Real estate: | Commercial mortgage: | Pass
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	226,137	229,108
Fiscal year before current fiscal year	208,230	126,169
Two years before current fiscal year	119,531	146,584
Three years before current fiscal year	129,950	126,014
Four years before current fiscal year	145,932	153,041
Five years before current fiscal year	472,267	387,751
Amortized Cost of Revolving Loans	11,473	9,472
Total	1,313,520	1,178,139
Real estate: | Commercial mortgage: | Special Mention
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	0	0
Fiscal year before current fiscal year	0	0
Two years before current fiscal year	0	3,106
Three years before current fiscal year	11,388	3,219
Four years before current fiscal year	0	283
Five years before current fiscal year	16,082	9,455
Amortized Cost of Revolving Loans	0	0
Total	27,470	16,063
Real estate: | Commercial mortgage: | Substandard
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	0	0
Fiscal year before current fiscal year	10,149	0
Two years before current fiscal year	0	1,760
Three years before current fiscal year	1,700	8,050
Four years before current fiscal year	2,133	1,784
Five years before current fiscal year	8,103	14,408
Amortized Cost of Revolving Loans	0	0
Total	22,085	26,002
Consumer | Consumer
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	358,610	308,336
Fiscal year before current fiscal year	243,203	96,101
Two years before current fiscal year	59,443	91,503
Three years before current fiscal year	51,138	42,075
Four years before current fiscal year	20,107	20,748
Five years before current fiscal year	12,248	9,827
Amortized Cost of Revolving Loans	54,038	55,311
Total	798,787	623,901
Loans and leases, gross	798,957	624,115
Net deferred costs (income)	(170)	(214)
Total loans, net of deferred fees and costs	798,787	623,901
Consumer | Consumer | Pass
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	358,609	308,326
Fiscal year before current fiscal year	242,942	96,066
Two years before current fiscal year	59,352	91,194
Three years before current fiscal year	50,899	41,995
Four years before current fiscal year	20,065	20,719
Five years before current fiscal year	10,958	9,446
Amortized Cost of Revolving Loans	54,038	55,311
Total	796,863	623,057
Loans and leases, gross	797,029	623,271
Consumer | Consumer | Special Mention
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	0	0
Fiscal year before current fiscal year	0	0
Two years before current fiscal year	0	181
Three years before current fiscal year	113	0
Four years before current fiscal year	0	10
Five years before current fiscal year	0	7
Amortized Cost of Revolving Loans	0	0
Total	113	198
Loans and leases, gross	113	181
Consumer | Consumer | Substandard
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	1	10
Fiscal year before current fiscal year	261	35
Two years before current fiscal year	91	128
Three years before current fiscal year	126	80
Four years before current fiscal year	42	19
Five years before current fiscal year	790	221
Amortized Cost of Revolving Loans	0	0
Total	1,311	493
Loans and leases, gross	1,315	510
Consumer | Consumer | Loss
Recorded investment in the loans and leases, by class and credit indicator
Current fiscal year	0	0
Fiscal year before current fiscal year	0	0
Two years before current fiscal year	0	0
Three years before current fiscal year	0	0
Four years before current fiscal year	0	0
Five years before current fiscal year	500	153
Amortized Cost of Revolving Loans	0	0
Total	500	153
Loans and leases, gross	$ 500	$ 153

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ALLOWANCE FOR LOAN AND LEASE LOSSES (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Changes in the allowance
Beginning balance		$ 68,097	$ 83,269	$ 47,971
Provision (credit) for credit losses, excluding accrued interest receivable		288	(14,323)	38,930
Subtotal		68,385	68,946	90,467
Charge-offs		8,368	6,125	11,355
Recoveries		3,721	5,276	4,157
Net charge-offs (recoveries)		4,647	849	7,198
Ending balance		63,738	68,097	83,269
Provision for credit losses	$ (200)	(1,273)	(14,591)	42,111
Reserve against accrued receivable	$ 200
Impact of adoption of new accounting standards
Changes in the allowance
Beginning balance				3,566
Adjusted balance at beginning of period
Changes in the allowance
Beginning balance				51,537
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP")
Changes in the allowance
Beginning balance		77	304	0
Provision (credit) for credit losses, excluding accrued interest receivable		(75)	(227)	304
Subtotal		2	77	304
Charge-offs		0	0	0
Recoveries		0	0	0
Net charge-offs (recoveries)		0	0	0
Ending balance		2	77	304
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP") | Impact of adoption of new accounting standards
Changes in the allowance
Beginning balance				0
Commercial, financial and agricultural: | Small Business Administration Paycheck Protection Program ("SBA PPP") | Adjusted balance at beginning of period
Changes in the allowance
Beginning balance				0
Commercial, financial and agricultural: | Other
Changes in the allowance
Beginning balance		10,314	18,717	8,136
Provision (credit) for credit losses, excluding accrued interest receivable		(2,518)	(7,684)	13,077
Subtotal		7,796	11,033	20,586
Charge-offs		1,969	1,723	3,026
Recoveries		995	1,004	1,157
Net charge-offs (recoveries)		974	719	1,869
Ending balance		6,822	10,314	18,717
Commercial, financial and agricultural: | Other | Impact of adoption of new accounting standards
Changes in the allowance
Beginning balance				(627)
Commercial, financial and agricultural: | Other | Adjusted balance at beginning of period
Changes in the allowance
Beginning balance				7,509
Real estate: | Construction
Changes in the allowance
Beginning balance		3,908	4,277	1,792
Provision (credit) for credit losses, excluding accrued interest receivable		(1,117)	(1,528)	1,875
Subtotal		2,791	2,749	4,146
Charge-offs		0	0	0
Recoveries		76	1,159	131
Net charge-offs (recoveries)		(76)	(1,159)	(131)
Ending balance		2,867	3,908	4,277
Real estate: | Construction | Impact of adoption of new accounting standards
Changes in the allowance
Beginning balance				479
Real estate: | Construction | Adjusted balance at beginning of period
Changes in the allowance
Beginning balance				2,271
Real estate: | Residential mortgage
Changes in the allowance
Beginning balance		12,463	16,484	13,327
Provision (credit) for credit losses, excluding accrued interest receivable		(954)	(4,379)	2,383
Subtotal		11,509	12,105	16,318
Charge-offs		0	0	63
Recoveries		295	358	229
Net charge-offs (recoveries)		(295)	(358)	(166)
Ending balance		11,804	12,463	16,484
Real estate: | Residential mortgage | Impact of adoption of new accounting standards
Changes in the allowance
Beginning balance				608
Real estate: | Residential mortgage | Adjusted balance at beginning of period
Changes in the allowance
Beginning balance				13,935
Real estate: | Home equity
Changes in the allowance
Beginning balance		4,509	5,449	4,206
Provision (credit) for credit losses, excluding accrued interest receivable		(431)	(949)	2,824
Subtotal		4,078	4,500	5,416
Charge-offs		0	0	0
Recoveries		36	9	33
Net charge-offs (recoveries)		(36)	(9)	(33)
Ending balance		4,114	4,509	5,449
Real estate: | Home equity | Impact of adoption of new accounting standards
Changes in the allowance
Beginning balance				(1,614)
Real estate: | Home equity | Adjusted balance at beginning of period
Changes in the allowance
Beginning balance				2,592
Real estate: | Commercial mortgage
Changes in the allowance
Beginning balance		18,411	22,163	11,113
Provision (credit) for credit losses, excluding accrued interest receivable		(509)	(3,825)	8,485
Subtotal		17,902	18,338	22,222
Charge-offs		0	0	75
Recoveries		0	73	16
Net charge-offs (recoveries)		0	(73)	59
Ending balance		17,902	18,411	22,163
Real estate: | Commercial mortgage | Impact of adoption of new accounting standards
Changes in the allowance
Beginning balance				2,624
Real estate: | Commercial mortgage | Adjusted balance at beginning of period
Changes in the allowance
Beginning balance				13,737
Consumer | Consumer
Changes in the allowance
Beginning balance		18,415	15,875	9,397
Provision (credit) for credit losses, excluding accrued interest receivable		5,892	4,269	9,982
Subtotal		24,307	20,144	21,475
Charge-offs		6,399	4,402	8,191
Recoveries		2,319	2,673	2,591
Net charge-offs (recoveries)		4,080	1,729	5,600
Ending balance		$ 20,227	$ 18,415	15,875
Consumer | Consumer | Impact of adoption of new accounting standards
Changes in the allowance
Beginning balance				2,096
Consumer | Consumer | Adjusted balance at beginning of period
Changes in the allowance
Beginning balance				$ 11,493

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ALLOWANCE FOR LOAN AND LEASE LOSSES (Reserve For Off-Balance Sheet Credit Exposure) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
LOANS AND LEASES
Reserve for off-balance sheet credit exposures (included in other liabilities)	$ 3,243	$ 4,804	$ 4,884	$ 1,272
Impact of adoption of new accounting standards
LOANS AND LEASES
Reserve for off-balance sheet credit exposures (included in other liabilities)		0	0	740
Adjusted balance at beginning of period
LOANS AND LEASES
Reserve for off-balance sheet credit exposures (included in other liabilities)		4,804	4,884	$ 2,012
(Credit) provision for off-balance sheet credit exposures	$ (1,561)	$ (80)	$ 2,872

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PREMISES AND EQUIPMENT (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Premises and Equipment
Gross premises and equipment	$ 206,137	$ 191,327
Accumulated depreciation and amortization	(114,503)	(110,973)
Net premises and equipment	91,634	80,354
Land
Premises and Equipment
Gross premises and equipment	23,150	14,184
Office buildings and improvements
Premises and Equipment
Gross premises and equipment	145,793	141,628
Furniture, fixtures and equipment
Premises and Equipment
Gross premises and equipment	$ 37,194	$ 35,515

