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Section 1: DEF 14A (DEF 14A)

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

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.  )

Filed by the Registrant ☒
Filed by a Party other than the Registrant o
Check the appropriate box:
o
Preliminary Proxy Statement
o
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material under §240.14a-12


CENTRAL PACIFIC FINANCIAL CORP.
(Name of Registrant as Specified In Its Charter)
   
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
No fee required.
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:
 
 
 
 
(2)
Aggregate number of securities to which transaction applies:
 
 
 
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
 
 
(4)
Proposed maximum aggregate value of transaction:
 
 
 
 
(5)
Total fee paid:
 
 
 
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
(1)
Amount Previously Paid:
 
 
 
 
(2)
Form, Schedule or Registration Statement No.:
 
 
 
 
(3)
Filing Party:
 
 
 
 
(4)
Date Filed:
 
 
 

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CENTRAL PACIFIC FINANCIAL CORP.
220 South King Street
Honolulu, Hawaii 96813
(808) 544-0500

APRIL 27, 2018 ANNUAL MEETING
YOUR VOTE IS IMPORTANT

March 9, 2018

Dear Fellow Shareholder:

On behalf of your Board of Directors, we cordially invite you to attend the 2018 Annual Meeting of Shareholders of Central Pacific Financial Corp. The Annual Meeting will be held on Friday, April 27, 2018, at 11:00 a.m., Hawaii time, at Harbor Square, 4th Floor, Waikiki Room, 225 Queen Street, Honolulu, Hawaii 96813. Your Board and management look forward to greeting those shareholders able to attend the meeting in person.

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

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

We appreciate your continued interest in Central Pacific Financial Corp.

Sincerely,
 

 
A. Catherine Ngo
President and Chief Executive Officer
 

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CENTRAL PACIFIC FINANCIAL CORP.
220 South King Street
Honolulu, Hawaii 96813
(808) 544-0500

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 2018

TO THE SHAREHOLDERS OF CENTRAL PACIFIC FINANCIAL CORP.:

NOTICE IS HEREBY GIVEN that, pursuant to its Bylaws and the call of its Board of Directors, the Annual Meeting of Shareholders (the “Meeting”) of Central Pacific Financial Corp. (the “Company”) will be held at Harbor Square, 4th Floor, Waikiki Room, 225 Queen Street, Honolulu, Hawaii 96813, on Friday, April 27, 2018, at 11:00 a.m., Hawaii time, for the purpose of considering and voting upon the following proposals:

(1) Election of Directors. To elect up to twelve (12) persons to the Board of Directors for a term of one (1) year and to serve until their successors are elected and qualified, as more fully described in the accompanying Proxy Statement.
(2) Executive Compensation. To approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers (“Say-on-Pay”).
(3) Ratification of Appointment of Independent Registered Public Accounting Firm. To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018.
(4) Other Business. To transact such other business as may properly come before the Meeting and at any and all adjournments or postponements thereof.

Only those shareholders of record at the close of business on February 23, 2018 shall be entitled to notice of and to vote at the Meeting.

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

Important notice regarding the availability of proxy materials for the annual shareholders’ meeting to be held on April 27, 2018. Our Proxy Statement and Annual Report on Form 10-K, as amended for the fiscal year ended December 31, 2017 are accessible, free of charge, athttps://www.centralpacificbank.com/2018proxyandhttps://www.proxyvote.com.

 
By Order of the Board of Directors,
 

 
GLENN K.C. CHING
 
Executive Vice President and Corporate Secretary
   
 
Dated: March 9, 2018
 

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CENTRAL PACIFIC FINANCIAL CORP.
220 South King Street
Honolulu, Hawaii 96813
(808) 544-0500

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 2018

INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Central Pacific Financial Corp. (the “Company”) for use at the 2018 Annual Meeting of Shareholders (the “Meeting”) of the Company to be held at Harbor Square, 4th Floor, Waikiki Room, 225 Queen Street, Honolulu, Hawaii 96813, on Friday, April 27, 2018, at 11:00 a.m., Hawaii time, and at any and all adjournments or postponements thereof. The Notice of Internet Availability of Proxy Materials, this Proxy Statement and accompanying form of proxy or voting instruction card, are first being made available to shareholders on or about March 9, 2018.

Proposals to be Considered

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

(1) Election of Directors.To elect up to twelve (12) persons to the Board of Directors for a term of one (1) year and to serve until their successors are elected and qualified, as more fully described in this Proxy Statement.
(2) Executive Compensation.To approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers.
(3) Ratification of Appointment of Independent Registered Public Accounting Firm. To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018.
(4) Other Business. To transact such other business as may properly come before the Meeting and at any and all adjournments or postponements thereof.

Record Date, Outstanding Securities and Voting Rights

The Board fixed the close of business on February 23, 2018 as the record date (the “Record Date”) for the determination of the shareholders of the Company entitled to notice of and to vote at the Meeting. Only holders of record of shares of the Company’s Common Stock (“Common Stock”) at the close of business on the Record Date will be entitled to vote at the Meeting and at any adjournment or postponement of the Meeting. There were 29,899,484 shares of the Company’s Common Stock, no par value, issued and outstanding on the Record Date, held by approximately 3,392 holders of record. There are no other classes of shares of the Company’s capital stock outstanding.

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

Quorum

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

Broker Authority to Vote

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

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

Vote Required to Approve the Proposals

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

Proposal
Required Vote
Effect of “Withhold” Votes,
Abstentions, Broker Non-Votes
Proposal 1—Election of Directors
Affirmative vote of a plurality of the shares of Common Stock present in person or by proxy and entitled to vote.
“Withhold” votes will have the effect of a vote AGAINST the election of directors. Broker non-votes will have no effect on the voting for the election of directors.
 
 
 
Proposal 2—Proposal relating to an advisory (non-binding) vote on executive compensation (“Say-On-Pay”)
Affirmative vote of a majority of the shares of Common Stock represented and voting on the matter.
Abstentions and broker non-votes will have no effect in calculating the votes on this matter.
 
 
 
Proposal 3—Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018.
Affirmative vote of a majority of the shares of Common Stock represented and voting on the matter.
Abstentions and broker non-votes will have no effect in calculating the votes on this matter.

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

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

Proposal 1— The Board recommends a vote “FOR” the election of all nominees as directors.
Proposal 2— The Board recommends a vote “FOR” the compensation of the Company’s named executive officers.
Proposal 3— The Board recommends a vote “FOR” ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018.

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

Voting

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

Voting by Internet or Telephone. Voting by internet or telephone is fast and convenient and your vote is immediately confirmed and tabulated. The internet and telephone voting procedures are designed to authenticate votes cast by use of a personal identification number which is provided with your voting instructions. These procedures allow shareholders to appoint a proxy to vote their shares and to confirm that their instructions have been

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properly recorded. If you vote by internet or telephone, you do not have to mail in a proxy card, but your vote must be received by the voting deadline set forth in your voting instructions.

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

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

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

Revocability of Proxies

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

Solicitation of Proxies

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

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on April 27, 2018.

The Company’s Proxy Statement and Annual Report on Form 10-K, as amended for the fiscal year ended December 31, 2017 are available free of charge at https://www.centralpacificbank.com/2018proxy and at https://www.proxyvote.com.

In addition, the Company will provide without charge, upon the written request of any shareholder, a copy of the Company’s Annual Report on Form 10-K, as amended including the financial statements and the financial statement schedules, required to be filed with the United States Securities and Exchange Commission (the “SEC”) for the fiscal year ended December 31, 2017. Requests should be directed to Central Pacific Financial Corp., Attn: Investor Relations, P.O. Box 3590, Honolulu, Hawaii 96811 or to https://www.proxyvote.com.

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

We are furnishing materials to our shareholders primarily via the internet instead of mailing printed copies of those materials to our shareholders. By doing so, we save costs and reduce the environmental impact of the Meeting. On March 9, 2018, the Company mailed a Notice of Internet Availability of Proxy Materials (“Notice”) to shareholders. The Notice contains instructions about how to access our proxy materials and vote online or by telephone. If you would like to receive a paper copy of our proxy materials, please follow the instructions included in the Notice.

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Principal Shareholders

Based on filings made under Section 13(d) and Section 13(g) of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of February 23, 2018, the following were the only persons known to management of the Company to beneficially own more than five percent (5%) of the Company’s outstanding Common Stock:

Name and Address of Beneficial Owner
Amount and
Nature of
Beneficial
Ownership
Percent of
Class
BlackRock, Inc.(1)
 
4,431,408
 
 
14.7
%
55 East 52nd Street
 
 
 
 
 
 
New York, New York 10055
 
 
 
 
 
 
The Vanguard Group(2)
 
3,090,971
 
 
10.25
%
P.O. Box 2600
 
 
 
 
 
 
Valley Forge, Pennsylvania 19482
 
 
 
 
 
 
(1) Pursuant to Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 23, 2018, wherein BlackRock, Inc. reported sole voting power as to 4,340,259 shares of Company Common Stock, and sole dispositive power as to 4,431,408 shares of Company Common Stock.
(2) Pursuant to Schedule 13G/A filed by The Vanguard Group with the SEC on February 9, 2018, wherein The Vanguard Group reported sole voting power as to 35,306 shares of Company Common Stock, shared voting power as to 2,700 shares of Company Common Stock, sole dispositive power as to 3,055,765 shares of Company Common Stock, and shared dispositive power as to 35,206 shares of Company Common Stock.

Security Ownership of Directors, Nominees and Executive Officers

The following table sets forth certain information regarding beneficial ownership of Common Stock by each of the current directors, nominees, and the Named Executive Officers (as defined under “COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS—COMPENSATION DISCUSSION AND ANALYSIS”), as well as all directors and executive officers as a group, as of the close of business on February 23, 2018. Unless otherwise noted, the address of each person is c/o Central Pacific Financial Corp., 220 South King Street, Honolulu, Hawaii 96813.

Name of Beneficial Owner
Amount and
Nature of
Beneficial
Ownership(1)
Percent of
Class(2)
Directors and Nominees
 
 
 
 
 
 
Christine H. H. Camp
 
121,317
(3) 
 
 
*
John C. Dean
 
172,791
(4) 
 
 
*
Earl E. Fry
 
56,362
(5) 
 
 
*
Wayne K. Kamitaki
 
6,489
(6) 
 
 
*
Paul J. Kosasa
 
121,086
(7) 
 
 
*
Duane K. Kurisu
 
17,562
(8) 
 
 
*
Christopher T. Lutes
 
0
 
 
 
 
Colbert M. Matsumoto
 
305,771
(9) 
 
1.0
%
A. Catherine Ngo
 
169,105
(10) 
 
 
*
Saedene K. Ota
 
7,859
(11) 
 
 
*
Crystal K. Rose
 
40,500
(12) 
 
 
*
Paul K. Yonamine
 
1,400
(13) 
 
 
 
Named Executive Officers
 
 
 
 
 
 
 
 
   
() 
 
 
*
Blenn A. Fujimoto
 
42,237
(14) 
 
 
*
David W. Hudson
 
34,141
(15) 
 
 
 
Arnold D. Martines
 
16,033
(16) 
 
 
*
David S. Morimoto
 
16,559
(17) 
 
 
*
 
 
 
 
 
 
 
All Directors and Current Executive Officers as a Group (22 persons)
 
1,290,839
(18) 
 
4.3
%
(*) Less than one percent (1%).
(1) Except as otherwise noted below, each person has sole voting and investment power with respect to the shares listed. The numbers shown include the shares actually owned as of February 23, 2018 and, in accordance with Rule 13d-3 under the Exchange Act, any shares of Common Stock that the person has the right or will have the right to acquire within sixty (60) days of February 23, 2018. For restricted stock awards which have not vested, individuals have voting power with respect to such shares but no investment power.

