Central Pacific Financial (CPF) risk factors, FY2025 10-K

Risks Related to General Economic Conditions

1. 01Difficult economic and market conditions in Hawaii would result in significant adverse effects on us because of the geographic concentration of our business
2. 02The fiscal, monetary and regulatory policies of the federal government and its agencies could have a material adverse effect on our results of operations
3. 03In a high 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
4. 04The financial services industry and broader economy may be subject to new or changing government policy, legislation and regulation, or the prolonged effects of a government shutdownNew
5. 05Negative developments in the global and U.S. economies could have an adverse effect on us
6. 06Negative developments affecting the banking industry, such as bank failures or concerns involving liquidity, may have a material adverse effect on the Company’s operations

Risks Related to Credit

1. 07Our real estate loan operations have a considerable effect on our results of operationsNew
2. 08The 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. The strength of the real estate market and the results of our operations could be negatively affected by an economic downturn
3. 09A large percentage of our loans are collateralized by real estate and deterioration in the real estate market may adversely affect our financial results26% rewritten
4. 10Provisions for credit losses and charge-offs of additional loans in the future, could adversely affect our results of operations35% rewritten
5. 11Our 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
6. 12In 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
7. 13Our commercial and industrial, and commercial real estate loan portfolios expose us to risks that may be greater than the risks related to our other loans
8. 14We 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
9. 15Consumer protection initiatives related to the foreclosure process could materially affect our ability as a creditor to obtain remedies58% rewritten
10. 16Changes to, or limitations on our ability to participate in, the programs and guidelines of government-sponsored entities could adversely affect our mortgage origination and secondary‑market activitiesNew
11. 17Banking-as-a-Service ("BaaS") collaboration agreements that we may enter into may expose us to credit risk32% rewritten

Risks Related to Interest Rates and Liquidity

1. 18Our business is subject to interest rate risk and fluctuations in interest rates may adversely affect our earnings
2. 19If 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 affected27% rewritten
3. 20The high interest rate environment has decreased the market value of the Company’s fixed-rate investment securities and loan portfolios, and the Company would realize losses if we were required to sell such securities or loans to meet liquidity needs
4. 21Our 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 obligations49% rewritten
5. 22credit exposure to other parties could adversely impact our sources of liquidity, financial position, including regulatory capital ratios, results of operations and our business prospectsNew
6. 23We rely on the mortgage secondary market for some of our revenue and liquidity
7. 24We are required to act as a source of financial and managerial strength for our Bank
8. 25Because 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 revenue and our liquidity, including as the source of funds for payment of interest and principal on our holding company debt obligations21% rewritten

Risks Related to the Operation of Our Business

1. 26Managing reputational risk is important to attracting and maintaining customers, investors and employees
2. 27Our deposit customers may pursue alternatives to deposits at our Bank or seek higher yielding deposits causing us to incur increased funding costs
3. 28Failure to manage our growth may adversely affect our performance
4. 29Failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely affect our ability to report our financial condition and results of operations completely, accurately, and timely
5. 30Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition
6. 31Financial services companies depend on the accuracy and completeness of information about customers and counterparties
7. 32We operate in a highly competitive industry and market area59% rewritten
8. 33Failure 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 operationsNew
9. 34We are subject to environmental liability risk associated with our bank branches and any real estate collateral we acquire upon foreclosure
10. 35Our business could be adversely affected by unfavorable actions from rating agencies
11. 36Our operational risks include risks associated with third-party vendors and other financial institutions
12. 37Significant increases in residential home insurance premiums and overall challenges in obtaining homeowners insurance generally may negatively impact the residential real estate market

Risks Related to Legal, Compliance and Regulatory Matters

1. 38Governmental regulation and regulatory actions against us may impair our operations or restrict our growth93% rewritten
2. 39examining authorities may be subject to change at any time. In addition, regulations may be adopted that increase expenses associated with running our business and adversely affect our earningsNew
3. 40We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations
4. 41Regulatory capital standards impose enhanced capital adequacy requirements on us
5. 42Costs of compliance with environmental laws and regulations are significant, and the cost of compliance with potential new environmental laws, including limitations on emissions relating to climate change and disclosure requirements, could adversely affect our financial condition and results of operations
6. 43We are subject to various legal claims and litigation

Risks Related to an Investment in the Company's Securities

1. 44The market price of our common stock could decline
2. 45Anti-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
3. 46Our common stock is equity and therefore is subordinate to our subsidiaries' indebtedness and preferred stock20% rewritten
4. 47There is a limited trading market for our common stock and as a result, shareholders may not be able to resell their shares at or above the price they pay for them or at the time they otherwise may desire
5. 48The soundness of other financial institutions could adversely affect us

Risks Related to Technology

1. 49We continually encounter technological change including developments in artificial intelligence
2. 50The 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
3. 51We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects23% rewritten
4. 52Natural disasters and other external events (including pandemic viruses or disease) could have a material adverse effect on our financial condition and results of operations
5. 53Climate change could have a material adverse effect on us and our customers85% rewritten
6. 54transition risks associated with the transition to a less carbon-dependent economy; and reputational risk from stakeholder concerns about our practices related to climate change, our carbon footprint, and our business relationships with clients who operate in carbon-intensive industriesNew