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PREMISES AND EQUIPMENT (Depreciation and Amortization) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Premises and Equipment
Depreciation and amortization of premises and equipment	$ 6,865	$ 6,984	$ 6,223
Net occupancy
Premises and Equipment
Depreciation and amortization of premises and equipment	4,720	4,570	3,616
Equipment
Premises and Equipment
Depreciation and amortization of premises and equipment	$ 2,145	$ 2,414	$ 2,607

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INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2022	Dec. 31, 2021
Schedule of Investments [Line Items]
Investments in unconsolidated subsidiaries accounted for under the equity methods		$ 0.1	$ 0.2
Unfunded Loan Commitment
Schedule of Investments [Line Items]
Unfunded low income housing commitment		$ 23.6	14.3
Swell Financial, Inc.
Schedule of Investments [Line Items]
Investments in unconsolidated subsidiaries accounted for under the equity methods	$ 2.0
Other intangible assets and services provided for common stock	1.5
Payments for repurchase of convertible preferred stock	$ 0.5
JAM FINTOP Banktech Fund, L.P.
Schedule of Investments [Line Items]
Investments in unconsolidated subsidiaries accounted for under the equity methods			$ 2.0

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INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Investments in and Advances to Affiliates, Schedule of Investments [Abstract]
Investments in low income housing tax credit partnerships	$ 40,939	$ 25,916
Investments in common securities of statutory trusts	1,547	1,547
Investments in affiliates	110	162
Other	4,045	2,054
Total	$ 46,641	$ 29,679

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INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES Investment in LHIC (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Investments in and Advances to Affiliates, Schedule of Investments [Abstract]
Amortization expense recognized in income tax expense	$ 2,566	$ 2,174	$ 1,391
Federal and state tax credits recognized in income tax expense	$ 2,938	$ 2,373	$ 1,599

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INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES (Future Commitments) (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Other Commitments [Line Items]
2023	$ 10,996
2024	9,280
2025	4,248
2026	26
2027	26
Thereafter	333
Other Commitment	24,909
Low Income Housing Tax Credit
Other Commitments [Line Items]
2023	9,693
2024	9,280
2025	4,248
2026	26
2027	26
Thereafter	333
Other Commitment	23,606
Other Partnerships
Other Commitments [Line Items]
2023	1,303
2024	0
2025	0
2026	0
2027	0
Thereafter	0
Other Commitment	$ 1,303

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INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES (Amortization Expense and Tax Credits Recognized With Investments in LIHTC) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Investments in and Advances to Affiliates [Abstract]
Amortization expense recognized in income tax expense	$ 2,566	$ 2,174	$ 1,391
Federal and state tax credits recognized in income tax expense	$ 2,938	$ 2,373	$ 1,599

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MORTGAGE SERVICING RIGHTS (Changes In Mortgage Servicing Rights) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Changes in other intangible assets
Balance, beginning of period	$ 9,738
Balance, end of period	9,074	$ 9,738
Mortgage servicing rights
Changes in other intangible assets
Balance, beginning of period	9,738	11,865
Additions	631	1,341
Amortization	(1,295)	(3,468)
Balance, end of period	$ 9,074	$ 9,738

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MORTGAGE SERVICING RIGHTS (Gross Carrying Value, Accumulated Amortization, Net Carrying Value) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Gross carrying value, accumulated amortization and net carrying value related to intangible assets
Gross Carrying Value	$ 69,413	$ 72,250
Accumulated Amortization	(60,339)	(62,512)
Net Carrying Value	9,074	9,738
Mortgage servicing rights
Gross carrying value, accumulated amortization and net carrying value related to intangible assets
Gross Carrying Value	69,413	72,250
Accumulated Amortization	(60,339)	(62,512)
Net Carrying Value	$ 9,074	$ 9,738	$ 11,865

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MORTGAGE SERVICING RIGHTS (Estimated Amortization Expense) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Estimated Amortization Expense
Total	$ 9,074	$ 9,738
Mortgage servicing rights
Estimated Amortization Expense
2023	994
2024	950
2025	844
2026	749
2027	656
Thereafter	4,881
Total	$ 9,074	$ 9,738	$ 11,865

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MORTGAGE SERVICING RIGHTS (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Finite-Lived Intangible Assets [Line Items]
Mortgage banking income	$ 3,810	$ 7,732	$ 13,682
Loans serviced for others	1,280,000	1,400,000
Mortgage servicing rights
Finite-Lived Intangible Assets [Line Items]
Mortgage banking income	$ 600	$ 1,300	$ 3,300

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MORTGAGE SERVICING RIGHTS (Fair Market Value And Key Assumptions Used In Determining Fair Market Value of Mortgage Servicing Rights) (Details) - Mortgage servicing rights $ in Thousands	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Finite-Lived Intangible Assets [Line Items]
Fair market value	$ 12,061	$ 10,504	$ 12,003
Weighted-average discount rate
Finite-Lived Intangible Assets [Line Items]
Debt Instrument, Measurement Input	0.095	0.095
Weighted-average prepayment speed assumption
Finite-Lived Intangible Assets [Line Items]
Debt Instrument, Measurement Input	0.104	0.190

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DERIVATIVES (Details)	Dec. 31, 2022 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2021 USD ($) $ / shares
Designated as Hedging Instrument
DERIVATIVES
Number os instruments held | $ / shares			0
Designated as Hedging Instrument | Interest rate swap
DERIVATIVES
Notional amount	$ 115,500,000	$ 115,500,000
Fixed interest rate (in percent)	2.095%	2.095%
Derivative instruments not designated as hedging instruments. | Forward interest rate contracts
DERIVATIVES
Mortgage loans hedged	$ 1,100,000		$ 3,500,000
Derivative instruments not designated as hedging instruments. | Interest rate lock commitments
DERIVATIVES
Mortgage loans hedged	0		0
Derivative instruments not designated as hedging instruments. | Back-to-back swap agreements
DERIVATIVES
Notional amount	0		$ 33,100,000
Cash collateral	$ 10,000,000

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DERIVATIVES (Balance Sheet) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Derivative instruments not designated as hedging instruments. | Risk participation agreements
Asset Derivatives
Fair Value	$ 0	$ 0
Liability Derivatives
Fair Value	0	16
Derivative instruments not designated as hedging instruments. | Back-to-back swap agreements
Asset Derivatives
Fair Value	4,611	435
Liability Derivatives
Fair Value	4,611	435
Derivative instruments not designated as hedging instruments. | Derivatives - Interest rate contracts
Asset Derivatives
Fair Value	10	5
Liability Derivatives
Fair Value	2	20
Designated as Hedging Instrument | Interest rate swap
Asset Derivatives
Fair Value	5,986	0
Liability Derivatives
Fair Value	$ 0	$ 0

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DERIVATIVES (Income Statement) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
DERIVATIVES
Amount of Gain (Loss) Recognized in Earnings on Derivatives	$ 8	$ 98	$ (76)
Derivative instruments not designated as hedging instruments. | Derivatives Not in Cash Flow Hedging Relationship | Interest rate lock and forward sale commitments
DERIVATIVES
Location of Gain (Loss) Recognized in Earnings on Derivatives	Mortgage banking income	Mortgage banking income	Mortgage banking income
Amount of Gain (Loss) Recognized in Earnings on Derivatives	$ 8	$ 98	$ (76)
Derivative instruments not designated as hedging instruments. | Derivatives Not in Cash Flow Hedging Relationship | Loans held for sale
DERIVATIVES
Location of Gain (Loss) Recognized in Earnings on Derivatives	Other
Amount of Gain (Loss) Recognized in Earnings on Derivatives	$ (3)
Derivative instruments not designated as hedging instruments. | Derivatives Not in Cash Flow Hedging Relationship | Risk participation agreements
DERIVATIVES
Location of Gain (Loss) Recognized in Earnings on Derivatives	Other service charges and fees	Other service charges and fees	Other service charges and fees
Amount of Gain (Loss) Recognized in Earnings on Derivatives	$ 16	$ 32	$ 1,323
Derivative instruments not designated as hedging instruments. | Derivatives Not in Cash Flow Hedging Relationship | Back-to-back swap agreements
DERIVATIVES
Location of Gain (Loss) Recognized in Earnings on Derivatives		Other service charges and fees
Amount of Gain (Loss) Recognized in Earnings on Derivatives		$ 600
Designated as Hedging Instrument | Derivatives Not in Cash Flow Hedging Relationship | Interest rate swap
DERIVATIVES
Location of Gain (Loss) Recognized in Earnings on Derivatives	Interest Income (Expense), Net
Amount of Gain (Loss) Recognized in Earnings on Derivatives	$ (340)

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DEPOSITS (Narrative) (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Transfers and Servicing [Abstract]
Time deposits	$ 991,205,000	$ 706,732,000
FDIC insurance limit	250,000
Total	678,557,000	488,800,000
Collagenized government time deposits	290,100,000	215,000,000
Overdrawn deposit accounts	$ 700,000	$ 500,000

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DEPOSITS (Current Maturities of Time Deposits) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Deposits [Abstract]
2023	$ 912,198
2024	52,870
2025	12,048
2026	6,527
2027	7,186
Thereafter	376
Total	$ 991,205	$ 706,732

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DEPOSITS (Current Maturities of Time Deposits of $250,000 Or More) (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Transfers and Servicing [Abstract]
FDIC insurance limit	$ 250,000
Three months or less	370,239,000
Over three months through six months	97,913,000
Over six months through twelve months	188,943,000
2024	15,185,000
2025	2,326,000
2026	1,540,000
2027	2,411,000
Thereafter	0
Total	$ 678,557,000	$ 488,800,000