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(2) In computing the percentage of shares beneficially owned by each person or group of persons named above, any shares which the person (or group) has a right to acquire within sixty (60) days after February 23, 2018 are deemed outstanding for the purpose of computing the percentage of Common Stock beneficially owned by that person (or group) but are not deemed outstanding for the purpose of computing the percentage of shares beneficially owned by any other person.
(3) 103,196 shares of Common Stock are held by Ms. Camp as trustee of the Christine Camp Revocable Trust. 6,112 shares of Common Stock are directly held by Ms. Camp. 10,728 shares of Common Stock are held for Ms. Camp’s account and benefit under the Company’s Directors’ Deferred Compensation Plan. 1,065 shares of Common Stock are held in Ms. Camp’s Simplified Employee Pension Plan Individual Retirement Account. 216 shares of Common Stock are those Ms. Camp has a right to acquire by exercise of stock options vested pursuant to the Company’s equity compensation plans.
(4) 50,000 shares of Common Stock are held in Mr. Dean’s Roth Converted IRA account. 71,978 shares of Common Stock are held by Mr. Dean as trustee of the John Dean Revocable Trust. 50,813 shares of Common Stock are those Mr. Dean has a right to acquire by exercise of stock options vested pursuant to the Company’s equity compensation plans.
(5) 50,250 shares of Common Stock are held in the Fry Family Trust of which Mr. Fry and his wife are co-trustees and they share voting and investment power. 5,645 shares of Common Stock are held for Mr. Fry’s account and benefit under the Company’s Directors’ Deferred Compensation Plan. 251 shares of Common Stock are directly held by Mr. Fry. 216 shares of Common Stock are those Mr. Fry has a right to acquire by exercise of stock options vested pursuant to the Company’s equity compensation plans.
(6) 289 shares of Common Stock are directly held by Mr. Kamitaki. 6,200 shares of Common Stock are held for Mr. Kamataki’s account and benefit under the Company’s Directors’ Deferred Compensation Plan.
(7) 119,947 shares of Common Stock are directly held by Mr. Kosasa. 923 shares of Common Stock are held jointly by Mr. Kosasa and his wife and they share voting and investment powers. 216 shares of Common Stock are those Mr. Kosasa has a right to acquire by exercise of stock options vested pursuant to the Company’s equity compensation plans.
(8) 17,562 shares of Common Stock are directly held by Mr. Kurisu.
(9) 70,500 shares of Common Stock are held by Island Insurance Foundation of which Mr. Matsumoto is Vice President and a Director. 40,460 shares of Common Stock are held by Atlas Insurance Foundation of which Mr. Matsumoto is Vice President and a Director. 167,340 shares of Common Stock are held by Island Holdings, Inc. of which Mr. Matsumoto is Chairman of the Board and President. Mr. Matsumoto shares voting and investment powers over the shares held by Island Insurance Foundation, Atlas Insurance Foundation, and Island Holdings, Inc., but disclaims beneficial ownership of such shares except to the extent of any pecuniary interest therein. 2,375 shares of Common Stock are directly held by Mr. Matsumoto. 24,880 shares of Common Stock are held for Mr. Matsumoto’s account and benefit under the Company’s Directors’ Deferred Compensation Plan. 216 shares of Common Stock are those Mr. Matsumoto has the right to acquire by exercise of stock options vested pursuant the Company’s equity compensation plans.
(10) 109,532 shares of Common Stock are held by Ms. Ngo and her husband in their Family Trust of which Ms. Ngo and her husband are co-trustees and share voting and investment powers. 41,493 shares of Common Stock are those Ms. Ngo has a right to acquire by exercise of stock options vested pursuant to the Company’s equity compensation plans. 9,480 shares of Common Stock are held in Ms. Ngo’s Individual Retirement Account. 2,714 shares of Common Stock are held in Ms. Ngo’s husband’s Individual Retirement Account. 5,886 shares of Common Stock are held by Central Pacific Bank Foundation, of which Ms. Ngo is Vice President and a Director.
(11) 1,659 shares of Common Stock are directly held by Ms. Ota. 6,200 shares of Common Stock are held for Ms. Ota’s account and benefit under the Company’s Directors’ Deferred Compensation Plan.
(12) 27,175 shares of Common Stock are directly held by Ms. Rose. 64 shares of Common Stock are held jointly by Ms. Rose and her husband and they share voting and investment powers. 12,815 shares of Common Stock are held for Ms. Rose’s account and benefit under the Company’s Directors’ Deferred Compensation Plan. 230 shares of Common Stock are held by Ms. Rose as trustee of her pension plan. 216 shares of Common Stock are those Ms. Rose has a right to acquire by exercise of stock options vested pursuant to the Company’s equity compensation plans.
(13) 1,400 shares of Common Stock are held for Mr. Yonamine’s account and benefit under the Company’s Directors’ Deferred Compensation Plan.
(14) 23,394 shares of Common Stock are directly held by Mr. Fujimoto. 2,845 shares of Common Stock are those Mr. Fujimoto has a right to acquire by exercise of Stock Appreciation Rights pursuant to the Company’s equity compensation plans. 438 shares of Common Stock are held under Mr. Fujimoto’s account under the Central Pacific Bank 401(k) Retirement Savings Plan. 15,560 shares of Common Stock are those Mr. Fujimoto has a right to acquire by exercise of stock options vested pursuant to the Company’s equity compensation plans.
(15) 28,069 shares of Common Stock are held by Mr. Hudson and his wife in their Family Trust which Mr. Hudson and his wife are co-trustees and share voting and investment powers. 6,072 shares of Common Stock are those Mr. Hudson has a right to acquire by exercise of stock options vested pursuant to the Company’s equity compensation plans.
(16) 5,103 shares of Common Stock are held jointly by Mr. Martines and his wife and they share voting and investment powers. 6,613 shares of Common Stock are held under Mr. Martines’s account under the Central Pacific Bank 401(k) Retirement Savings Plan. 4,142 shares of Common Stock are held under Mr. Martines’s wife’s account under the Central Pacific Bank 401(k) Retirement Savings Plan. 175 shares of Common Stock are those Mr. Martines has a right to acquire by exercise of stock options vested pursuant to the Company’s equity compensation plans.
(17) 13,740 shares of Common Stock are directly held by Mr. Morimoto. 2,399 shares of Common Stock are held jointly by Mr. Morimoto and his wife and they share voting and investment powers. 270 shares of Common Stock are held under Mr. Morimoto’s account under the Central Pacific Bank 401(k) Retirement Savings Plan. 150 shares of Common Stock are those Mr. Morimoto has a right to acquire by exercise of stock options vested pursuant to the Company’s equity compensation plans.
(18) Includes 161,820 shares of Common Stock which the directors and current executive officers have the right to acquire by exercise of equity grants.

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Section 16(a) Beneficial Ownership Reporting Compliance

The Company’s directors, executive officers and the beneficial holders of more than ten percent (10%) of the Common Stock are required to file certain reports with the SEC regarding the amount of and changes in their beneficial ownership of the Company’s Common Stock. Based on its review of copies of those reports, the Company is required to disclose known failures to file required forms, or failures to timely file required reports during the previous year. To the best knowledge of the Company, there were no failures to file or timely file such required reports during year 2017 by any person who was at any time during year 2017 a director, officer, beneficial owner of more than 10% of the Common Stock, or any other person subject to Section 16 of the Exchange Act with respect to the Company.

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ELECTION OF DIRECTORS

The Company currently has twelve (12) directors: Christine H. H. Camp, John C. Dean, Earl E. Fry, Wayne K. Kamitaki, Paul J. Kosasa, Duane K. Kurisu, Christopher T. Lutes, Colbert M. Matsumoto, A. Catherine Ngo, Saedene K. Ota, Crystal K. Rose, and Paul K. Yonamine, all of whom are also nominees for directors. The term of all directors expires at the Meeting. Accordingly, there are twelve (12) directors to be elected at the Meeting to serve one-year terms expiring at the 2019 Annual Meeting of Shareholders and until their respective successors are elected and qualified, subject to the earlier of their death, resignation, retirement, disqualification or removal from office.

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

There are no family relationships among directors or executive officers of the Company, other than Executive Vice Presidents Patricia L. Foley and David S. Morimoto are first cousins. As of the date hereof and for the past five years, no directorships are held by any director or director nominee with a company with a class of securities registered pursuant to Section 12 of the Exchange Act, or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940, except for director Christine H. H. Camp who is a director of the Federal Home Loan Bank of Des Moines, director John C. Dean who is a director of Elevate Credit, Inc. (NYSE ticker “ELVT”), director Earl E. Fry, who is a director of Hawaiian Holdings, Inc. (NASDAQ ticker “HA”) and a former director of Xactly Corporation from September 2005 to July 2017, director Crystal K. Rose, who is also a director of Hawaiian Holdings, Inc. (NASDAQ ticker “HA”), and director Duane K. Kurisu who previously served as director of Emmaus Life Sciences, Inc. from May 2014 to January 2015.

The election of directors requires a plurality of the votes cast “FOR” the election of the directors by the shares entitled to vote in the election at a meeting at which a quorum is present. Accordingly, the twelve (12) directorships to be filled at the meeting will be filled by the twelve (12) nominees receiving the highest number of “FOR” votes.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL TWELVE (12) NOMINEES.

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DIRECTORS’ AND EXECUTIVE OFFICERS’ INFORMATION

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

Name
Principal Occupation for the Past Five Years
Age
First Year
Elected or Appointed
as Executive Officer
or Director
of the Company(1)
Nominees
 
 
 
 
 
 
 
 
 
CAMP, Christine H. H.
President and Chief Executive Officer, Avalon Group, LLC (2002—present) (real estate consulting); Managing Director, Avalon Development Company, LLC (1999—present) (real estate development)
51
2004
 
 
 
 
DEAN, John C.
Executive Chair (non-executive officer), Central Pacific Financial Corp. and Central Pacific Bank (7/1/2015—present); Chairman of the Board and Chief Executive Officer, Central Pacific Financial Corp. and Central Pacific Bank (6/1/2014—6/30/2015); President and Chief Executive Officer, Central Pacific Financial Corp. and Central Pacific Bank (4/20/2011—5/31/2014); Managing General Partner, Startup Capital Ventures, L.P. (2005—present) (investment); Managing Member, SCV Management Co, LLC (2005—present) (investment); Managing Director, Tuputele Ventures Fund (2003—present) (investment)
70
2010
 
 
 
 
FRY, Earl E.
Director and Audit Committee Chair, Hawaiian Holdings, Inc. (5/2016—present) (airline); Director, Xactly Corporation (9/2005—7/2017) (technology); Interim Chief Financial Officer, Informatica Corporation (9/2015—1/2016) (technology); Chief Customer Officer and Executive Vice President, Operations Strategy, Informatica Corporation (11/2014—8/2015) (technology); Chief Financial Officer, Chief Administrative Officer and Executive Vice President of Global Customer Support and Services, Informatica Corporation (2010—10/2014) (technology)
59
2005
 
 
 
 
KAMITAKI, Wayne K.
President and Chief Executive Officer, Maui Varieties, Ltd. (1990—present) (retail)
66
2015
 
 
 
 
KOSASA, Paul J.
President and Chief Executive Officer, MNS, Ltd., doing business as ABC Stores (1999—present) (retail)
60
2002
 
 
 
 
KURISU, Duane K.(2)
Chairman of the Board and Chief Executive Officer, aio, LLC, doing business as aio Group (2002—present) (media/sports/food/real estate/investment)
64
2004
 
 
 
 
LUTES, Christopher T.
Chief Financial Officer, Elevate Credit, Inc. (2015—present) (technology/risk management/marketing); Chief Financial Officer, Think Finance, Inc. (2007—2014) (technology/risk management/marketing)
50
2018

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Name
Principal Occupation for the Past Five Years
Age
First Year
Elected or Appointed
as Executive Officer
or Director
of the Company(1)
 
 
 
 
MATSUMOTO, Colbert M.
Chairman of the Board and President, Island Holdings, Inc. (2010—present) (insurance/investment); Executive Chairman, Island Insurance Company, Ltd. (1999—present) (insurance); Executive Chairman, Tradewind Capital Group, Inc. (4/2015-—present) (investment/asset management); President, Tradewind Capital Group, Inc. (2006—4/2015) (investment/asset management)
65
2004
 
 
 
 
NGO, A. Catherine
President and Chief Executive Officer, Central Pacific Financial Corp. and Central Pacific Bank (7/1/2015 – present); President, Chief Operating Officer, Central Pacific Financial Corp. and Central Pacific Bank (6/1/2014 – 6/30/2015); Executive Vice President, Chief Administrative Officer, Central Pacific Financial Corp. and Central Pacific Bank (11/23/2010 —5/31/2014); General Partner, Startup Capital Ventures, L.P. (2005—present) (investment); Managing Member, SCV Management Co, LLC (2005—present) (investment)
57
2015
 
 
 
 
OTA, Saedene K.
President, Sae Design, Inc. (2007—present) (design and marketing); President, Maui Thing LLC (2010-present) (retail)
49
2015
 
 
 