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SHORT-TERM BORROWINGS (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
SHORT-TERM BORROWINGS
Maximum borrowing capacity	$ 2,230,000,000
FHLB advances and other short-term borrowings	5,000,000	$ 0	$ 22,000,000
Interest on short-term borrowings	1,055,000	2,000	$ 718,000
Central Bank | Federal Reserve Bank Advances
SHORT-TERM BORROWINGS
Additional unused borrowings available	75,900,000	55,400,000
Federal Home Loan Bank Borrowings
SHORT-TERM BORROWINGS
FHLB advances and other short-term borrowings	5,000,000
Standby letters of credit issued	36,000,000	32,200,000
Federal Home Loan Bank Borrowings | Asset Pledged as Collateral
SHORT-TERM BORROWINGS
Loans, net of ACL	3,280,000,000
Federal Reserve Bank Advances | Asset Pledged as Collateral
SHORT-TERM BORROWINGS
Loans, net of ACL	125,000,000	$ 131,000,000
FHLB line of credit
SHORT-TERM BORROWINGS
Additional unused borrowings available	$ 2,190,000,000

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SHORT-TERM BORROWINGS (Summary Of Short-Term Borrowings) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Receivables [Abstract]
FHLB advances and other short-term borrowings	$ 5,000,000	$ 0	$ 22,000,000
Average amount outstanding during year	37,210,000	607,000	89,904,000
Highest month-end balance during year	$ 140,000,000	$ 6,500,000	$ 222,000,000
Weighted-average interest rate on balances outstanding at December 31	4.60%	0.00%	0.29%
Weighted-average interest rate during year	2.84%	0.30%	0.80%

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LONG-TERM DEBT (Summary Of Long Term Debt) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Long-term debt	$ 105,859	$ 105,616	$ 0
Subordinated debentures
Debt Instrument [Line Items]
Long-term debt	51,547	51,547
Subordinated notes, net of issuance costs
Debt Instrument [Line Items]
Long-term debt	$ 54,312	$ 54,069

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LONG-TERM DEBT (Narrative) (Details)			1 Months Ended		12 Months Ended
	Oct. 20, 2020 USD ($)	Mar. 27, 2020	Dec. 31, 2004 USD ($)	Sep. 30, 2004 USD ($)	Dec. 31, 2022 USD ($) period	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Debt Instrument [Line Items]
Long-term debt					$ 105,859,000	$ 105,616,000	$ 0
Interest on long-term debt					4,930,000	4,097,000	3,602,000
Maximum
Debt Instrument [Line Items]
Debt instrument, term		5 years
CPB Capital Trust IV
Debt Instrument [Line Items]
Trust preferred securities issued				$ 30,000,000
Variable rate basis				three-month LIBOR
Interest Rate				2.45%
Common securities issued to the Company				$ 900,000
CPB Capital Trust V
Debt Instrument [Line Items]
Trust preferred securities issued			$ 20,000,000
Variable rate basis			three-month LIBOR
Interest Rate			1.87%
Common securities issued to the Company			$ 600,000
Federal Home Loan Bank Borrowings | Asset Pledged as Collateral
Debt Instrument [Line Items]
Loans, net of ACL					3,280,000,000
FHLB line of credit
Debt Instrument [Line Items]
Long-term debt					0	0
Additional unused borrowings available					2,190,000,000
Interest on long-term debt					0	0	$ 1,500,000
Subordinated debentures
Debt Instrument [Line Items]
Long-term debt					$ 51,547,000	51,547,000
Number of consecutive quarterly periods for which payments of interest can be deferred without default or penalty (up to) | period					20
Subordinated debentures | Maximum
Debt Instrument [Line Items]
Redemption period of trust preferred securities, the subordinated debentures and the common securities, following the occurrence of certain events					90 days
Subordinated debentures | CPB Capital Trust IV
Debt Instrument [Line Items]
Long-term debt					$ 30,900,000
Subordinated debentures | CPB Capital Trust V
Debt Instrument [Line Items]
Long-term debt					20,600,000
Subordinated notes, net of issuance costs
Debt Instrument [Line Items]
Long-term debt					54,312,000	$ 54,069,000
Subordinated notes, net of issuance costs | Subordinated Notes
Debt Instrument [Line Items]
Long-term debt					$ 54,300,000
Debt face amount	$ 55,000,000
Debt instrument, term	10 years
Stated interest rate, first five years	4.75%				0.0475%
Unamortized debt issuance costs					$ 700,000
Subordinated notes, net of issuance costs | Subordinated Notes | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate
Debt Instrument [Line Items]
Basis spread on variable rate	4.56%

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LONG-TERM DEBT (Future Principal Payments) (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Future principal payments on long-term debt based on final maturity
2023	$ 0
2024	0
2025	0
2026	0
2027	0
Thereafter	106,547
Total	$ 106,547

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LONG-TERM DEBT (Schedule of Subordinated Borrowing) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($)
Debt Instrument [Line Items]
Amount of Subordinated Debentures	$ 51,547
Trust IV
Debt Instrument [Line Items]
Amount of Subordinated Debentures	$ 30,928
Interest Rate	0.0245%
Trust V
Debt Instrument [Line Items]
Amount of Subordinated Debentures	$ 20,619
Interest Rate	0.0187%

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LONG-TERM DEBT (Subordinated Notes) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Oct. 20, 2020
Debt Instrument [Line Items]
Subordinated notes	$ 106,547
Subordinated notes, net of issuance costs
Debt Instrument [Line Items]
Subordinated notes	55,000
Subordinated Notes | Subordinated notes, net of issuance costs
Debt Instrument [Line Items]
Subordinated notes	$ 55,000
Stated interest rate, first five years	0.0475%	4.75%

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EQUITY (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Jan. 31, 2022	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Jan. 31, 2021
EQUITY
Amount authorized under the Repurchase Plan	$ 30,000				$ 25,000
Remaining amount available for repurchase	$ 5,300				$ 26,600
Repurchase plan expiration period	1 year
Number of shares in remaining available for repurchase		10,300,000
Common stock repurchased		$ 20,740	$ 18,669	$ 4,749
Common Stock
EQUITY
Common stock repurchased		$ 20,740	$ 18,669	$ 4,749
Common shares outstanding
EQUITY
Number of shares repurchased or acquired through tender offer		868,613	696,894	206,802
Existing Share Repurchase Plan | Common Stock
EQUITY
Number of shares repurchased or acquired through tender offer		868,613
Value of shares repurchased or acquired through tender offer		$ 20,700
Central Bank
EQUITY
Retained earnings		$ 145,700	$ 114,000

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REVENUE FROM CONTRACTS WITH CUSTOMERS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Revenue from External Customer [Line Items]
In-scope other operating income	$ 30,403	$ 28,707	$ 23,812
Out-of-scope other operating income	17,516	14,353	21,386
Total other operating income	47,919	43,060	45,198
Mortgage banking income
Revenue from External Customer [Line Items]
In-scope other operating income	1,060	1,993	1,128
Service charges on deposit accounts
Revenue from External Customer [Line Items]
In-scope other operating income	8,197	6,358	6,234
Other service charges and fees
Revenue from External Customer [Line Items]
In-scope other operating income	16,581	15,281	11,621
Income on fiduciary activities
Revenue from External Customer [Line Items]
In-scope other operating income	$ 4,565	$ 5,075	$ 4,829

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MORTGAGE BANKING INCOME (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Revenue from External Customer [Line Items]
Net loan servicing fees	$ 30,403	$ 28,707	$ 23,812
Amortization of mortgage servicing rights	(1,295)	(3,468)	(6,167)
Net gain on sale of residential mortgage loans	1,778	6,376	16,043
Unrealized gain (loss) on interest rate locks	8	98	(76)
Loan placement fees	1,060	1,993	1,128
Total mortgage banking income	3,810	7,732	13,682
Bank Servicing
Revenue from External Customer [Line Items]
Net loan servicing fees	$ 2,259	$ 2,733	$ 2,754

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SHARE-BASED COMPENSATION (Share-Based Compensation) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
SHARE-BASED COMPENSATION
Income Tax Benefit, Due to Vesting of Restricted Stock	$ 100	$ 200	$ (300)
Net share-based compensation effect	3,456	3,222	3,178
Salaries and employee benefits
SHARE-BASED COMPENSATION
Net share-based compensation effect	4,567	4,580	3,822
Directors stock awards
SHARE-BASED COMPENSATION
Net share-based compensation effect	350	91	165
Income tax benefit
SHARE-BASED COMPENSATION
Net share-based compensation effect	(1,461)	(1,449)	(809)
Stock Option
SHARE-BASED COMPENSATION
Equity instruments other than options, aggregate intrinsic value, outstanding	$ 700	$ 900	$ 0
Contractual terms	10 years
Minimum | Stock Option
SHARE-BASED COMPENSATION
Vesting period	3 years

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SHARE-BASED COMPENSATION (Equity Incentive Plans and Stock Option Activity) (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Apr. 30, 2013
SHARE-BASED COMPENSATION
Grants in period		0
Stock Option
SHARE-BASED COMPENSATION
Equity instruments other than options, aggregate intrinsic value, outstanding	$ 700	$ 900	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value	$ 0
Contractual terms	10 years
Vested shares	0	0	0
Grants in period	0	0	0
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value	$ 706
Shares
Outstanding at the beginning of the period (in shares)	47,440
Changes during the period
Exercised (shares)	(47,440)	(86,373)
Expired (in shares)	0
Forfeited (in shares)	0
Outstanding at the end of the period (in shares)	0	47,440
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number	0
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 14.32
Changes during the period:
Exercised (in dollars per share)	14.32
Expired (in dollars per share)	0
Forfeited (in dollars per share)	0
Outstanding at the end of the period (in dollars per share)	0	$ 14.32
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price
Weighted Average Remaining Contractual Term
Outstanding	0 years
Vested and exercisable	0 years
Aggregate Intrinsic Value
Outstanding	$ 0
Stock Option | Stock Compensation 2004 Plan
SHARE-BASED COMPENSATION
Additional shares authorized for grants	747,332	843,469	996,850
Stock Option | Stock Option 2013 Plan
SHARE-BASED COMPENSATION
Shares authorized for grants				2,200,000
Stock Option | Minimum
SHARE-BASED COMPENSATION
Vesting period	3 years
Stock Option | Maximum
SHARE-BASED COMPENSATION
Vesting period	5 years

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SHARE-BASED COMPENSATION (Restricted Stock Awards and Units) (Details) - Restricted Stock Awards and Units - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Activity of nonvested shares
Nonvested at the beginning of the period (in shares)	485,339	532,374	366,467
Changes during the period:
Granted (in shares)	99,887	221,774	322,180
Forfeited (in shares)	(53,980)	(75,850)	(28,058)
Vested (in shares)	(178,781)	(192,959)	(128,215)
Nonvested at the end of the period (in shares)	352,465	485,339	532,374
Weighted Average Grant Date Fair Value
Nonvested at the beginning of the period (in dollars per share)	$ 21.95	$ 22.49	$ 28.89
Changes during the period:
Granted (in dollars per share)	28.99	21.93	18.11
Forfeited (in dollars per share)	25.66	21.95	23.79
Vested (in dollars per share)	21.91	23.42	29.48
Nonvested at the end of the period (in dollars per share)	$ 23.40	$ 21.95	$ 22.49
Additional disclosures
Weighted-average period for recognition of compensation cost not yet recognized	1 year 8 months 12 days
Unrecognized compensation costs	$ 3,500
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value	$ 4,787	$ 5,077	$ 3,780
Share-Based Payment Arrangement, Tranche One
Additional disclosures
Vesting period	2 years
Share-Based Payment Arrangement, Tranche Two
Additional disclosures
Vesting period	3 years
Share-Based Payment Arrangement, Tranche Three
Additional disclosures
Vesting period	5 years

XML

PENSION PLANS (Defined Benefit Retirement Plan) (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Nov. 30, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Change in plan assets, at fair value:
Employer contributions		$ 50	$ 0
Pension Plan
PENSION PLANS
Consecutive period of service considered for highest average annual salaries for calculation of benefits under the reactivated plan		60 months
Increase in unrecognized prior service cost due to reactivation of the plan		$ 5,900
Amortization period of increase in prior service cost		13 years
Change in benefit obligation:
Benefit obligation at beginning of year		$ 20,420	21,919
Interest cost		212	485	$ 641
Actuarial gains		(1,766)	(427)
Benefits paid		(5,398)	(1,557)
Annuity purchase		(13,468)	0
Benefit obligation at end of the year		0	20,420	21,919
Change in plan assets, at fair value:
Fair value of plan assets at beginning of year		20,785	21,153
Actual return on plan assets		(1,969)	1,189
Benefits paid		(5,398)	(1,557)
Annuity purchase		(13,468)	0
Fair value of plan assets at end of year		0	20,785	21,153
Funded status at end of year		0	365
Amounts recognized in AOCI:
Net actuarial losses		0	$ (4,699)
Benefit obligation actuarial assumptions:
Weighted-average discount rate			2.40%
Components of net periodic benefit cost:
Interest cost		212	$ 485	641
Expected return on plan assets		(207)	(549)	(920)
Amortization of net actuarial losses		225	701	909
Settlement		4,884	0	0
Net periodic benefit cost		$ 5,114	$ 637	$ 630
Net periodic cost actuarial assumptions:
Weighted-average discount rate		2.40%	2.30%	3.10%
Expected long-term rate of return on plan assets		2.30%	2.70%	4.50%
Pension Plan | Maximum
Components of net periodic benefit cost:
Settlement	$ 4,900
SERPs
Change in benefit obligation:
Benefit obligation at beginning of year		$ 12,297	$ 12,740
Interest cost		301	264	$ 341
Actuarial gains		(2,960)	(398)
Benefits paid		(418)	(309)
Benefit obligation at end of the year		9,220	12,297	12,740
Change in plan assets, at fair value:
Fair value of plan assets at beginning of year		0	0
Employer contributions		418	309
Benefits paid		(418)	(309)
Fair value of plan assets at end of year		0	0	0
Funded status at end of year		(9,220)	(12,297)
Amounts recognized in AOCI:
Net transition obligation		(7)	(26)
Net actuarial losses		701	(2,337)
Total amounts recognized in AOCI		$ 694	$ (2,363)
Benefit obligation actuarial assumptions:
Weighted-average discount rate		5.00%	2.50%
Components of net periodic benefit cost:
Interest cost		$ 301	$ 264	341
Amortization of net actuarial (gains) losses		79	335	251
Amortization of net transition obligation		18	18	18
Amortization of net actuarial losses		0	0	14
Net periodic benefit cost		$ 398	$ 617	$ 624
Net periodic cost actuarial assumptions:
Weighted-average discount rate		2.70%	2.10%	3.10%

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PENSION PLANS (Asset Allocations) (Details) - Pension Plan $ in Millions	Dec. 31, 2021 USD ($)
PENSION AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
Asset allocations by asset category	100.00%
Equity securities
PENSION AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
Equity securities included the entity's common stock	$ 0.0
Debt Securities
PENSION AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
Asset allocations by asset category	85.90%
Money market funds
PENSION AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
Asset allocations by asset category	14.10%

XML

PENSION PLANS (Fair Value of Defined Benefit) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value	$ 0	$ 20,785	$ 21,153
SERPs
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value	0	0	$ 0
Expected contribution to the defined benefit retirement plan	$ 600
Quoted Prices in Active Markets for Identical Assets (Level 1) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		13,650
Significant Other Observable Inputs (Level 2) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		7,135
Significant Unobservable Inputs (Level 3) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		0
Money market accounts | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		2,938
Money market accounts | Quoted Prices in Active Markets for Identical Assets (Level 1) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		2,938
Money market accounts | Significant Other Observable Inputs (Level 2) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		0
Money market accounts | Significant Unobservable Inputs (Level 3) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		0
Mutual funds | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		10,712
Mutual funds | Quoted Prices in Active Markets for Identical Assets (Level 1) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		10,712
Mutual funds | Significant Other Observable Inputs (Level 2) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		0
Mutual funds | Significant Unobservable Inputs (Level 3) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		0
Government obligations | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		1,899
Government obligations | Quoted Prices in Active Markets for Identical Assets (Level 1) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		0
Government obligations | Significant Other Observable Inputs (Level 2) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		1,899
Government obligations | Significant Unobservable Inputs (Level 3) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		0
Corporate securities | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		5,236
Corporate securities | Quoted Prices in Active Markets for Identical Assets (Level 1) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		0
Corporate securities | Significant Other Observable Inputs (Level 2) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		5,236
Corporate securities | Significant Unobservable Inputs (Level 3) | Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fair value		$ 0

XML

PENSION PLANS (Amortization of AOCI and Estimated Future Benefit Payments) (Details) - SERPs $ in Thousands	Dec. 31, 2022 USD ($)
Estimated future benefit payments
2023	$ 573
2024	570
2025	566
2026	561
2027	556
2028-2032	4,817
Thereafter	1,577
Total	$ 9,220

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401 (K) RETIREMENT SAVINGS PLAN (Details) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Retirement Benefits [Abstract]
Employee's elective deferrals	100.00%	100.00%	100.00%
Matching contributions by employer (up to)	2.00%	4.00%	4.00%
Vesting period		3 years
Discretionary contribution percentage			$ 1,250
Discretionary contribution, maximum amount			2.00%
Employer matching contributions to the Retirement Savings Plan			$ 2,400,000	$ 500,000	$ 2,100,000

XML

OPERATING LEASES (Narrative) (Details)	12 Months Ended
	Dec. 31, 2022
Minimum
OPERATING LEASES
Period for which option to extend the lease term is available	5 years
Maximum
OPERATING LEASES
Period for which option to extend the lease term is available	15 years

XML

OPERATING LEASES (Lease Cost and Other Information) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Sep. 30, 2022
Lease cost:
Operating lease cost	$ 5,495	$ 6,397
Variable lease cost	3,278	2,476
Less: sublease income	(48)	(78)
Total lease cost	8,725	8,795
Operating cash flows from operating leases	$ (5,896)	$ (6,533)	$ (6,371)
Weighted-average remaining lease term - operating leases	11 years 2 months 19 days	11 years 10 months 28 days
Weighted-average discount rate - operating leases		3.93%		3.95%

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OPERATING LEASES (Undiscounted Cash Flows And Reconciliation To Operating Lease Liabilities) (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Undiscounted Cash Flows
2023	$ 5,100
2024	4,438
2025	4,152
2026	4,089
2027	4,080
Thereafter	23,049
Total	44,908
Lease Liability Expense
2023	1,328
2024	1,202
2025	1,078
2026	958
2027	835
Thereafter	3,618
Total	9,019
Lease Liability Reduction
2023	3,772
2024	3,236
2025	3,074
2026	3,131
2027	3,245
Thereafter	19,431
Total	$ 35,889

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OPERATING LEASES (Operating Lease Income) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Leases, Operating [Abstract]
Operating Lease, Lease Income, Statement of Income or Comprehensive Income [Extensible Enumeration]	Net occupancy	Net occupancy
Total rental income recognized	$ 2,228	$ 2,094

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OPERATING LEASES (Future Minimum Rental Income) (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Future minimum rental income for those noncancellable operating leases that had initial lease terms in excess of one year
2023	$ 1,001
2024	835
2025	675
2026	555
2027	533
Thereafter	2,300
Total	$ 5,899