 
ROSE, Crystal K., J.D.
Partner, Bays Lung Rose & Holma (1989—present) (law); Lead Independent Director, Central Pacific Financial Corp. and Central Pacific Bank (6/1/2014-present); Chairman of the Board, Central Pacific Financial Corp. and Central Pacific Bank (4/20/2011—5/31/2014)
60
2005
 
 
 
 
YONAMINE, Paul K.
Executive Chairman, GCA Corporation (6/2017—present) (investment banking); Executive Advisor and Director, IBM Japan, Ltd. (4/2017—6/2017) (technology); Country General Manager and President, IBM Japan, Ltd. (1/2015—3/2017) (technology); Executive Vice President, IBM Japan, Ltd. (1/2013—1/2015) (technology)
60
2017
 
 
 
 

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Name
Principal Occupation for the Past Five Years
Age
First Year
Elected or Appointed
as Executive Officer
or Director
of the Company(1)
Executive Officers
 
 
 
CHING, Glenn K.C.
Executive Vice President, Chief Legal Officer, Risk Management Division Manager, and Corporate Secretary, Central Pacific Financial Corp. and Central Pacific Bank (1/1/2016—present); Senior Vice President, General Counsel and Corporate Secretary, Central Pacific Financial Corp. and Central Pacific Bank (12/2002—12/31/2015)
59
2016
 
 
 
 
FOLEY, Patricia L.
Executive Vice President, Human Resources, Central Pacific Financial Corp. and Central Pacific Bank (9/1/2016—present); Senior Vice President, Division Manager, Human Resources, Central Pacific Financial Corp. and Central Pacific Bank (6/1/2014—8/31/2016); Senior Vice President, Division Manager, Human Resources, Central Pacific Bank (1/1/2014— 5/31/2014); Senior Vice President, Human Resources Manager, Central Pacific Bank (11/16/2010—12/31/2013)
59
2014
 
 
 
 
FUJIMOTO, Blenn A.
Executive Vice President, Consumer Lending and Wealth Management, Central Pacific Financial Corp. and Central Pacific Bank (4/1/2017—present); Executive Vice President, Specialized Markets Division Manager, Central Pacific Financial Corp. and Central Pacific Bank (1/1/2014—3/31/17); Executive Vice President, Specialized Markets Manager, Central Pacific Bank (2/1/2012—12/31/2013)
59
2016
 
 
 
 
HU, Anna M.
Executive Vice President, Chief Credit Officer, Central Pacific Financial Corp. and Central Pacific Bank (10/1/2016—present); Senior Vice President, Interim Chief Credit Officer, Central Pacific Financial Corp. and Central Pacific Bank (8/28/2015—9/30/2016); Senior Vice President, Credit Administration Division Manager, Central Pacific Bank (3/30/2015—8/27/2015); Vice President, Corporate Banking Relationship Manager, Bank of Hawaii (12/28/2009—3/27/2015)
44
2015
 
 
 
 
HUDSON, David W.
Executive Vice President, Community Banking, Central Pacific Financial Corp. and Central Pacific Bank (3/11/2011—present)
59
2011
 
 
 
 

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Name
Principal Occupation for the Past Five Years
Age
First Year
Elected or Appointed
as Executive Officer
or Director
of the Company(1)
ISONO, Denis K.
Executive Vice President, Corporate Services, Central Pacific Financial Corp. and Central Pacific Bank (1/1/2016—present); Executive Vice President, interim Risk Management Division Manager, Central Pacific Financial Corp. and Central Pacific Bank (8/28/2015—12/31/2015); Executive Vice President, Corporate Services, Central Pacific Financial Corp. and Central Pacific Bank (7/1/2015—8/27/2015); Executive Vice President, Chief Financial Officer, Central Pacific Financial Corp. and Central Pacific Bank (10/1/2011—6/30/2015)
66
2002
 
 
 
 
KIRIHARA, Wayne H.
Executive Vice President, Chief Marketing Officer, Central Pacific Financial Corp. and Central Pacific Bank (9/1/2016—present); Senior Vice President, Chief Marketing Officer, Central Pacific Financial Corp. and Central Pacific Bank (6/1/2014—8/31/2016); Senior Vice President, Chief Marketing Officer, Central Pacific Bank (3/2010—5/31/2014)
63
2014
 
 
 
 
MARTINES, Arnold D.
Executive Vice President, Commercial Markets, Central Pacific Financial Corp. and Central Pacific Bank (9/1/2016—present); Senior Vice President, Commercial Real Estate Lending Division Manager, Central Pacific Financial Corp. and Central Pacific Bank (6/1/2014 – 8/31/2016); Senior Vice President, Commercial Real Estate Lending Division Manager, Central Pacific Bank (3/1/2011—5/31/2014)
53
2014
 
 
 
 
MORIMOTO, David S.
Executive Vice President, Chief Financial Officer, Central Pacific Financial Corp. and Central Pacific Bank (7/1/2015—present); Senior Vice President, Treasurer, Central Pacific Financial Corp. and Central Pacific Bank (3/1/2005—6/30/2015)
50
2015
 
 
 
 
MORIWAKI, Lee Y.
Executive Vice President, Chief Information Officer, Central Pacific Financial Corp. and Central Pacific Bank (2/1/2015—present); Senior Vice President and Manager, Loan and Deposit Operations, Central Pacific Bank (7/1/2014-1/31/2015); Senior Vice President, D+H Project Director, Central Pacific Bank (6/1/2013—6/30/2014); Senior Vice President, Loan Operations Division Manager, Central Pacific Bank (2/1/2012—5/31/2013)
59
2015
(1) All directors of the Company are also directors of the Bank. Mr. Kosasa has been a director of the Bank since 1994. Ms. Camp, Mr. Matsumoto, Mr. Kurisu and Ms. Rose have been directors of the Bank since 2004. Mr. Fry has been a director of the Bank since 2005. Mr. Dean has been a director of the Bank since 2010. Ms. Ngo has been a director of the Bank since July 1, 2015. Mr. Kamitaki and Ms. Ota have been directors of the Bank since September 16, 2015. Mr. Yonamine has been a director of the Bank since June 27, 2017. Mr. Lutes has been a director of the Bank since March 1, 2018.
(2) Mr. Kurisu also served as a director of the Company from September 2004 to May 2008. On January 25, 2012, Mr. Kurisu was reappointed to the Company’s Board.

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Director Background and Experience

Christine H. H. Camp—Ms. Camp has over twenty-eight (28) years’ experience in real estate, and her company Avalon Group, LLC, is a full service real estate company which provides detailed financial and market analysis to a wide range of investors involved in various real estate transactions and development scenarios, and also real estate brokerage, market and financial consulting. Ms. Camp is also engaged in real estate development through her company Avalon Development Company, LLC. Prior to establishing Avalon Group, Ms. Camp was Vice President of Development at A&B Properties, Inc., a subsidiary of Alexander & Baldwin, Inc. (a publicly traded company listed on the NYSE), and was in charge of that company’s real estate development and investment acquisition activities. Ms. Camp also was the Senior Project Coordinator of Planning and Engineering at Castle & Cooke Properties, Inc., where she handled site acquisition and development of non-company owned properties. Ms. Camp has been a director of the Federal Home Loan Bank of Des Moines (a privately held company registered with the Securities and Exchange Commission) since January 2018. Ms. Camp’s real estate, financial, and public company knowledge and experience gained from her prior and current positions makes her a valuable resource to the Board and management in many areas, but particularly in connection with the Company’s real estate lending and other real estate related activities, to include the evaluation of real estate related risks, investments, opportunities, and asset management oversight.

John C. Dean—Since July 1, 2015, Mr. Dean is Executive Chair of the Company and the Bank (a non-executive officer role). Prior to that, Mr. Dean served as Chief Executive Officer and Chairman of the Board of the Company and the Bank from June 1, 2014 to June 30, 2015. From April 20, 2011 through May 31, 2014, Mr. Dean served as President and Chief Executive Officer, and a Director, of the Company and the Bank. From June 2010 through April 19, 2011, Mr. Dean served as the Executive Chairman and a Director of the Company and the Bank. Previously, Mr. Dean has served in various capacities in the banking industry for thirty-four (34) years, including as the Chief Executive Officer and Chairman of the Board of Silicon Valley Bancshares and Silicon Valley Bank, the President and Chief Executive Officer of Pacific First Bank, the Chief Executive Officer and Chairman of the Board of First Interstate Bank of Washington, the Chief Executive Officer and Chairman of the Board of First Interstate Bank of Oklahoma, and the President and Chief Executive Officer of First Interstate System, Inc. Since 2005, Mr. Dean has been the managing general partner of Startup Capital Ventures, L.P., a venture capital firm, and managing member of SCV Management Co, LLC, and since 2003 he has served as managing director of Tuputele Ventures Fund, a small private equity firm investing in early-stage technology companies and venture capital funds. Mr. Dean has been a director of Elevate Credit, Inc. (a publicly traded company listed on the NYSE) since May 2014. Mr. Dean is a graduate of the Wharton School of the University of Pennsylvania, with a Master of Business Administration degree in Finance, and currently serves as an advisor to the board of the Wharton School. Mr. Dean’s extensive experience in leading financial institutions and his management expertise makes him a valuable contributor to the Board and the overall success of the Company.

Earl E. Fry—Mr. Fry is a director and the current Audit Committee Chair for Hawaiian Holdings Inc. (a publicly traded company listed on NASDAQ, and the parent company of Hawaiian Airlines, Inc.) and former director of Xactly Corporation (a privately held company that was previously publicly traded on NYSE). Mr. Fry is a retired Executive Vice President and Chief Financial Officer of Informatica Corporation (a publicly traded company listed on NASDAQ), a company which provides data integration software and services and which has reported annual revenue in excess of $1 billion. During his tenure as Chief Financial Officer of Informatica Corporation, Mr. Fry effected, among other things, numerous major capital and financial transactions, to include credit lines, equity offerings, convertible rate issuances, stock/bond buyback plans, over fifteen (15) technology acquisitions, and he established development and support centers in Bangalore, India, Dublin, Ireland, and Tel Aviv, Israel, and he also established Informatica’s enterprise risk management program. Mr. Fry also previously managed the Global Customer Support and Consulting Services areas of Informatica Corporation representing over half of Informatica’s revenue. Prior to joining Informatica Corporation, Mr. Fry was Chief Financial Officer of Omnicell Technologies, Inc. (a publicly traded company listed on NASDAQ) for four (4) years, Chief Financial Officer of C.ATS Software, Inc. for two (2) years, Chief Financial Officer of Weitek Corporation for three (3) years, and he also served at other technology companies in various finance and other capacities. Mr. Fry began his professional career at Ernst & Whinney, CPAs (now known as Ernst & Young), where he held the position of Senior Auditor. Mr. Fry is a graduate of the Stanford Graduate School of Business. Mr. Fry was voted Software Chief Financial Officer of the Year by Institutional Investor in 2010, 2011, 2012, 2013 and 2014. Mr. Fry brings extensive finance, public company, and auditing knowledge and experience to the Board and Company and therefore is highly qualified to Chair the Company’s and Bank’s Audit Committees.

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Wayne K. Kamitaki—Mr. Kamitaki is Chief Executive Officer of Maui Varieties, Ltd., a holding company, which through various subsidiaries, owns and operates Ace Hardware and Ben Franklin Crafts stores throughout the State of Hawaii, and in the States of Washington and Oregon, and Las Vegas, Nevada, and owns, operates and/or invests in numerous other commercial business ventures. Mr. Kamitaki, who resides on the Island of Hawaii, is Chairman of the Board of the Hawaii Japanese Center (Hilo) and also serves on the board of the Hawaii Academy of Science. The Bank has two (2) branches on the Island of Hawaii and firmly believes it is important to have a director from the Island of Hawaii, who best understands and can help the Bank connect with residents and businesses on the Island of Hawaii, and to demonstrate the Bank’s commitment to serving all islands and communities comprising the State of Hawaii. The vast majority of businesses in Hawaii are small and each island has its own unique business markets, needs and communities, and thus having Mr. Kamitaki who is a prominent businessperson and community leader on the Island of Hawaii, serve on our Company’s Board and Bank’s Board of Directors, will provide great insight and perspective in how we can best serve small businesses throughout the State of Hawaii, but also within the Island of Hawaii. As a community bank serving all the people and islands of Hawaii, we believe it is vital that our Board have experienced and proven businesspeople who reflect and represent all of Hawaii and the diversity of Hawaii. Mr. Kamitaki has decades of business knowledge, experience, management and leadership which we believe will be of great benefit to the Company and the Bank.