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INCOME TAXES (Income Tax Expense (Benefit)) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Current expense:
Federal	$ 996	$ 11,304	$ 22,014
State	(1,965)	3,626	2,833
Total current	(969)	14,930	24,847
Deferred expense:
Federal	18,854	8,654	(12,952)
State	6,956	2,174	(135)
Total deferred	25,810	10,828	(13,087)
Total	$ 24,841	25,758	11,760
Reconciliation between the income tax benefit and the expected tax benefit
U.S. Federal corporate tax rate	21.00%
Computed "expected" tax expense (benefit)	$ 20,741	22,187	10,297
Increase (decrease) in taxes resulting from:
Tax-exempt interest income	(692)	(526)	(528)
Other tax-exempt income	(392)	(734)	(799)
Low-income housing tax credits	(530)	(365)	(332)
State income taxes, net of Federal income tax effect, excluding impact of deferred tax valuation allowance	4,982	5,377	2,590
Change in the beginning-of-the-year balance of the valuation allowance for deferred tax assets allocated to income tax expense	39	(39)	(22)
Other, net	693	(142)	554
Total	$ 24,841	$ 25,758	$ 11,760

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INCOME TAXES (Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Deferred tax assets
Lease liability	$ 9,598	$ 10,891
Allowance for credit losses	13,534	14,382
Accrued expenses	3,737	3,616
Employee retirement benefits	1,941	2,547
Federal net operating loss carryforwards	16,363	0
State net operating loss carryforwards	7,583	3,091
Restricted stock and non-qualified stock options	388	611
Premises and equipment	4,717	4,678
Other	9,504	6,333
Total deferred tax assets	67,365	46,149
Deferred tax liabilities
Right-of-use lease asset	9,356	10,546
Intangible assets	2,427	2,604
Other	3,647	3,808
Total deferred tax liabilities	15,430	16,958
Less: Deferred tax valuation allowance	3,398	3,359
Net deferred tax assets	48,537	25,832
Net gains (losses) on sales of investment securities	8,506	150	$ (201)
Income tax (expenses) benefit	(24,841)	(25,758)	(11,760)
Amortization of unrealized losses on investment securities transferred to held-to-maturity at fair value	4,295	0	0
Total reclassification adjustments from AOCI for the period, net of tax	73,928	79,894	37,273
Investment Securities
Deferred tax liabilities
Amortization	(4,698)	110	(147)
Amortization of net actuarial losses
Deferred tax liabilities
Amortization	304	1,036	(1,160)
Tax effect	(81)	(291)	310
Amortization	223	745	(850)
Amortization of net transition obligation
Deferred tax liabilities
Amortization	18	18	(18)
Tax effect	(4)	(4)	5
Amortization	14	14	(13)
Amortization of prior service cost
Deferred tax liabilities
Amortization			(14)
Tax effect			4
Amortization			(10)
Defined Benefit Plans
Deferred tax liabilities
Amortization	(3,304)	(759)	(873)
Amount Reclassified from AOCI
Deferred tax liabilities
Total reclassification adjustments from AOCI for the period, net of tax	(8,002)	(649)	(1,020)
Amount Reclassified from AOCI | Investment Securities
Deferred tax liabilities
Net gains (losses) on sales of investment securities	0	150	(201)
Income tax (expenses) benefit	0	(40)	54
Net change in fair value of investment securities	0	110	(147)
Amount Reclassified from AOCI | Accumulated Net Unrealized Loss on Held To Maturity Securities
Deferred tax liabilities
Amortization of unrealized losses on investment securities transferred to held-to-maturity at fair value	(6,218)	0	0
Less: Amortization of unrealized losses on investment securities transferred to HTM	1,520	0	0
OCI, Debt Securities, Available-for-Sale, Transfer to Held-to-Maturity, Adjustment from AOCI for Amortization of Gain (Loss), after Tax	(4,698)	0	0
Amount Reclassified from AOCI | Amortization of net actuarial losses
Deferred tax liabilities
Amortization	(304)	(1,036)	(1,160)
Amount Reclassified from AOCI | Amortization of net transition obligation
Deferred tax liabilities
Amortization	(18)	(18)	(18)
Amount Reclassified from AOCI | Amortization of prior service cost
Deferred tax liabilities
Amortization	0	0	(14)
Amount Reclassified from AOCI | Settlement
Deferred tax liabilities
Amortization	(4,884)	0	0
Amount Reclassified from AOCI | Defined Benefit Plans
Deferred tax liabilities
Amortization	(5,206)	(1,054)	(1,192)
Tax effect	1,902	295	319
Amortization	$ (3,304)	$ (759)	$ (873)

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INCOME TAXES (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Operating loss carryforwards
Less: Deferred tax valuation allowance	$ 3,398,000	$ 3,359,000
Valuation allowance, increase (decrease)	39,000	(39,000)
Net of valuation allowance	48,500,000	$ 25,800,000
Unrecognized tax benefits that, if recognized would favorably affect the effective income tax rate	0
Domestic Tax Authority
Operating loss carryforwards
Net operating loss carryforwards	77,900,000
State
Operating loss carryforwards
Net operating loss carryforwards	$ 132,000,000

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Components of Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Net unrealized gains/losses on investment securities, Before Tax
Less: Amortization of unrealized losses on investment securities transferred to HTM	$ (4,295)	$ 0	$ 0
Other Comprehensive Income (Loss), before Tax	(184,493)	(38,319)	15,844
Defined benefit plans, Before Tax
Net actuarial gains arising during the period	2,007	2,014	1,488
Settlement	4,884
Net unrealized gains/losses on investment securities, Tax Effect
Other Comprehensive Income (Loss), Tax	(48,469)	(10,231)	4,125
Defined benefit plans, Tax Effect
Net actuarial gains arising during the period	537	544	508
Settlement	1,817
Net unrealized gains/losses on investment securities, Net of Tax
Net unrealized gains (losses) on investment securities	(145,443)	(30,317)	11,826
Total other comprehensive (loss) income, net of tax	(136,024)	(28,088)	11,719
Defined benefit plans, Net of Tax
Net actuarial gains/losses arising during the period	1,470	1,470	980
Settlement	3,067
Amortization of net actuarial losses
Defined benefit plans, Before Tax
Amortization	304	1,036	(1,160)
Defined benefit plans, Tax Effect
Amortization	81	291	(310)
Defined benefit plans, Net of Tax
Amortization	223	745	(850)
Amortization of net transition obligation
Defined benefit plans, Before Tax
Amortization	18	18	(18)
Defined benefit plans, Tax Effect
Amortization	4	4	(5)
Defined benefit plans, Net of Tax
Amortization	14	14	(13)
Amortization of prior service cost
Defined benefit plans, Before Tax
Amortization			(14)
Defined benefit plans, Tax Effect
Amortization			(4)
Defined benefit plans, Net of Tax
Amortization			(10)
Defined Benefit Plans
Net unrealized gains/losses on investment securities, Before Tax
Other Comprehensive Income (Loss), before Tax	7,213	3,068	296
Net unrealized gains/losses on investment securities, Tax Effect
Other Comprehensive Income (Loss), Tax	2,439	839	189
Net unrealized gains/losses on investment securities, Net of Tax
Other comprehensive (loss) income before reclassifications	1,470	1,470	(980)
Total other comprehensive (loss) income, net of tax	4,774	2,229	(107)
Defined benefit plans, Net of Tax
Amortization	(3,304)	(759)	(873)
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-Sale, Noncontrolling Interest
Net unrealized gains/losses on investment securities, Before Tax
Net unrealized losses on investment securities arising during the period	(204,250)	(41,237)	15,939
Less: Reclassification adjustment for gains realized in net income		(150)	201
Less: Amortization of unrealized losses on investment securities transferred to HTM	6,218
Net change in fair value of investment securities	(198,032)	(41,387)	16,140
Net unrealized gains/losses on investment securities, Tax Effect
Net unrealized losses on investment securities arising during the period	(54,109)	(11,030)	4,260
Less: Reclassification adjustment for gains realized in net income		(40)	54
Less: Amortization of unrealized losses on investment securities transferred to HTM	1,520
Net change in fair value of investment securities	(52,589)	(11,070)	4,314
Net unrealized gains/losses on investment securities, Net of Tax
Net unrealized gains/losses arising during the period	(150,141)	(30,207)	11,679
Less: Reclassification adjustment for losses realized in net income		110	(147)
Net of tax	(4,698)
Net unrealized gains (losses) on investment securities	(145,443)	$ (30,317)	$ 11,826
Gain (Loss) On Unrealized Losses On Derivative Instruments
Net unrealized gains/losses on investment securities, Before Tax
Net unrealized gains arising during the period	6,326
Other Comprehensive Income (Loss), before Tax	6,326
Net unrealized gains/losses on investment securities, Tax Effect
Net unrealized gains arising during the period	1,681
Other Comprehensive Income (Loss), Tax	1,681
Net unrealized gains/losses on investment securities, Net of Tax
Other comprehensive (loss) income before reclassifications	4,645
Total other comprehensive (loss) income, net of tax	$ 4,645

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Changes in AOCI) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Changes in each component of accumulated other comprehensive income (loss), net of tax
Balance at the beginning of the period	$ 558,219
Total other comprehensive (loss) income, net of tax	(136,024)	$ (28,088)	$ 11,719
Balance at the end of the period	452,871	558,219
Investment Securities
Changes in each component of accumulated other comprehensive income (loss), net of tax
Balance at the beginning of the period	(3,666)	26,651	14,825
Other comprehensive (loss) income before reclassifications	(150,141)	(30,207)	11,679
Amounts reclassified from AOCI	4,698	(110)	147
Total other comprehensive (loss) income, net of tax	(145,443)	(30,317)	11,826
Balance at the end of the period	(149,109)	(3,666)	26,651
Defined Benefit Plans
Changes in each component of accumulated other comprehensive income (loss), net of tax
Balance at the beginning of the period	(4,294)	(6,523)	(6,416)
Other comprehensive (loss) income before reclassifications	1,470	1,470	(980)
Amounts reclassified from AOCI	3,304	759	873
Total other comprehensive (loss) income, net of tax	4,774	2,229	(107)
Balance at the end of the period	480	(4,294)	(6,523)
AOCI
Changes in each component of accumulated other comprehensive income (loss), net of tax
Balance at the beginning of the period	(7,960)	20,128	8,409
Other comprehensive (loss) income before reclassifications	(144,026)	(28,737)	10,699
Amounts reclassified from AOCI	8,002	649	1,020
Total other comprehensive (loss) income, net of tax	(136,024)	(28,088)	11,719
Balance at the end of the period	(143,984)	(7,960)	$ 20,128
Derivatives
Changes in each component of accumulated other comprehensive income (loss), net of tax
Balance at the beginning of the period	0
Other comprehensive (loss) income before reclassifications	4,645
Amounts reclassified from AOCI	0
Total other comprehensive (loss) income, net of tax	4,645
Balance at the end of the period	$ 4,645	$ 0

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Reclassified out of AOCI) (LOSS) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Amounts reclassified out of each component of accumulated other comprehensive income
Net gains (losses) on sales of investment securities	$ 8,506	$ 150	$ (201)
Income tax (expenses) benefit	(24,841)	(25,758)	(11,760)
Amortization of unrealized losses on investment securities transferred to HTM	4,295	0	0
Total reclassification adjustments from AOCI for the period, net of tax	73,928	79,894	37,273
Amortization of net actuarial losses
Amounts reclassified out of each component of accumulated other comprehensive income
Amortization	304	1,036	(1,160)
Tax effect	(81)	(291)	310
Amounts reclassified from AOCI	223	745	(850)
Amortization of net transition obligation
Amounts reclassified out of each component of accumulated other comprehensive income
Amortization	18	18	(18)
Tax effect	(4)	(4)	5
Amounts reclassified from AOCI	14	14	(13)
Amortization of prior service cost
Amounts reclassified out of each component of accumulated other comprehensive income
Amortization			(14)
Tax effect			4
Amounts reclassified from AOCI			(10)
Defined Benefit Plans
Amounts reclassified out of each component of accumulated other comprehensive income
Amounts reclassified from AOCI	(3,304)	(759)	(873)
Investment Securities
Amounts reclassified out of each component of accumulated other comprehensive income
Amounts reclassified from AOCI	(4,698)	110	(147)
Amount Reclassified from AOCI
Amounts reclassified out of each component of accumulated other comprehensive income
Total reclassification adjustments from AOCI for the period, net of tax	(8,002)	(649)	(1,020)
Amount Reclassified from AOCI | Amortization of net actuarial losses
Amounts reclassified out of each component of accumulated other comprehensive income
Amortization	(304)	(1,036)	(1,160)
Amount Reclassified from AOCI | Amortization of net transition obligation
Amounts reclassified out of each component of accumulated other comprehensive income
Amortization	(18)	(18)	(18)
Amount Reclassified from AOCI | Amortization of prior service cost
Amounts reclassified out of each component of accumulated other comprehensive income
Amortization	0	0	(14)
Amount Reclassified from AOCI | Settlement
Amounts reclassified out of each component of accumulated other comprehensive income
Amortization	(4,884)	0	0
Amount Reclassified from AOCI | Defined Benefit Plans
Amounts reclassified out of each component of accumulated other comprehensive income
Amortization	(5,206)	(1,054)	(1,192)
Tax effect	1,902	295	319
Amounts reclassified from AOCI	(3,304)	(759)	(873)
Amount Reclassified from AOCI | Investment Securities
Amounts reclassified out of each component of accumulated other comprehensive income
Net gains (losses) on sales of investment securities	0	150	(201)
Income tax (expenses) benefit	0	(40)	54
Net of tax	0	110	(147)
Amount Reclassified from AOCI | Accumulated Net Unrealized Loss on Held To Maturity Securities
Amounts reclassified out of each component of accumulated other comprehensive income
Amortization of unrealized losses on investment securities transferred to HTM	(6,218)	0	0
Tax effect	1,520	0	0
Net of tax	$ (4,698)	$ 0	$ 0

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
SHARE-BASED COMPENSATION
Net income	$ 73,928	$ 79,894	$ 37,273
Weighted average shares outstanding - basic (in shares)	27,398,445	28,003,744	28,074,543
Weighted average shares outstanding - diluted (in shares)	27,567,780	28,257,323	28,180,576
Basic earnings per share (in dollars per share)	$ 2.70	$ 2.85	$ 1.33
Diluted earnings per share (in dollars per share)	$ 2.68	$ 2.83	$ 1.32
Antidilutive securities excluded from the dilutive share calculation (in shares)	0	0	0
Stock Option
SHARE-BASED COMPENSATION
Dilutive effect of share-based compensation arrangements (in shares)	169,335	253,579	106,033

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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Commitments to extend credit
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	$ 1,328,791		$ 1,266,596
Standby letters of credit and financial guarantees written
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	5,367		6,634
Assets
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Notional amount	32,335		33,112
Liabilities
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Notional amount	32,335		33,112
Forward interest rate contracts
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Notional amount	1,110		3,525
Not Designated as Hedging Instrument [Member] | Assets
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	32,335		33,112
Not Designated as Hedging Instrument [Member] | Liabilities
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	32,335		33,112
Forward interest rate contracts | Not Designated as Hedging Instrument [Member] | Forward interest rate contracts
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	1,110		3,525
Risk participation agreements | Not Designated as Hedging Instrument [Member]
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	36,835		37,531
Interest rate swap | Not Designated as Hedging Instrument [Member]
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	115,545		$ 0
Interest rate swap | Designated as Hedging Instrument
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Notional amount	$ 115,500	$ 115,500
Fixed interest rate (in percent)	2.095%	2.095%