Paul J. Kosasa—Mr. Kosasa has been President and Chief Executive Officer of MNS, Ltd., doing business as ABC Stores, for the past nineteen (19) years, and has been with ABC Stores for thirty-eight (38) years. As President and Chief Executive Officer of ABC Stores, Mr. Kosasa oversees a Hawaii-based retail convenience store operation with a major presence in Waikiki and other tourist locations throughout the Hawaiian Islands, as well as in other locations outside of Hawaii, such as Guam, Saipan, and Las Vegas, Nevada. As President and Chief Executive Officer of a sizable retail store chain which primarily serves the tourist industry, one of the largest industries in Hawaii, Mr. Kosasa provides the Board and Company with significant business and management knowledge and experience in all aspects of a business operation, which includes business strategy and planning, financial management and budgeting, employee compensation and benefits, labor, marketing, advertising, and real estate, among other business expertise. In addition, Mr. Kosasa provides a link and close connection to the Hawaii tourism industry, one of Hawaii’s most profitable economic engines, and which provides a valuable source of banking business with respect to Hawaii businesses that support the Hawaii tourism industry, as well as retail customers from outside Hawaii who require or may desire Hawaii banking services.

Duane K. Kurisu—Mr. Kurisu was formerly a director of the Company from September 2004 through May 2008, and was reappointed to the Company’s Board of Directors on January 25, 2012. Mr. Kurisu has served on the Board of Directors of the Bank since September 2004. Mr. Kurisu owns, manages and/or is involved in numerous and varied businesses and industries in Hawaii including, among others: (i) real estate—investment, ownership and management of office buildings, shopping centers and industrial parks in Hawaii; (ii) media—owner and publisher of a number of Hawaii magazines, newspapers and publications, and radio; (iii) sports—professional baseball; and (iv) food—bakery, restaurants, nutraceuticals. Mr. Kurisu is the Chairman of the Board, Chief Executive Officer and owner of aio, LLC, doing business as aio Group, a holding company for brands focused on Hawaii and the Pacific in the areas of media, sports and food. Mr. Kurisu serves on numerous business and charitable Boards and organizations, and he also served as a Regent of the University of Hawaii. Mr. Kurisu is a successful businessman and prominent figure in the Hawaii business community and brings to the Board business acumen, judgment, background and experience, and his knowledge of the Hawaii market and his relationships and connections within the Hawaii market.

Christopher T. Lutes—Mr. Lutes, has over twenty (20) years of experience in the financial services industry in executive and chief financial officer capacities. Since January 2015 Mr. Lutes has served as the Chief Financial Officer of Elevate Credit, Inc., which specializes in tech-enabled online credit solutions. He was the Chief Financial Officer of Elevate Credit, Inc.’s predecessor company, Think Finance, Inc., since 2007. Prior to joining Elevate Credit, Inc., Mr. Lutes was the Chief Financial Officer for Silicon Valley Bank from 1998 to 2001. Mr. Lutes began his career in public accounting with Coopers & Lybrand. He has a BS in Accounting from Arizona State University and is a Certified Public Accountant in the State of Arizona. Mr. Lutes brings significant knowledge and experience in the technology and financial services sector to the Board.

Colbert M. Matsumoto—Mr. Matsumoto is Chairman of the Board and President of Island Holdings, Inc., a corporate holding company. Mr. Matsumoto also serves as the Executive Chairman of both Island Insurance Company, Ltd., Hawaii’s largest locally owned and managed property and casualty insurance company, and

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Tradewind Capital Group, Inc., an investment and asset management company. Mr. Matsumoto was a practicing attorney for twenty (20) years before assuming his current executive management positions. He is a Trustee of the Hawaii Employees Retirement System and, previously as its Chairman, played a significant leadership role in promoting reforms in the design and funding of the pension system to better secure its finances. Mr. Matsumoto’s substantial knowledge and experience, as an attorney, insurance executive, and investment professional, has been instrumental in assisting the Board and management with assessing and managing the Company’s legal and business risks and in corporate governance and business strategy and planning. Effective April 1, 2018, Mr. Matsumoto will serve as Vice Chair of the Company and the Bank.

A. Catherine Ngo—Ms. Ngo was appointed President and Chief Executive Officer of the Company and the Bank effective July 1, 2015. Prior to that, Ms. Ngo served as President and Chief Operating Officer of the Company and the Bank from June 1, 2014 to June 30, 2015. Ms. Ngo also served as Executive Vice President, Chief Administrative Officer of the Company and the Bank from November 23, 2010 through May 31, 2014. Ms. Ngo is an experienced executive who has served in various capacities in the financial industry during the last twenty-five (25) years, including as general partner of Startup Capital Ventures (from 2005 to present), a venture capital firm, where her responsibilities included: managing relationships with many of the firm’s portfolio companies and assisting companies with operational (financial and legal) issues. Ms. Ngo also had primary oversight for the firm’s finance, reporting and investor relations activities and had a significant role in managing the firm’s China-based portfolio. Ms. Ngo is also managing member of SCV Management Co, LLC. As Chief Operating Officer of Alliant Partners, an investment banking subsidiary of Silicon Valley Bank, Ms. Ngo’s responsibilities included oversight of legal and compliance, finance, marketing, human resources, and information technology functions. As Executive Vice President, General Counsel and Corporate Secretary of Silicon Valley Bancshares and Silicon Valley Bank (“SVB”), Ms. Ngo directed Audit, Credit Review, Collateral Audit, Legal and Loan Operations divisions of SVB with responsibility for over one hundred (100) employees.

Saedene K. Ota—Ms. Ota is owner and creative director of Sae Design, Inc., a graphic design and visual marketing agency headquartered on the Island of Maui, and is also principal owner and manager of Maui Thing LLC, a lifestyle apparel company. In her over twenty-three (23) year career, Ms. Ota has received numerous design, graphics and marketing rewards and recognition. Ms. Ota, who resides on the Island of Maui, serves on the boards of the Chamber of Commerce of Hawaii, Maui Economic Development Board, Nissei Veterans Memorial Center, and Wailuku Community Association. The Bank has four (4) branches on the Island of Maui and firmly believes it is important to have a director from the Island of Maui, who best understands and can help the Bank connect with residents and businesses on the Island of Maui, and to demonstrate the Bank’s commitment to serving all islands and communities comprising the State of Hawaii. The vast majority of businesses in Hawaii are small and each island has its own unique business markets, needs and communities, and thus having Ms. Ota who is a prominent businessperson and community leader on the Island of Maui, serve on our Company’s Board and Bank’s Board of Directors, will provide great insight and perspective in how we can best serve small businesses throughout the State of Hawaii, but also within the Island of Maui. As a community bank serving all the people and islands of Hawaii, we believe it is vital that our Board have experienced and proven businesspeople who reflect and represent all of Hawaii and the diversity of Hawaii. We believe Ms. Ota’s lifetime of experiences and success as a small businessperson, and her substantial marketing knowledge and expertise, will add significant value and perspective to our Board.

Crystal K. Rose, J.D.—Ms. Rose is a named partner in the law firm of Bays Lung Rose & Holma, and has been actively practicing law for thirty-six (36) years, specializing in the areas of real estate, trust and commercial litigation, commercial real estate transactions, trusts and estates, and construction law. Ms. Rose has been a director of Hawaiian Holdings, Inc. (a publicly traded company listed on NASDAQ, and the parent company of Hawaiian Airlines, Inc.) since June 2006, and serves as Chair of the Compensation Committee, and is a member of the Governance and Nominating Committee of its Board of Directors. Given the limited number of publicly traded companies in Hawaii, Ms. Rose brings experience as a director of another Hawaii-based publicly traded company. Ms. Rose also brings a wealth of legal and real estate knowledge and experience to the Company’s Board and Bank’s Board, and her professional, leadership, and business skills and expertise are well-suited to her serving since June 1, 2014, as the Company’s and the Bank’s Lead Independent Director and Governance Committee Chair, and before that, from April 20, 2011 through May 31, 2014, serving as the Company’s and Bank’s Board Chair, and in providing guidance with respect to the Company’s and the Bank’s strategic issues, overall business plans and legal matters.

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Paul K. Yonamine—Mr. Yonamine serves as Executive Chairman of GCA Corporation, the largest independent M&A firm in Japan. Until March, 2017, Mr. Yonamine served as the Country General Manager and President of IBM Japan, Ltd. Mr. Yonamine previously served as President and CEO of Hitachi Consulting Co., Ltd., where he founded the first consulting and solutions business for Hitachi Ltd. He was a senior advisor to the Mayor of the City & County of Honolulu from 2004 to 2006. Mr. Yonamine’s prior experience includes serving as Executive Vice President and Chairman of Asia Pacific, BearingPoint, President of KPMG Consulting in Japan, and Managing Partner of KPMG, LLC – Hawaii Operations. A graduate of the University of San Francisco with a degree in accounting and a CPA designation, Mr. Yonamine also serves as Chairman of the Board of Councilors of the U.S. Japan Council, member of the Young Presidents’ Organization, and member of Keizai Doyukai (Japan Association of Corporate Executives). He played a significant role in facilitating the strategic relationships the Bank has established with mid-sized regional banks in Japan. Mr. Yonamine has close ties to Hawaii, as well as an impressive resume in Japan, devoting much of his career to promoting the introduction and globalization of information technologies to Japan corporations. Mr. Yonamine’s experience in both business and accounting in Japan and Hawaii brings a global perspective to the Company’s Board and the Bank’s Board.

Executive Officer Background and Experience

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

Glenn K.C. Ching—Mr. Ching was appointed Executive Vice President, Chief Legal Officer and Risk Management Division Manager, effective January 1, 2016. Prior to his appointment, Mr. Ching was Senior Vice President, General Counsel and Corporate Secretary for the Company and the Bank from December 2002 to December 31, 2015. Mr. Ching has been an actively licensed attorney in Hawaii since 1989 (for twenty-eight (28) years), and is a former partner of the Honolulu law firm, Ashford & Wriston wherein he specialized in real estate and banking law. Mr. Ching is a graduate of the United States Air Force Academy, and served as an officer in the United States Air Force prior to his legal and banking career. Mr. Ching obtained his law degree from the University of Hawaii’s William S. Richardson School of Law, and a Master of Business Administration degree from the University of North Dakota.

Patricia (“Patty”) L. Foley—Ms. Foley was appointed Executive Vice President, Human Resources, of the Company and the Bank effective September 1, 2016, and has held various managerial positions within the Bank’s Human Resources Division since her arrival to the Bank in July 2008. Ms. Foley is an experienced human resources professional with twenty-eight (28) years in the field, and was prior to joining the Bank, Corporate Director of Human Resources for Outrigger Hotels and Resorts (“Outrigger”), a Hawaii-based family owned business with over 3,000 employees worldwide. During her eighteen (18) years at Outrigger, Ms. Foley actively supported the growth of Outrigger from a Oahu-based employer focused on managing its owned properties to a world-wide diversified organization managing contracts for other hotel owners and expansion in to the timeshare and condominium management business. Ms. Foley is recognized in the local Human Resources industry for her progressive management of health care expense through a focus on the health and well-being of employees.

Blenn A. Fujimoto—Mr. Fujimoto was appointed Executive Vice President, Consumer Lending and Wealth Management of the Company on April 1, 2017, and previously served as Executive Vice President, Specialized Markets Division Manager of the Company since January 2014. He became an Executive Officer of the Company on September 1, 2016. Mr. Fujimoto has been with the Bank since 2000 and has over thirty-seven (37) years of banking experience in the Hawaii market. He has a diverse background in retail banking, commercial real estate lending, business banking, investment services, trust, private banking, residential mortgage and consumer lending. Mr. Fujimoto previously served as the Bank’s Chief Executive Officer of Central Pacific HomeLoans. Mr. Fujimoto received his Bachelor of Business Administration degree in Finance from the University of Hawaii at Manoa and is a graduate of the Pacific Coast Banking School at the University of Washington, Seattle. He serves on the Board of Directors of Aloha United Way and Goodwill Hawaii.