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FAIR VALUE OF ASSETS AND LIABILITIES (Carrying Amount and Estimated Fair Value of Financial Instruments) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Fair Value Disclosures [Abstract]
Loans, weighted average discount rate, percent	7.44%
Time deposits, weighted average discount rate, percent	4.96%
Long -term debt, weighted average discount rate, percent	7.28%
Financial assets
Cash and due from financial institutions	$ 97,150	$ 81,506
Interest-bearing deposits in other financial institutions	14,894	247,401
Investment securities	1,268,574
Loans held for sale	1,105	3,531
Federal Home Loan Bank ("FHLB") stock	9,146	7,964
Accrued interest receivable	20,345	16,709
Financial liabilities
Noninterest-bearing demand	2,092,823	2,291,246
Time deposits	991,205	706,732
Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets
Cash and due from financial institutions	97,150	81,506
Interest-bearing deposits in other financial institutions	14,894	247,401
Investment securities	0	0
Loans Receivable Held-for-sale, Net, Not Part of Disposal Group	0	0
Loans, net of ACL	0	0
Accrued interest receivable	20,345	16,709
Financial liabilities
Noninterest-bearing demand	2,092,823	2,291,246
Interest-bearing demand and savings deposits	3,652,195	3,641,180
Time deposits	0	0
FHLB advances and other short-term borrowings	0
Long-term debt	0	0
Accrued interest payable (included in other liabilities)	4,739	1,122
Significant Other Observable Inputs (Level 2)
Financial assets
Cash and due from financial institutions	0	0
Interest-bearing deposits in other financial institutions	0	0
Investment securities	1,261,306	1,623,080
Loans held for sale	1,105	3,531
Loans, net of ACL	0	0
Accrued interest receivable	0	0
Financial liabilities
Noninterest-bearing demand	0	0
Interest-bearing demand and savings deposits	0	0
Time deposits	0	0
FHLB advances and other short-term borrowings	5,000
Long-term debt	0	0
Accrued interest payable (included in other liabilities)	0	0
Significant Unobservable Inputs (Level 3)
Financial assets
Cash and due from financial institutions	0	0
Interest-bearing deposits in other financial institutions	0	0
Investment securities	7,268	8,619
Loans Receivable Held-for-sale, Net, Not Part of Disposal Group	0	0
Loans, net of ACL	5,043,436	4,741,379
Accrued interest receivable	0	0
Financial liabilities
Noninterest-bearing demand	0	0
Interest-bearing demand and savings deposits	0	0
Time deposits	975,086	704,645
FHLB advances and other short-term borrowings	0
Long-term debt	93,729	94,558
Accrued interest payable (included in other liabilities)	0	0
Carrying Amount
Financial assets
Cash and due from financial institutions	97,150	81,506
Interest-bearing deposits in other financial institutions	14,894	247,401
Investment securities	1,336,677	1,631,699
Loans held for sale	1,105	3,531
Loans, net of ACL	5,491,728	5,033,552
Accrued interest receivable	20,345	16,709
Financial liabilities
Noninterest-bearing demand	2,092,823	2,291,246
Interest-bearing demand and savings deposits	3,652,195	3,641,180
Time deposits	991,205	706,732
FHLB advances and other short-term borrowings	5,000
Long-term debt	105,859	105,616
Accrued interest payable (included in other liabilities)	4,739	1,122
Estimated Fair Value
Financial assets
Cash and due from financial institutions	97,150	81,506
Interest-bearing deposits in other financial institutions	14,894	247,401
Investment securities	1,268,574	1,631,699
Loans held for sale	1,105	3,531
Loans, net of ACL	5,043,436	4,741,379
Accrued interest receivable	20,345	16,709
Financial liabilities
Noninterest-bearing demand	2,092,823	2,291,246
Interest-bearing demand and savings deposits	3,652,195	3,641,180
Time deposits	975,086	704,645
FHLB advances and other short-term borrowings	5,000
Long-term debt	93,729	94,558
Accrued interest payable (included in other liabilities)	4,739	1,122
Commitments to extend credit
Financial liabilities
Off-balance sheet financial instruments:	1,328,791	1,266,596
Commitments to extend credit | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial liabilities
Off-balance sheet financial instruments:	0	0
Commitments to extend credit | Significant Other Observable Inputs (Level 2)
Financial liabilities
Off-balance sheet financial instruments:	1,270	1,347
Commitments to extend credit | Significant Unobservable Inputs (Level 3)
Financial liabilities
Off-balance sheet financial instruments:	0	0
Commitments to extend credit | Carrying Amount
Financial liabilities
Off-balance sheet financial instruments:	0	0
Commitments to extend credit | Estimated Fair Value
Financial liabilities
Off-balance sheet financial instruments:	1,270	1,347
Standby letters of credit and financial guarantees written
Financial liabilities
Off-balance sheet financial instruments:	5,367	6,634
Standby letters of credit and financial guarantees written | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial liabilities
Off-balance sheet financial instruments:	0	0
Standby letters of credit and financial guarantees written | Significant Other Observable Inputs (Level 2)
Financial liabilities
Off-balance sheet financial instruments:	80	100
Standby letters of credit and financial guarantees written | Significant Unobservable Inputs (Level 3)
Financial liabilities
Off-balance sheet financial instruments:	0	0
Standby letters of credit and financial guarantees written | Carrying Amount
Financial liabilities
Off-balance sheet financial instruments:	0	0
Standby letters of credit and financial guarantees written | Estimated Fair Value
Financial liabilities
Off-balance sheet financial instruments:	80	100
Assets
Financial liabilities
Notional amount	(32,335)	(33,112)
Assets | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial liabilities
Financial Liabilities Fair Value Disclosure	0	0
Assets | Significant Other Observable Inputs (Level 2)
Financial liabilities
Financial Liabilities Fair Value Disclosure	0	0
Assets | Significant Unobservable Inputs (Level 3)
Financial liabilities
Financial Liabilities Fair Value Disclosure	(4,611)	(435)
Assets | Carrying Amount
Financial liabilities
Financial Liabilities Fair Value Disclosure	(4,611)	(435)
Assets | Estimated Fair Value
Financial liabilities
Financial Liabilities Fair Value Disclosure	(4,611)	(435)
Liabilities
Financial liabilities
Notional amount	(32,335)	(33,112)
Financial Liabilities Fair Value Disclosure	(4,611)	(435)
Liabilities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial liabilities
Financial Liabilities Fair Value Disclosure	0	0
Liabilities | Significant Other Observable Inputs (Level 2)
Financial liabilities
Financial Liabilities Fair Value Disclosure	0	0
Liabilities | Significant Unobservable Inputs (Level 3)
Financial liabilities
Financial Liabilities Fair Value Disclosure	(4,611)	(435)
Forward interest rate contracts
Financial liabilities
Notional amount	(1,110)	(3,525)
Risk participation agreements
Financial liabilities
Notional amount	(36,835)	(37,531)
Interest rate swap
Financial liabilities
Notional amount	(115,545)
Recurring basis | Forward interest rate contracts | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	0	0
Recurring basis | Forward interest rate contracts | Significant Other Observable Inputs (Level 2)
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	8	1
Recurring basis | Forward interest rate contracts | Significant Unobservable Inputs (Level 3)
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	0	0
Recurring basis | Forward interest rate contracts | Carrying Amount
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	8	1
Recurring basis | Forward interest rate contracts | Estimated Fair Value
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	8	1
Recurring basis | Risk participation agreements | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	0	0
Recurring basis | Risk participation agreements | Significant Other Observable Inputs (Level 2)
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	0	0
Recurring basis | Risk participation agreements | Significant Unobservable Inputs (Level 3)
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	0	16
Recurring basis | Risk participation agreements | Carrying Amount
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	0	16
Recurring basis | Risk participation agreements | Estimated Fair Value
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	0	$ 16
Recurring basis | Interest rate swap | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	0
Recurring basis | Interest rate swap | Significant Other Observable Inputs (Level 2)
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	0
Recurring basis | Interest rate swap | Significant Unobservable Inputs (Level 3)
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	5,986
Recurring basis | Interest rate swap | Carrying Amount
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	5,986
Recurring basis | Interest rate swap | Estimated Fair Value
Financial liabilities
Assets, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	$ 5,986

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FAIR VALUE OF ASSETS AND LIABILITIES (Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) - Recurring basis - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	$ 671,794	$ 1,631,699
Derivatives	5,994	(15)
Total	677,788	1,631,684
Interest rate lock commitments
Assets and liabilities measured at fair value
Derivatives		1
Forward interest rate contracts
Assets and liabilities measured at fair value
Derivatives	8	(16)
Interest rate swap
Assets and liabilities measured at fair value
Derivatives	5,986
States and political subdivisions
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	135,752	236,828
Corporate securities
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	30,211	40,646
U.S. Treasury obligations and direct obligations of U.S Government agencies
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	25,715	35,334
Residential - U.S. Government-sponsored entities ("GSEs")
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	423,803	1,198,816
Commercial - U.S. GSEs and agencies
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	8,662	12,213
Residential - Non-Government Agencies
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	46,144	65,849
Commercial - Non-GSEs
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	1,507	42,013
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	0	0
Derivatives	0	0
Total	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Interest rate lock commitments
Assets and liabilities measured at fair value
Derivatives		0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Forward interest rate contracts
Assets and liabilities measured at fair value
Derivatives	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Interest rate swap
Assets and liabilities measured at fair value
Derivatives	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | States and political subdivisions
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate securities
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Treasury obligations and direct obligations of U.S Government agencies
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Residential - U.S. Government-sponsored entities ("GSEs")
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Commercial - U.S. GSEs and agencies
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Residential - Non-Government Agencies
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Commercial - Non-GSEs
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	0	0
Significant Other Observable Inputs (Level 2)
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	664,526	1,623,080
Derivatives	8	1
Total	664,534	1,623,081
Significant Other Observable Inputs (Level 2) | Interest rate lock commitments
Assets and liabilities measured at fair value
Derivatives		1
Significant Other Observable Inputs (Level 2) | Forward interest rate contracts
Assets and liabilities measured at fair value
Derivatives	8	0
Significant Other Observable Inputs (Level 2) | Interest rate swap
Assets and liabilities measured at fair value
Derivatives	0
Significant Other Observable Inputs (Level 2) | States and political subdivisions
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	129,168	229,147
Significant Other Observable Inputs (Level 2) | Corporate securities
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	30,211	40,646
Significant Other Observable Inputs (Level 2) | U.S. Treasury obligations and direct obligations of U.S Government agencies
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	25,715	35,334
Significant Other Observable Inputs (Level 2) | Residential - U.S. Government-sponsored entities ("GSEs")
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	423,803	1,198,816
Significant Other Observable Inputs (Level 2) | Commercial - U.S. GSEs and agencies
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	7,978	11,275
Significant Other Observable Inputs (Level 2) | Residential - Non-Government Agencies
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	46,144	65,849
Significant Other Observable Inputs (Level 2) | Commercial - Non-GSEs
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	1,507	42,013
Significant Unobservable Inputs (Level 3)
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	7,268	8,619
Derivatives	5,986	(16)
Total	13,254	8,603
Significant Unobservable Inputs (Level 3) | Interest rate lock commitments
Assets and liabilities measured at fair value
Derivatives		0
Significant Unobservable Inputs (Level 3) | Forward interest rate contracts
Assets and liabilities measured at fair value
Derivatives	0	(16)
Significant Unobservable Inputs (Level 3) | Interest rate swap
Assets and liabilities measured at fair value
Derivatives	5,986
Significant Unobservable Inputs (Level 3) | States and political subdivisions
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	6,584	7,681
Significant Unobservable Inputs (Level 3) | Corporate securities
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	0	0
Significant Unobservable Inputs (Level 3) | U.S. Treasury obligations and direct obligations of U.S Government agencies
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	0	0
Significant Unobservable Inputs (Level 3) | Residential - U.S. Government-sponsored entities ("GSEs")
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	0	0
Significant Unobservable Inputs (Level 3) | Commercial - U.S. GSEs and agencies
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	684	938
Significant Unobservable Inputs (Level 3) | Residential - Non-Government Agencies
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	0	0
Significant Unobservable Inputs (Level 3) | Commercial - Non-GSEs
Assets and liabilities measured at fair value
Available-for-sale debt securities, at fair value	$ 0	$ 0

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FAIR VALUE OF ASSETS AND LIABILITIES (Level 3 Assets and Liabilities) (Details)	12 Months Ended
	Dec. 31, 2022 USD ($) bond security	Dec. 31, 2021 USD ($)
Additional disclosures
Transfers of financial assets (liability) into Level 3	$ 0
Transfers of financial assets (liability) out of Level 3	0
Mortgage revenue bonds
Changes in Level 3 assets and liabilities measured at fair value on a recurring basis
Aggregate fair value / Balance at the beginning of the period	8,619,000	$ 12,326,000
Principal payments received	(235,000)	(2,863,000)
Unrealized net loss included in other comprehensive loss	(1,116,000)	(844,000)
Aggregate fair value / Balance at the end of the period	$ 7,268,000	8,619,000
Additional disclosures
Number of investment securities held | bond	2
Mortgage revenue bonds | States and political subdivisions
Changes in Level 3 assets and liabilities measured at fair value on a recurring basis
Aggregate fair value / Balance at the beginning of the period	$ 7,681,000	11,337,000
Principal payments received	(212,000)	(2,841,000)
Unrealized net loss included in other comprehensive loss	(885,000)	(815,000)
Aggregate fair value / Balance at the end of the period	6,584,000	7,681,000
Mortgage revenue bonds | Residential - Non-Government Agencies
Changes in Level 3 assets and liabilities measured at fair value on a recurring basis
Aggregate fair value / Balance at the beginning of the period	938,000	989,000
Principal payments received	(23,000)	(22,000)
Unrealized net loss included in other comprehensive loss	(231,000)	(29,000)
Aggregate fair value / Balance at the end of the period	$ 684,000	$ 938,000
Additional disclosures
Number of investment securities held | security	2
Weighted-average discount rate | Mortgage revenue bonds | Weighted average
Fair Value Of Financial Assets And Liabilities
Debt Instrument, Measurement Input	0.0641