Anna M. Hu—Ms. Hu was appointed Executive Vice President, Chief Credit Officer of the Company and the Bank, effective October 1, 2016. Ms. Hu is responsible for the strategic management of credit risk in the bank’s loan portfolio and implementing credit risk management programs. Ms. Hu’s prior banking experience spans twenty-six (26) years, comprising positions of increasing levels of responsibility. Ms. Hu has extensive experience in commercial lending including credit underwriting and structuring, credit approvals, and problem loan workouts. She also has experience in retail branch and in-store banking, and retail collections and recovery. Prior to her appointment,

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Ms. Hu has held the positions of Corporate Banking Associate, Credit Administrator, Senior Credit Administrator, Senior Special Assets Officer, Corporate Banking Relationship Manager, and Credit Administration Division Manager. Ms. Hu received her Bachelor of Business Administration degree in Finance from University of Hawaii at Manoa. She is also a graduate of Pacific Coast Banking School at University of Washington. Ms. Hu is the Chair of the Finance Committee and Board of Director of Sacred Hearts Academy, Board of Director of American Red Cross, Hawaii State Chapter, and Trustee of the Public Schools of Hawaii Foundation.

David W. Hudson—Mr. Hudson was appointed Executive Vice President, Community Banking of the Bank and the Company, effective March 11, 2011. Prior to his appointment, Mr. Hudson was Senior Vice President, Community Banking Division Manager for the Bank. As Executive Vice President, Community Banking, Mr. Hudson oversees the Bank’s entire branch network throughout the State of Hawaii, to include branches on the islands of Oahu, Hawaii, Maui, and Kauai. Mr. Hudson has more than thirty-four (34) years of experience in the finance industry in Hawaii and California. He started his banking career in corporate, international and commercial real estate lending with Crocker National and First Nationwide banks. More recently, Mr. Hudson’s career has focused on retail and branch banking. Prior to joining the Bank in 2009, Mr. Hudson spent six (6) years as Senior Vice President of the consumer and business banking division of Hawaii-based American Savings Bank. In addition, Mr. Hudson has also served at Honfed Bank and Bank of America in Hawaii and California in various positions from process design executive to consumer region executive.

Denis K. Isono—Mr. Isono is presently Executive Vice President, Corporate Services, for the Company and the Bank. Prior to that and during his fifteen (15) previous years with the Company and the Bank, Mr. Isono has served in numerous executive positions, to include serving as Executive Vice President, Chief Financial Officer of the Company and the Bank from October 1, 2011 to June 30, 2015. Mr. Isono has over forty-five (45) years of banking and financial experience in the Hawaii market. Before joining the Company and the Bank, Mr. Isono was employed by Bank of Hawaii for eighteen (18) years and held various senior management positions to include Executive Vice President, Operations, and Senior Vice President, Controller. Mr. Isono began his banking career at City Bank where he worked for six (6) years. Mr. Isono is a Certified Public Accountant, Certified Management Accountant, Certified Bank Auditor, Certified Internal Auditor, and a graduate of the Stanford University Executive Program and the University of Hawaii Advanced Management Program. Prior to his banking career, Mr. Isono also spent six (6) years with Ernst & Ernst, and held the position of Audit Supervisor.

Wayne H. Kirihara—Mr. Kirihara was appointed Executive Vice President, Chief Marketing Officer of the Company and the Bank effective September 1, 2016, and had prior to that been the Bank’s Chief Marketing Officer since March 2010. Additionally, Mr. Kirihara has been with the Bank for twenty-nine (29) years in various management capacities. As Chief Marketing Officer, Mr. Kirihara oversees the corporate communications, marketing, product management, and electronic banking channels areas of the Company and Bank. In aggregate at the Bank, Mr. Kirihara has twenty-three (23) years of experience managing marketing and corporate communications, fourteen (14) years of experience managing product development, and twelve (12) years of experience managing electronic banking. Mr. Kirihara previously managed the Retail Banking Group of the Bank for eight (8) years, overseeing branch operations, consumer loan center, marketing, electronic banking, merchant services, and product development. Mr. Kirihara began his career at the Bank planning and implementing special projects, and later as a commercial loan officer.

Arnold D. Martines—Mr. Martines was appointed Executive Vice President, Commercial Markets of the Company and the Bank effective September 1, 2016. Prior to his appointment, Mr. Martines was Senior Vice President, Commercial Real Estate Lending Division Manager of the Company and the Bank. As Executive Vice President, Commercial Markets, Mr. Martines oversees the Bank’s business banking, commercial banking, corporate banking, commercial real estate lending and institutional trust lines of business. Mr. Martines has over twenty-two (22) years of banking experience. Mr. Martines started his banking career in 1995 as an Assistant Branch Manager at Bank of Hawaii. He subsequently took on increasing responsibility in both line and credit management roles for small business, middle market and corporate lending before joining the Bank in February 2004 as Vice President and Portfolio Management Approval Manager where he oversaw commercial and industrial loan approvals for the Bank. Mr. Martines also served as the Bank’s Senior Vice President, Community Banking Division Manager and Senior Vice President, Chief Credit Administrator before he was appointed to lead the Bank’s Commercial Real Estate Lending Division in March 2011.

David S. Morimoto—Mr. Morimoto was appointed Executive Vice President, Chief Financial Officer of the Company and the Bank effective July 1, 2015. Prior to that, Mr. Morimoto was Senior Vice President, Treasurer of

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the Company and the Bank from March 1, 2005 to June 30, 2015. Mr. Morimoto has more than twenty-six (26) years of experience in the banking industry and has extensive experience in effectively working with institutional investors, investment bankers, and financial institution regulators. Mr. Morimoto received his Bachelor of Business Administration degree in Finance from the University of Hawaii and received his Master of Business Administration degree with a concentration in Accounting from Chaminade University of Honolulu. Mr. Morimoto serves on the Board of Directors of the Institute for Human Services and the Hawaii Council on Economic Education.

Lee Y. Moriwaki—Mr. Moriwaki was appointed Executive Vice President, Chief Information Officer (“CIO”) of the Company and the Bank effective February 1, 2015. As CIO, Mr. Moriwaki is responsible for the Company-wide strategic direction and management of technology and Bank operations, which includes managing computer and network operations, loan and deposit operations, and the Bank’s customer service center. Mr. Moriwaki has been with the Bank since 2011 and has more than thirty-six (36) years of experience in the banking industry. He has a diverse background in retail banking, retail brokerage, finance, investments, operations and information technology. He previously served as the Bank’s Senior Vice President and Manager, Loan and Deposit Operations. Prior to joining the Bank, Mr. Moriwaki served as Senior Executive Vice President and a Managing Committee Member at Bank of Hawaii where he began his banking career in 1981. His management experience includes mortgage and consumer lending, bank operations and call center, electronic banking, investment services and trust, treasury and finance and computer operations and programming. Mr. Moriwaki has experience managing multiple divisions and also has experience in systems integration, including following the merger between Bank of Hawaii and Hawaiian Trust Company where he led the team responsible for integrating the two firm’s data centers and computer systems. Mr. Moriwaki has a Bachelor of Science degree in Management Science from the Massachusetts Institute of Technology and a Master of Business Administration in Finance from the University of Hawaii at Manoa.

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CORPORATE GOVERNANCE AND BOARD MATTERS

During the fiscal year ended December 31, 2017, the Board held a total of nine (9) meetings. Each incumbent director attended at least 75% of the total number of the aggregate of the Board meetings and meetings held by all committees of the Board on which he/she served during 2017. The Company expects directors to attend the annual meeting of shareholders. The directors who attended last year’s annual meeting of shareholders were Christine Camp, John Dean, Earl Fry, Paul Kosasa, Duane Kurisu, Colbert Matsumoto, Catherine Ngo and Crystal Rose, all of whom, other than Earl Fry, reside on the island of Oahu. Directors Wayne Kamitaki, who resides on the island of Hawaii, and Saedene Ota, who resides on the island of Maui, did not attend the annual meeting. Directors Christopher Lutes and Paul Yonamine were not directors of the Company at the time of the annual meeting.

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

The following table sets forth the members of the Board as of the date of this Proxy Statement and the committees of the Board on which they currently serve, and the committees on which they will serve as of April 1, 2018.

Name of Director
Audit
Committee
(current)
Compensation
Committee
(current)
Governance
Committee
(current)
Audit
Committee
(as of 4/1/18)
Compensation
Committee
(as of 4/1/18)
Governance
Committee
(as of 4/1/18)
Non-Employee Directors:
 
 
 
 
 
 
Christine H. H. Camp
*
C
*
 
*
 
Earl E. Fry
C
*
 
C
 
 
Wayne K. Kamitaki
*
 
*
*
C
 
Paul J. Kosasa
 
 
*
 
 
VC
Duane K. Kurisu
 
 
*
 
 
*
Christopher T. Lutes
*
 
 
*
 
 
Colbert M. Matsumoto
 
 
 
 
 
 
Saedene K. Ota
 
*
 
 
*
 
Crystal K. Rose
 
*
C
 
*
C
Paul K. Yonamine
 
 
 
 
 
*
* = Member
C = Chair
VC = Vice Chair

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

Audit Committee

The Audit Committee held ten (10) meetings during 2017. The responsibilities of the Audit Committee are described below under the subheading “REPORT OF THE AUDIT COMMITTEE.” The Audit Committee operates under a Charter adopted by the Board. The Charter of the Audit Committee is available on the Company’s website (www.centralpacificbank.com). The current members of the Company’s Audit Committee are Earl E. Fry (Chair), Christine H. H. Camp, Christopher T. Lutes, and Wayne K. Kamitaki, each of whom is “independent” within the meaning of the listing standards of the NYSE and the rules of the SEC. The members of the Company’s Audit Committee as of April 1, 2018 will be Earl E. Fry (Chair), Wayne K. Kamitaki, and Christopher T. Lutes, each of whom is “independent” within the meaning of the listing standards of the NYSE and the rules of the SEC. The Board has also determined that each member is financially literate, as such qualification is defined under the rules of the NYSE, that each member has accounting or related financial management expertise, as such qualification is defined under the rules of the NYSE, and that each member is an “audit committee financial expert” within the meaning of

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the rules of the SEC. None of Ms. Camp, Mr. Kamitaki and Mr. Lutes serves on the audit committee of any other publicly registered company. Mr. Fry serves on the audit committee of one other publicly listed company: Hawaiian Holdings Inc.

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

Compensation Committee

The Compensation Committee held four (4) meetings during 2017. The Compensation Committee’s primary purpose is to assist the Board in discharging the Board’s responsibilities relating to compensation of the Company’s executive officers by evaluating and recommending to the Board approval of executive officer benefit, bonus, incentive compensation, severance, equity-based or other compensation plans, policies and programs of the Company and providing all required disclosures on executive compensation for inclusion in the Company’s Proxy Statement. The functions of the Compensation Committee are further described in “COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS” below, under the subheading “COMPENSATION DISCUSSION AND ANALYSIS.” The Charter of the Compensation Committee is available on the Company’s website (www.centralpacificbank.com). The current members of the Company’s Compensation Committee are Christine H.H. Camp (Chair), Earl E. Fry, Saedene K. Ota, and Crystal K. Rose, each of whom is “independent” within the meaning of the listing standards of the NYSE, is a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act and is an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended. The members of the Company’s Compensation Committee as of April 1, 2018 will be Wayne K. Kamitaki (Chair), Christine H.H. Camp, Saedene K. Ota, and Crystal K. Rose, each of whom is “independent” within the meaning of the listing standards of the NYSE, is a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act and is an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.

Interaction with Consultants

From time-to-time, the Compensation Committee seeks advice from outside experts in the compensation field. The Compensation Committee has historically engaged a compensation consultant to provide input on both Board and executive compensation issues. In 2017 the Committee retained McLagan, an AonHewitt Company. McLagan is a compensation consulting and performance benchmarking firm focused exclusively on the financial services sector.

In 2017, the Compensation Committee engaged McLagan to provide market benchmarking information and advisory services related to executive compensation plan design features, positioning to market, regulatory compliance, and with respect to the review and development of various incentive plans. McLagan was engaged directly by the Compensation Committee and McLagan consultants reported directly to the Compensation Committee for its services in these capacities. The Compensation Committee discusses, reviews, and approves all consulting projects performed by McLagan and periodically reviews the relationship with McLagan and considers competitive proposals from other firms.

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

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Governance Committee

The Governance Committee held five (5) meetings during 2017. The Governance Committee is responsible for promoting the best interests of the Company and its shareholders through the implementation of sound corporate governance principles and practices, including identifying individuals qualified to become Board members, recommending nominees for directors of the Company, reviewing the qualifications and independence of the members of the Board and its committees, reviewing and monitoring the Company’s Corporate Governance Guidelines, monitoring the Board’s and the Company’s compliance regarding changes in corporate governance practices and laws and leading the Board in its annual review of the performance of the Board. The Charter of the Governance Committee and the Company’s Corporate Governance Guidelines are available on the Company’s website (www.centralpacificbank.com). The current members of the Company’s Governance Committee are Crystal K. Rose (Chair), Christine H. H. Camp, Wayne K. Kamitaki, Paul J. Kosasa, and Duane K. Kurisu, each of whom is “independent” within the meaning of the listing standards of the NYSE. The members of the Company’s Governance Committee as of April 1, 2018 will be Crystal K. Rose (Chair), Paul J. Kosasa (Vice Chair), Duane K. Kurisu, and Paul K. Yonamine, each of whom is “independent” within the meaning of the listing standards of the NYSE.

Director Resignation Policy

On January 28, 2009, the Board adopted a “Director Resignation Policy” which provides that at any shareholder meeting at which directors are subject to an uncontested election, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall tender a letter of resignation to the Board for consideration by the Governance Committee. The Governance Committee shall recommend to the Board the action to be taken with respect to such offer of resignation. The Board shall act promptly with respect to each such letter of resignation and shall notify the director concerned of its decision. Any director who tenders his or her resignation pursuant to this provision shall not participate in the Governance Committee or Board action regarding whether to accept his or her resignation offer.

Director Independence and Relationships

The Board has determined, in accordance with our Standards Regarding Director Independence, that all directors who are currently directors or who served during 2017 and all nominees (other than John C. Dean who is Executive Chair, and A. Catherine Ngo who is President and Chief Executive Officer) are “independent” within the meaning of the rules of the NYSE. All of the directors and nominees (other than Mr. Dean and Ms. Ngo) are non-employees. All committees of the Board are comprised solely of independent directors.

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

During 2017, the following directors and nominees either directly and/or indirectly through companies in which they have a business interest or affiliation, received and/or had outstanding loans with the Bank: Wayne K. Kamitaki, Paul J. Kosasa, Duane K. Kurisu, Colbert M. Matsumoto, Saedene K. Ota, and Crystal K. Rose.

During 2017, the following directors and nominees either directly and/or indirectly through companies in which they have a business interest or affiliation, opened and/or maintained deposit, trust, investment and/or other banking accounts with the Bank: Christine H. H. Camp, John C. Dean, Earl E. Fry, Wayne K. Kamitaki, Paul J. Kosasa, Duane K. Kurisu, Colbert M. Matsumoto, A. Catherine Ngo, Saedene K. Ota, Crystal K. Rose, and Paul K. Yonamine.

During 2017, the following directors and nominees served on boards of, or were involved in fundraising on behalf of, non-profit, community, charitable and/or cultural organizations, which received monetary donations from the Bank: Christine H. H. Camp, John C. Dean, Wayne K. Kamitaki, Paul J. Kosasa, Colbert M. Matsumoto, A. Catherine Ngo, Saedene K. Ota, and Crystal K. Rose. For 2017, the Company did not pay to any charitable or non-profit organization in which one of the Company’s Board members serves on that organization’s board, any amount in excess of the greater of $1,000,000 or 2% of the recipient organization’s gross annual revenues. Donations from the Bank in 2017 totaled $125,570.

During 2017, the following directors and nominees served on boards of, or were involved in fundraising on behalf of, non-profit, community, charitable and/or cultural organizations, which received monetary donations from

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the Central Pacific Bank Foundation: Christine H. H. Camp, John C. Dean, Paul J. Kosasa, A. Catherine Ngo, Saedene K. Ota, and Crystal K. Rose. For 2017, the Company did not pay to any charitable or non-profit organization in which one of the Company’s Board members serves on that organization’s board, any amount in excess of the greater of $1,000,000 or 2% of the recipient organization’s gross annual revenues. Donations from the Foundation in 2017 totaled $196,506.

During 2017, the following directors and nominees served on boards and as officers of companies that either directly or indirectly had business relationships with the Bank in the ordinary course of the Bank’s business, in which the directors had no involvement and which were on no more favorable terms than for other similarly situated matters: Paul J. Kosasa, Duane K. Kurisu and Colbert M. Matsumoto.

Company director Paul J. Kosasa is President and Chief Executive Officer, and a director of ABC Stores. In 2017, the Bank paid ABC Stores $52,950.48 for the right to lease space in various ABC Stores locations for the placement of Bank ATMs. Mr. Kosasa had no direct involvement with any of the aforementioned transactions and they were made on no more favorable terms than for other similarly situated transactions.

Company director Duane K. Kurisu is a director and holds less than five percent (5%) ownership interest in Oahu Publications, Inc., which publishes the Honolulu Star Advertiser newspaper (Hawaii’s only major daily newspaper), and the MidWeek, Hawaii Tribune Herald, The Garden Island and West Hawaii Today newspapers. Mr. Kurisu is also sole owner and co-manager of PacificBasin Communications LLC which publishes Hawaii Business magazine and Honolulu magazine. In 2017, the Bank paid a total amount of $453,291 for advertising of the Bank’s brand, products and services, in the foregoing media, detailed as follows: $252,288 for the Honolulu Star Advertiser newspaper; $1,699 for the MidWeek newspaper; $20,129 for the Hawaii Tribune Herald newspaper; $18,282 for The Garden Island newspaper; $13,793 for the West Hawaii Today newspaper; $72,862 for Hawaii Business magazine; and, $74,238 for Honolulu magazine. In addition, Mr. Kurisu is sole member of PCSC LLC and is vice president and director of WKF Inc., which are landlord and managing agent respectively, of a location in which the Bank has one of its branches, and for which the Bank paid $43,177 (for base rent, common area maintenance fees, real property taxes, and general excise taxes) in 2017. Mr. Kurisu had no involvement with any of the aforementioned transactions and they were made on no more favorable terms than for other similarly situated transactions.

Company director Colbert M. Matsumoto is Chairman of the Board, President and a minority owner (<10%), of Island Holdings, Inc. (“Island Holdings”), Executive Chairman of Island Insurance Company, Limited (“Island Insurance”), a Director of Atlas Insurance Agency, Inc. (“Atlas Insurance”), and Chairman of the Board of Tradewind Insurance Company, Limited (“Tradewind Insurance”). Island Holdings is the parent company of Island Insurance and Atlas Insurance. Mr. Matsumoto is an employee of Island Insurance and is not an employee of any of the other aforementioned entities. Tradewind Insurance is a wholly owned subsidiary of Island Insurance. Atlas Insurance is the largest insurance agency in Hawaii, with roots going back to 1929 and an A+ rating from the Better Business Bureau of Hawaii, Inc. Atlas Insurance is headquartered in Honolulu, Oahu and has offices on the islands of Hawaii and Maui. The Company has been a customer of Atlas Insurance since at least 2000, well before Mr. Matsumoto joined the Company’s Board. The Company’s engagement of Atlas Insurance was not and is not due to Mr. Matsumoto’s relationship with Atlas Insurance, and Mr. Matsumoto is not involved in any way in any insurance matters between the Company and Atlas Insurance. In 2017, out of the insurance premiums which the Company and its subsidiaries paid for insurance policies that Atlas Insurance placed on behalf of the Company and its subsidiaries, Atlas Insurance received a total of $112,177 in commissions (based on premiums on the Company’s corporate insurance policies totaling $1,323,999, of which the Company paid $182,653 in premiums to Island Insurance and Tradewind Insurance for policies they issued). The services provided by Atlas Insurance, Island Insurance and Tradewind Insurance were not professional services; the services were not advisory in nature. Atlas Insurance acted as an insurance agency and the Company independently made all decisions and determinations regarding the Company’s insurance coverage. Payments to Island Insurance and Tradewind Insurance were premiums for insurance policies. Mr. Matsumoto did not receive any direct commissions paid for premiums paid by the Company to Island Insurance, Atlas Insurance or Tradewind Insurance. In addition, Atlas Insurance paid the Bank $43,895 (for base rent, common area maintenance fees, real property taxes, and general excise taxes) for space in the Bank’s Hilo office building. Century Computers, Inc. doing business as Pacxa, is principally indirectly owned by Island Holdings, and provides the Bank with various information technology and business process services for which it received $30,203 in 2017. In addition, Mr. Matsumoto is a director of Oahu Publications, Inc., which publishes the Honolulu Star Advertiser newspaper (Hawaii’s only major daily newspaper), and the MidWeek, Hawaii Tribune

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Herald, The Garden Island and West Hawaii Today newspapers. In 2017, the Bank paid the following amounts for advertising of the Bank’s brand, products and services, in the foregoing media, detailed as follows: $252,288 for the Honolulu Star Advertiser newspaper; $1,699 for the MidWeek newspaper; $20,129 for the Hawaii Tribune Herald newspaper; $18,282 for The Garden Island newspaper; $13,793 for the West Hawaii Today newspaper. Mr. Matsumoto had no involvement with any of the aforementioned transactions and they were made on no more favorable terms than for other similarly situated transactions. The Company’s relationships with the aforementioned entities predate Mr. Matsumoto joining the Company’s Board.

Company executive officer, Mr. Arnold Martines, is Executive Vice President, Commercial Markets of the Company and the Bank. His wife, Thuy Nguyen-Martines, has been employed by the Company since 2003 and currently holds the position of Vice President and Senior Private Banking Manager, a non-executive officer position. In 2017, Ms. Nguyen-Martines’s total compensation, including salary, bonus, equity awards and other benefits, totaled approximately $190,000. Her compensation is commensurate with that of her peers.

Loans to Related Persons

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

Policy Regarding Transactions with Related Persons

The Company has a Board approved written policy (“Policy Regarding Transactions with Related Persons”) which sets forth the process and procedures for the review, approval, ratification and disclosure of any transaction with a related person (“transaction” and “related person” being as defined by Item 404 of SEC Regulation S-K). Transactions with related persons are reviewed by the Company’s Audit Committee.

Board Leadership Structure and Risk Oversight

The Company’s Board has no policy with respect to the separation of the offices of Chairman, President and Chief Executive Officer. It is the Board’s view that rather than having a rigid policy, the Board, with the advice and assistance of its Governance Committee, and upon consideration of all relevant factors and circumstances, will determine, as and when appropriate, whether the offices of Chairman, President and Chief Executive Officer should be separate. Since June 1, 2014, Crystal K. Rose has served as Lead Independent Director and as Chair of the Governance Committee of the Company’s and the Bank’s Board of Directors. Ms. Rose previously served as Chair of the Board of Directors of the Company and the Bank from April 20, 2011 through May 31, 2014. John C. Dean, former Chief Executive Officer of the Company and the Bank, currently serves as Executive Chair of the Company’s and the Bank’s Board of Directors, a non-executive officer position. A. Catherine Ngo currently serves as President and Chief Executive Officer for the Company and the Bank and also serves on the Company’s and Bank’s Board of Directors. As of April 1, 2018, Colbert M. Matsumoto will serve as Vice Chair of the Board of Directors of the Company and the Bank. Ten (10) of the twelve (12) Company’s and Bank’s Board of Directors are independent outside (non-employee) directors. As the Board’s former Chair and now as its Lead Independent Director, Ms. Rose previously presided over and once again presides over all meetings of the non-management directors in executive sessions, acts as liaison and facilitates communications between the Board and the principal executive officer, and ensures independent Board governance and oversight of management. In addition, all members of the Board’s Audit Committee, Compensation Committee, and Governance Committee are comprised of independent, non-management directors. The Company believes that the current structure ensures sufficient Board independence from management while also optimizing the efficiency and effectiveness of the Board and management in the oversight of the Company and the Bank, and also supports and provides for orderly transition and succession. On January 23, 2018, the Company’s Board adopted a resolution providing that the Board Chairman, Board Committee Chairs, and Lead Independent Director shall serve terms of four (4) years. When the Board Chair/Board Committee Chair/Lead Independent Director begins their fourth year of their term, a Vice Chair shall be appointed who shall assume the Board Chair/Board Committee Chair/Lead Independent Director position upon the end of the current Board Chair’s/Board Committee Chair’s/Lead Independent Director’s term.