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PARENT COMPANY AND REGULATORY RESTRICTIONS (Required Capital and Capital Ratios) (Details) $ in Thousands		12 Months Ended
	Jan. 01, 2019	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2020	Dec. 31, 2019
Leverage capital
Actual Amount		$ 642,302	$ 622,130
Actual Ratio		0.085	0.085
Minimum amount required to be adequately capitalized		$ 301,053	$ 293,382
Minimum ratio required to be adequately capitalized		0.040	0.040
Tier 1 risk-based capital
Actual Amount		$ 642,302	$ 622,130
Actual Ratio		0.113	0.122
Minimum amount required to be adequately capitalized		$ 340,151	$ 307,215
Minimum ratio required to be adequately capitalized		0.060	0.060
Total risk-based capital
Actual Amount		$ 764,283	$ 741,291
Actual Ratio		0.135	0.145
Minimum amount required to be adequately capitalized		$ 453,535	$ 409,620
Minimum ratio required to be adequately capitalized		0.080	0.080
CET1 risk-based capital
Actual Amount		$ 592,302	$ 572,130
Actual Ratio		10.50%	11.20%
Minimum amount required for capital adequacy purposes		$ 255,113	$ 230,411
Minimum ratio required for capital adequacy purposes		4.50%	4.50%
Capital Conservation Buffer, Year One				1.25%	0.625%
Capital Conservation Buffer, Year Two			1.875%
Capital Conservation Buffer, Year Three	0.025%	2.50%
Capital Conservation Buffer, Year Four	2.50%
Central Bank
PARENT COMPANY AND REGULATORY RESTRICTIONS
Equity in undistributed losses		$ (339,400)
Retained earnings		145,700	$ 114,000
Leverage capital
Actual Amount		$ 675,331	$ 652,987
Actual Ratio		0.090	0.089
Minimum amount required to be adequately capitalized		$ 300,584	$ 292,877
Minimum ratio required to be adequately capitalized		0.040	0.040
Minimum amount required to be well-capitalized		$ 375,730	$ 366,096
Minimum ratio required to be well-capitalized		0.050	0.050
Tier 1 risk-based capital
Actual Amount		$ 675,331	$ 652,987
Actual Ratio		0.119	0.128
Minimum amount required to be adequately capitalized		$ 339,422	$ 306,497
Minimum ratio required to be adequately capitalized		0.060	0.060
Minimum amount required to be well-capitalized		$ 452,563	$ 408,663
Minimum ratio required to be well-capitalized		0.080	0.080
Total risk-based capital
Actual Amount		$ 742,312	$ 717,000
Actual Ratio		0.131	0.140
Minimum amount required to be adequately capitalized		$ 452,563	$ 408,663
Minimum ratio required to be adequately capitalized		0.080	0.080
Minimum amount required to be well-capitalized		$ 565,704	$ 510,828
Minimum ratio required to be well-capitalized		0.100	0.100
CET1 risk-based capital
Actual Amount		$ 675,331	$ 652,987
Actual Ratio		11.90%	12.80%
Minimum amount required for capital adequacy purposes		$ 254,567	$ 229,873
Minimum ratio required for capital adequacy purposes		4.50%	4.50%
Minimum amount equired to be well-capitalized		$ 367,708	$ 332,038
Minimum ratio required to be well-capitalized		6.50%	6.50%

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PARENT COMPANY AND REGULATORY RESTRICTIONS (Condensed Balance Sheets) (Details) - USD ($) $ / shares in Units, $ in Thousands	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Assets
Total assets	$ 7,432,763	$ 7,419,089
Liabilities and Shareholders' Equity
Long-term debt	105,859	105,616	$ 0
Other liabilities	96,921	75,317
Total liabilities	6,979,892	6,860,822
Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding none at December 31, 2022 and 2021	0	0
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding 27,025,070 and 27,714,071 shares at December 31, 2022 and 2021, respectively	408,071	426,091
Additional paid-in capital	101,346	98,073
Retained earnings	87,438	42,015
Accumulated other comprehensive loss	(143,984)	(7,960)
Total shareholders' equity	452,871	558,219
Non-controlling interest	0	48
Total equity	452,871	558,267	546,733	$ 528,520
Total liabilities and equity	$ 7,432,763	$ 7,419,089
Preferred stock, par value (in dollars per share)	$ 0	$ 0
Preferred stock, authorized (in shares)	1,000,000	1,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, authorized (in shares)	185,000,000	185,000,000
Common stock, issued (in shares)	27,025,070	27,714,071
Common stock, outstanding (in shares)	27,025,070	27,714,071
Parent
Assets
Cash and cash equivalents	$ 16,915	$ 20,090	$ 11,184		$ 10,634
Investment in subsidiary bank	534,817	639,050
Other assets	14,442	12,029
Total assets	566,174	671,169
Liabilities and Shareholders' Equity
Long-term debt	105,859	105,616
Other liabilities	7,444	7,334
Total liabilities	113,303	112,950
Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares; issued and outstanding none at December 31, 2022 and 2021	0	0
Common stock, no par value, authorized 185,000,000 shares; issued and outstanding 27,025,070 and 27,714,071 shares at December 31, 2022 and 2021, respectively	408,071	433,263
Additional paid-in capital	101,346	98,073
Retained earnings	87,438	34,843
Accumulated other comprehensive loss	(143,984)	(7,960)
Total shareholders' equity	452,871	558,219
Total equity	452,871	558,219
Total liabilities and equity	$ 566,174	$ 671,169
Preferred stock, par value (in dollars per share)	$ 0	$ 0
Preferred stock, authorized (in shares)	1,000,000	1,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, authorized (in shares)	185,000,000	185,000,000
Common stock, issued (in shares)	27,025,070	27,714,071
Common stock, outstanding (in shares)	27,025,070	27,714,071

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PARENT COMPANY AND REGULATORY RESTRICTIONS (Condensed Statements of Income) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Expense:
Interest on long-term debt	$ 4,930	$ 4,097	$ 3,602
Income tax expense	24,841	25,758	11,760
Net income	73,928	79,894	37,273
Parent
Income:
Dividends from subsidiary bank	47,427	54,016	24,015
Interest income:
Interest income from subsidiary bank	3	3	4
Other income	64	43	52
Total income	47,494	54,062	24,071
Expense:
Interest on long-term debt	4,930	4,097	2,095
Other expenses	2,317	3,504	1,293
Total expenses	7,247	7,601	3,388
Income before income taxes and equity in undistributed income of subsidiaries	40,247	46,461	20,683
Income tax expense	(1,917)	(1,968)	(690)
Income before equity in undistributed income of subsidiaries	42,164	48,429	21,373
Equity in undistributed income of subsidiary bank	31,764	31,465	15,900
Net income	$ 73,928	$ 79,894	$ 37,273

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PARENT COMPANY AND REGULATORY RESTRICTIONS (Condensed Statements of Cash Flows) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Cash flows from operating activities
Net income	$ 73,928	$ 79,894	$ 37,273
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Deferred income tax benefit	25,810	10,828	(13,087)
Share-based compensation expense	3,273	3,231	3,231
Net Cash Provided by (Used in) Investing Activities [Abstract]
Proceeds from sale of investment securities		279,500	180,100
Distributions from unconsolidated entities	237	480	330
Cash flows from financing activities
Net proceeds from issuance of common stock and stock option exercises	679	1,236	0
Proceeds from long-term debt	0	0	115,944
Repurchases of common stock	(20,740)	(18,669)	(4,749)
Dividends paid	(28,505)	(26,959)	(25,935)
Parent
Cash flows from operating activities
Net income	73,928	79,894	37,273
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Deferred income tax benefit	(26)	70	2,552
Equity in undistributed income of subsidiary bank	(31,764)	(31,465)	(15,900)
Share-based compensation expense	3,273	3,231	3,231
Other, net	(20)	(85)	(3,010)
Net cash provided by operating activities	45,391	51,645	24,146
Net Cash Provided by (Used in) Investing Activities [Abstract]
Contributions to subsidiary bank	0	0	(46,750)
Proceeds from sale of investment securities	0	1,653	0
Net cash provided by (used in) investing activities	0	1,653	(46,750)
Cash flows from financing activities
Net proceeds from issuance of common stock and stock option exercises	679	1,236	0
Net proceeds from subordinated debt	0	0	53,838
Repurchases of common stock	(20,740)	(18,669)	(4,749)
Dividends paid	(28,505)	(26,959)	(25,935)
Net cash provided by financing activities	(48,566)	(44,392)	23,154
Net increase (decrease) in cash and cash equivalents	(3,175)	8,906	550
At beginning of year	20,090	11,184
At end of year	$ 16,915	$ 20,090	$ 11,184

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SUBSEQUENT EVENTS (Details) - USD ($) shares in Millions, $ in Millions	Jan. 31, 2023	Dec. 31, 2022	Jan. 31, 2022	Jan. 31, 2021
Subsequent events
Authorized amount repurchased common stock			$ 30.0	$ 25.0
Number of shares in remaining available for repurchase		10.3
Subsequent Event
Subsequent events
Authorized amount repurchased common stock	$ 25.0