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The Company is a one-bank holding company, with the Bank being the Company’s only bank subsidiary. All of the directors on the Company’s Board also serve on the Bank’s Board of Directors. In addition, all of the Company’s directors who serve on the Company’s Audit Committee, Compensation Committee and Governance Committee also serve on those same board level committees at the Bank. Ernst & Young, the Company’s and Bank’s internal auditor, reports directly to the Company’s and Bank’s respective Audit Committees. In addition, the Bank also has an additional board level Trust Committee and Directors’ Loan Committee which provide board level oversight over the Bank’s trust activities and lending activities, respectively. The Company’s and Bank’s Audit Committees perform the required and customary risk oversight functions of an Audit Committee, which include, overseeing accounting, auditing, internal controls, legal and regulatory matters, financial reporting and financial risk. The Company’s and the Bank’s Compensation Committees perform the required and customary risk oversight functions of a Compensation Committee, which include, overseeing the Company’s and Bank’s compliance with any laws, rules and regulations applicable to the Company’s and Bank’s compensation practices, plans and programs, and to ensure that compensation is not structured in a way which will encourage unnecessary or excessive risk taking. The Company’s and Bank’s Chief Financial Officer and Chief Legal Officer report regularly to the Company’s and Bank’s Audit Committees. The Company’s and Bank’s Chief Credit Officer is required to report regularly to the Bank’s Directors’ Loan Committee.

Code of Conduct & Ethics

The Company is committed to promoting and fostering ethical conduct and sound corporate governance principles. The Company has a Code of Conduct & Ethics applicable to all employees, officers and directors of the Company. In addition, the Company also has a supplemental Code of Conduct & Ethics for Senior Financial Officers, which is applicable to the Chief Executive Officer, President, Chief Financial Officer, Controller, any other principal financial officer or principal accounting officer and any other person fulfilling and/or performing any similar role, function or capacity. Both of the aforementioned Codes of Conduct & Ethics are available on the Company’s website (www.centralpacificbank.com).

Director Education

Board members are invited to attend the Federal Deposit Insurance Corporation San Francisco Region Directors’ College Program which is designed to educate bank directors about their fiduciary role and responsibilities, and about regulatory issues and current issues faced by the banking industry. The 2017 attendees from the Company were Christine H. H. Camp, Colbert M. Matsumoto, and Saedene K. Ota.

Director Nomination Process

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

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

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Shareholder Nominees. In accordance with the policies set forth in the Company’s Corporate Governance Guidelines and the Company’s Bylaws (as amended), the Governance Committee will consider properly submitted director nominees for election at the 2019 Annual Meeting of Shareholders recommended by shareholders if such recommendations are received in writing not less than ninety (90) calendar days nor more than one hundred twenty (120) calendar days prior to the first anniversary date of the annual meeting for the preceding year (such anniversary date, April 27, 2019), and comply with all other applicable requirements set forth in said Corporate Governance Guidelines and Bylaws (as amended). Shareholder recommendations should be addressed to the Company’s Corporate Secretary, P.O. Box 3590, Honolulu, Hawaii 96811. In addition, shareholders may bring nominations directly before an annual meeting by giving timely notice in writing to the Company’s Corporate Secretary within the same ninety (90) to one hundred twenty (120) calendar day period prior to the first anniversary date of the annual meeting for the preceding year (such anniversary date, April 27, 2019) and complying with all other applicable requirements set forth in the Company’s Bylaws.

Communications with the Board

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

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REPORT OF THE AUDIT COMMITTEE

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

As of February 23, 2018, the Audit Committee is comprised of three (3) independent directors and operates pursuant to a written charter that was last adopted by our Board in January 2017. The charter is also available on our website at https://www.centralpacificbank.com. During 2017, the Audit Committee held ten (10) meetings, including six (6) private sessions with the independent auditors, two (2) private sessions with internal audit, five (5) private sessions with executive management, and five (5) executive sessions. The Audit Committee’s primary purposes are to: (a) assist the Board in its oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the Company’s independent auditors’ qualifications and independence, and (iv) the performance of the Company’s internal audit function and independent auditors; (b) decide whether to appoint, retain or terminate the Company’s independent auditors and to pre-approve all audit, audit-related and other services, if any, to be provided by the independent auditors; and (c) prepare this Report. The Board has determined, upon the recommendation of the Governance Committee, that each member of the Audit Committee is “independent” within the meaning of the rules of the NYSE and the SEC. The Board has also determined that each member is financially literate and has accounting or related financial management expertise, as such qualifications are defined under the rules of the NYSE, and that each member is an “audit committee financial expert” within the meaning of the rules of the SEC. The Audit Committee is established in accordance with Section 3(a)(58)(A) of the United States Securities Exchange Act of 1934, as amended.

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

In performing its oversight role, the Audit Committee has considered and discussed the audited financial statements with management and the independent auditors. The Committee has also discussed with the independent auditors matters required to be discussed by the statement under PCAOB Auditing Standard No. 1301, Communications with Audit Committees. The Committee has received the written disclosures and the letter from the independent accountants required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, and has discussed with the independent accountant the independent accountant’s independence. All non-audit services performed by the independent auditors must be specifically pre-approved by the Audit Committee or a member thereof.

During 2017, the Audit Committee performed all its duties and responsibilities under the Audit Committee Charter. In addition, based on the reports and discussions described in this Report, the Audit Committee recommended to the Board that the audited financial statements of the Company for the fiscal year ended December 31, 2017 be included in the Company’s Annual Report on Form 10-K for such fiscal year.

Respectfully submitted by the members of the Audit Committee of the Board as of February 26, 2018:

 
Earl E. Fry, Chair
 
Christine H. H. Camp
 
Wayne K. Kamitaki

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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

DIRECTOR COMPENSATION

Periodically the Compensation Committee engages a consultant to review the compensation of the Company’s Board to ensure alignment with peers, considering the Company and Board’s performance. There were no changes in Board fees in 2017. A review of Board fees was recently completed in November 2017 and any adjustments in fees resulting from the review will be implemented in 2018.

On June 27, 2017, the Central Pacific Financial Corp. (CPF or the Company) and Central Pacific Bank (CPB or the Bank) Board of Directors approved the appointment of Paul K. Yonamine as director on the Central Pacific Financial Corp. and Central Pacific Bank Board of Directors.

Annual Retainer

All non-employee directors are paid an annual retainer in cash and/or company stock. All payments were made in June 2017, with the exception of Paul K. Yonamine, who was a newly appointed director on June 27, 2017. Following Mr. Yonamine’s appointment, he was paid a prorated annual retainer in August 2017. Details on annual retainers paid to directors, as well as to chairs of our committees, are as follows:

Board of Directors Position
Annual
Retainer
Director, Lead Independent Director and Governance Committee Chair
$
125,000
 
Director and Audit Committee Chair
$
115,000
 
Director and Compensation Committee Chair
$
107,500
 
Director and Loan Committee Chair
$
105,000
 
Director and Trust Committee Chair
$
105,000
 
Director
$
90,000
 

Director Compensation

The following table shows, for the year ended December 31, 2017, information on compensation earned by our directors who served on the Company Board during 2017 other than A. Catherine Ngo, whose compensation is disclosed in our Summary Compensation Table.

Name
Fees
Earned or
Paid In
Cash
($)
Stock
Awards
($)
Options
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Change in
Pension Values
& Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Christine H. H. Camp
$
55,846
 
$
51,654
 
$
 
$
 
$
 
$
 
$
107,500
 
John C. Dean
$
 
$
 
$
 
$
 
$
 
$
261,816
 
$
261,816
 
Earl E. Fry
$
59,496
 
$
55,504
 
$
 
$
 
$
 
$
 
$
115,000
 
Wayne K. Kamitaki
$
45,084
 
$
44,916
 
$
 
$
 
$
 
$
 
$
90,000
 
Paul J. Kosasa
$
45,028
 
$
44,972
 
$
 
$
 
$
 
$
 
$
90,000
 
Duane K. Kurisu
$
52,516
 
$
52,484
 
$
 
$
 
$
 
$
 
$
105,000
 
Colbert M. Matsumoto
$
52,516
 
$
52,484
 
$
 
$
 
$
 
$
 
$
105,000
 
Saedene K. Ota
$
45,084
 
$
44,916
 
$
 
$
 
$
 
$
 
$
90,000
 
Crystal K. Rose
$
64,684
 
$
60,316
 
$
 
$
 
$
 
$
 
$
125,000
 
Paul K. Yonamine1
$
23,048
 
$
22,927
 
$
 
$
 
$
 
$
 
$
45,975
 
1. Fees for Paul K. Yonamine represent six and one eighth (6 1/8) months of service on the CPF/CPB Board of Directors, based on his June 27, 2017 appointment date.
(a) Board Member, A. Catherine Ngo is omitted from this table because Ms. Ngo’s compensation is disclosed in the Summary Compensation Table.

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(b) Included in this column are fees payable in cash, but which the Directors were permitted to elect to receive in the form of equity. The Directors listed below elected to receive 100% of their fees in equity through the Directors Deferred Compensation (DDC) Plan, under which stock purchase orders up to 98% of fees are placed on the market to allow for fluctuations in stock price. Therefore, actual amounts paid in equity were less than 100% of total fees. The amounts in this column include the following payments made in stock:
Wayne K. Kamitaki received 1,300 shares (in addition to those listed in column (c)) having a fair market value of $32.0831 per share, a total value of $41,708. Remaining fees of $3,376 were paid in cash.
Saedene K. Ota received 1,300 shares (in addition to those listed in column (c)) having a fair market value of $32.0831 per share, a total value of $41,708. Remaining fees of $3,376 were paid in cash.
Paul K. Yonamine received 660 shares (in addition to those listed in column (c)) having a fair market value of $30.9821 per share, a total value of $20,448. Remaining fees of $2,600 were paid in cash.
(c) Included in this column are fees required to be received in the form of equity, which are paid in shares of CPF common stock either issued from the 2013 Stock Compensation Plan or purchased through the Directors Deferred Compensation (DDC) Plan. In June 2016, the Board of Directors approved a revision to the Directors’ fee schedule, which required Directors to receive 50% of total fees in the form of equity. For Directors who elected equity through the DDC Plan, stock purchase orders up to 98% of the fee amount are placed on the market to allow for fluctuations in stock price. Therefore, actual percentages paid in equity may have resulted in less than 50% of total fees. The fees required to be received in equity and paid in equity were as follows:
Christine H. H. Camp received 1,610 shares having a fair market value of $32.0831 per share, a total of $51,654. Remaining fees of $55,846 were paid in cash.
Earl E. Fry received 1,730 shares having a fair market value of $32.0831 per share, a total value of $55,504. Remaining fees of $59,496 were paid in cash.
Wayne K. Kamitaki received 1,400 shares having a fair market value of $32.0831 per share, a total value of $44,916.
Paul J. Kosasa received 1,401 shares having a fair market value of $32.10 per share, a total value of $44,972. Remaining fees of $45,028 were paid in cash.
Duane K. Kurisu received 1,635 shares having a fair market value of $32.10 per share, a total value of $52,484. Remaining fees of $52,516 were paid in cash.
Colbert M. Matsumoto received 1,635 shares having a fair market value of $32.10 per share, a total value of $52,484. Remaining fees of $52,516 were paid in cash.
Saedene K. Ota received 1,400 shares having a fair market value of $32.0831 per share, a total value of $44,916.
Crystal K. Rose received 1,880 shares having a fair market value of $32.0831 per share, a total value of $60,316. Remaining fees of $64,684 were paid in cash.
Paul K. Yonamine received 740 shares having a fair market value of $30.9821 per share, a total value of $22,927.
(g) This column represents the compensation John C. Dean earned as an Executive Chair and employee of the Company. He earned a base salary of $229,327 and earned other compensation (total of $32,489), including $1,616 in parking benefits, $2,679 in group life fringe benefits, $10,800 in 401(k) Company contributions, $14,520 in transportation services, $2,866 in security services and $8 in wellness discount credit.

Set forth below is the composition of the Audit, Compensation and Governance Committees of the Central Pacific Financial Corp. and Central Pacific Bank Board for 2017.

Board Member
Audit
Committee
Compensation
Committee
Governance
Committee
Christine H. H. Camp
M
C
M
John C. Dean
 
 
 
Earl E. Fry
C
M
 
Wayne K. Kamitaki
M
 
M
Paul J. Kosasa
 
 
M
Duane K. Kurisu
 
 
M
Colbert M. Matsumtoto
 
 
 
A. Catherine Ngo
 
 
 
Saedene K. Ota
 
M
 
Crystal K. Rose
 
M
C
Paul K. Yonamine1
 
 
 

“C” = Chair; “M” = Member

1. Paul K. Yonamine was appointed to the Board effective 6/27/17.

Directors Stock Opportunity

Non-employee and employee directors of the Company and the Bank are eligible to participate in the Company’s 2013 Stock Compensation Plan. Prior to April 2013, stock options were granted to non-employee directors under the Company’s 2004 Stock Compensation Plan, and some of such stock options remain unexercised.

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The table below shows the aggregate number of unexercised stock option awards and unvested restricted stock for each Director other than Ms. Ngo as of December 31, 2017.

Name
Unexercised
Vested
Stock
Options
Unvested
Restricted
Stock
(a)
(b)
(c)
Christine H. H. Camp
 
216
 
 
 
 
John C. Dean1
 
50,813
 
 
6,317
 
Earl E. Fry
 
216
 
 
 
 
Wayne K. Kamitaki
 
0
 
 
 
 
Paul J. Kosasa
 
216
 
 
 
 
Duane K. Kurisu
 
0
 
 
 
 
Colbert M. Matsumoto
 
216
 
 
 
 
Saedene K. Ota
 
0
 
 
 
 
Crystal K. Rose
 
216
 
 
 
 
Paul K. Yonamine
 
0
 
 
 
 
1. John C. Dean is an employee of the Company, and therefore, his figures represent compensation as an employee.
(b) For each of Messrs. Fry, Kosasa and Matsumoto and Ms. Camp and Ms. Rose, the 216 vested unexercised stock options represent options that were granted on March 11, 2009, as their Company annual Board retainer in lieu of cash.
(c) John C. Dean’s Unvested Restricted Stock represents 902 shares of Restricted Stock Units (RSUs) that vest based on time and 5,415 Performance Stock Units (PSUs) that vest based on year-end 2017 ROA results. The PSUs were granted at target performance; however, the actual number of shares to vest will be based on final performance results. RSUs and PSUs are scheduled to vest on February 15, 2018.

Directors Deferred Compensation Plan

The Company maintains a Directors Deferred Compensation Plan under which each non-employee director of the Company and the Bank may elect to defer all or a portion of his or her annual retainer. Under the Directors Deferred Compensation Plan, a participating director may elect from various payment alternatives, but full payout must occur no later than the tenth (10th) anniversary of separation from service. Under the Directors Deferred Compensation Plan, deferred amounts are valued based on corresponding investments in certain investment funds offered by the Bank’s Trust Division which are selected by the director. No plan earnings are considered to be “above-market” or “preferential” and as a result no amounts are reported in column (f) of the Directors Compensation table. The Directors Deferred Compensation Plan is a nonqualified deferred compensation plan under which distributions are made from the general assets of the Company under the direction and oversight of the Compensation Committee.

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COMPENSATION COMMITTEE REPORT

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

The Compensation Committee has reviewed and discussed with executive management the Compensation Discussion and Analysis that immediately follows this report as required by Item 402(b) of SEC Regulation S-K. Based on such review and discussion, the Compensation Committee recommended to the Board that such Compensation Discussion and Analysis be included in the Proxy Statement and incorporated as referenced in our Annual Report on Form 10-K for the year ended December 31, 2017. Respectfully submitted by the members of the Compensation Committee of the Board who participated in the review discussion and recommendation:

 
Christine H. H. Camp, Chair
 
Earl E. Fry
 
Saedene K. Ota
 
Crystal K. Rose

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) discusses our 2017 executive compensation program, and more specifically as it relates to the individuals serving as the Company’s Chief Executive Officer (“CEO”), A. Catherine Ngo, Chief Financial Officer (“CFO”), David S. Morimoto and the three (3) other most highly paid executive officers, Blenn A. Fujimoto, Executive Vice President, Consumer Lending and Wealth Management, David W. Hudson, Executive Vice President, Community Banking, and Arnold D. Martines, Executive Vice President, Commercial Markets. We refer to these executives as our Named Executive Officers (“NEOs”).

Executive Summary

Under the oversight of our Compensation Committee of the Board of Directors (the “Committee”), our executive compensation program is designed to attract, retain and incent talented individuals to lead our organization to achieve sustained growth and strong performance for the long term. It includes base pay set at or near the market median, while considering the breadth and scope of each position, with variable incentive opportunities that meet or exceed market based on achieving or exceeding key performance objectives. The performance measures used in 2017 to determine the funding level of the Annual Incentive Compensation Plan and the vesting of performance shares under the Long Term Equity Grant Program were 2017 Net Income and 2017 to 2019 average Return on Assets, respectively.

2017 Executive Compensation Highlights

Strong incentive compensation with short and long term performance alignment. In 2017, our Annual Incentive Compensation goal was based on budgeted Net Income (GAAP), the same metric as was used for the prior year. Two thirds (2/3) of the Long Term Equity Grant is based on targeted 3-year (2017, 2018 and 2019) average Return on Assets (ROA), which cliff vests after attainment of the ROA target. The other one-third (1/3) of the Long Term Equity Grant vests with time.
Type of Compensation
Earnings Opportunity
Relevant
Performance
Metric
2017 Outcomes
Cash
Annual Cash Incentive (“ICP”)
Annual Incentive Compensation Plan Pool funding is subject to attainment of 85% of Net Income goal at which the incentive pool will be funded at 50%. Maximum funding is 150% based on attainment of 115% of Net Income goal.
Actual 2017 Net Income compared to 2017 Budgeted Net Income
Pool funding based on Net Income achieved was calculated at 112.5% of target funding, with an additional 1% of the calculated amount added to pool funding as a result of exceeding a Customer Experience goal. Management used the discretion to give the incentive dollars earned as a result of exceeding the Customer Experience goal to increase the funding of the non-Managing Committee incentive pool. Payouts to specific individuals vary based on attainment of corporate, business plan and personal goals.
105% of Net Income Target Achieved
Equity
(subject to multi-year vesting)
2/3rds Performance-Based Restricted Stock Units (“PSUs”)
0% to 150% of Performance Award earned at end of 3-year period
Actual compared to budget 3-Year Average ROA (2017, 2018, 2019)
Not yet earned
N/A
1/3rd Time-based Restricted Stock Units (“RSUs”)
Time-based step vesting, 1/3rd per year
Time
First tranche (1/3 of time-based RSUs) vests on 2/15/18

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We believe our CEO pay is consistent with our Solid Financial Performance. The Company continued to realize solid growth on its balance sheet and ended the year with $5.6 billion in assets, primarily due to a strong increase in loan balances across all lines of business. Asset quality improved with a significant reduction in non-performing assets. A decrease in other operating income was offset by higher gains in net interest income and a decrease in other operating expense, resulting in solid improvement in the efficiency ratio. Net income adjusted to exclude the impact of Tax Reform increased by 4.6%, year-over-year, and together with a strong capital position, allowed for the successful execution of a stock repurchase program. In addition quarterly cash dividends continued in 2017 with an increase to $0.18 per share in the second quarter. Other significant milestones were achieved in the Bank’s business plan, including operational streamlining and the launch of our enterprise data warehouse, which centralized key customer data. Key factors contributing to the Company’s financial performance in 2017 included the improving economic and business conditions in the State of Hawaii, as well as a focused strategy on building and strengthening customer relationships. Significant highlights for the year ended December 31, 2017 were as follows:
Net income adjusted to exclude the impact of Tax Cuts and Jobs Act was $49.142 million compared to $47.0 million in 2016
Return on Assets adjusted to exclude the impact of Tax Cuts and Jobs Act was 0.89% compared to 0.90% in 2016
Efficiency ratio improved to 64.55% compared to 66.69% in 2016
Total loans and leases increased by $245.7 million, or by 7.0%, over 2016
Total deposits increased by $348.2 million, or by 7.6%, over 2016
Increase in quarterly cash dividend from $0.16 to $0.18 per share in the 2nd quarter
Non-performing assets declined by 60.5% to $3.6 million at year-end 2017 compared to $9.2 million at year-end 2016


Emphasis on variable pay for our CEO. A significant portion of our CEO’s target compensation is comprised of variable short and long term pay. The exhibit below shows the target compensation for the President & CEO, as of January 1, 2017 compared to compensation for CEOs at the peer group at the median.

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CEO Target Pay Mix
CPF/CPB vs. Peers


1. Peer group data is of our Compensation Peer Group based on an analysis completed by McLagan in November 2017.
2. Fixed pay represents base salary.
3. Variable pay represents annual cash incentives and the current year Long Term Equity Grant at target payout amounts.

Key Areas of Focus and Results for 2017:

Focus on the Long Term
In 2017, the long term incentive plan design was revised to measure 3-year average ROA. For our 2017 grant, 2/3 cliff vests based upon the attainment of our 3-year (2017, 2018, 2019) average ROA target.
Focus on Shareholder Support
99.36% approval from shareholders in our most recent Say on Pay vote for 2017.
(vote submitted annually)
Focus on Improving Efficiencies
We continue to focus on improving processes, upgrading systems and reducing expenses as evidenced by the continued improvement in the efficiency ratio. Efficiency ratio improved to 64.55% from 66.69% in 2016.
Focus on Data
Monetize data analytics for revenue generation, cost efficiencies and improved productivity, data integrity and management through data governance.
Focus on the Employees
Create an environment in which employees are engaged and empowered to do their best every day.
Focus on Risk
Take actions to manage and mitigate the Bank’s top risks with a focus on compliance and information security.
   
 
Focus on the Customer
Customer Experience continues to be a top initiative with the implementation of a Customer Experience Transformation Program to achieve process improvements, increase quality customer face time capacity, and create a customer-centric mind set.
 

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Compensation Governance

The Company’s executive compensation program is supported by strong corporate governance and Board oversight. The Committee meets on a regular basis and routinely meets in executive sessions without management present.

Executive Compensation Governance and Practices
Oversight and Governance
 
 
Independent Oversight of Executive Compensation. The Committee (comprised of independent directors) oversees and makes recommendations to the Board of Directors on compensation matters as it relates to all NEO’s. The Committee also evaluates and recommends to the Board, appropriate policies and decisions relative to executive officer compensation and benefits, including oversight design and administration of executive compensation programs and the Company’s compensation policies, practices, and incentive plans for non-executives. It also oversees preparation of executive compensation disclosures for inclusion in our Proxy Statement.
   
 
 
Independent Board Members. Subject to the recommendation of the Committee, all of the independent directors of the Board review and approve the compensation for the President & CEO.
   
 
 
Independent Compensation Consultant. The Committee has retained McLagan, an Aon Hewitt company, an independent executive compensation consulting firm for the financial services industry, to provide advice and recommendations on Board and executive compensation matters under the oversight and responsibilities as defined by the Compensation Committee Charter. The Committee in its sole discretion selects the consultant, approves their fees and defines their scope of responsibilities.
   
 
 
Independent Legal Advisor. The Committee retains an independent legal advisor, Manatt, Phelps & Phillips, LLP, to advise on executive compensation compliance with legal and regulatory requirements.
   
 
 
Active Committee engagement. In 2017, the Committee held four (4) meetings to discuss compensation matters.
Alignment with Shareholder Interests
 
 
Stock Ownership Guidelines. Our NEOs and Board members are subject to robust equity ownership guidelines.
   
 
Compensation Management & Risk Mitigation
 
 
   
 
Compensation Risk Management. Committee oversight includes evaluating and monitoring the Company’s compensation programs, policies, and practices, which could have a material adverse effect on the risk profile of the overall Company. The Committee conducts at least semi-annual reviews with the Committee appointed senior risk officer to confirm that all incentive and bonus compensation plans, structures and arrangement, including those for NEOs, do not have a reasonable likelihood to encourage excessive and unnecessary risk taking and do not pose a threat to the overall value of the Company and annual reviews with the independent compensation consultant and independent legal advisor. The overall finding from these reviews is that the Company does not believe its plans, policies and practices individually or in their entirety encourage unnecessary or excessive risks that were reasonably likely to have a material adverse effect on the Company or threaten the overall value of the Company.

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Executive Compensation Governance and Practices
   
 
 
Incentive Plan Risk Management. Our Annual Cash Incentive Plan is subject to threshold performance at which the incentive pool is funded at 50% of target funding level. At maximum performance, the incentive pool is capped at 150% of target funding level.
   
 
 
Long Term Equity Grant Risk Management. Cliff vesting applies to the performance share portion of the 2017 Long Term Equity Grant, which comprises 2/3 of the total 2017 Long Term Equity Grant. The award is capped at 150% of target shares.
   
 
 
No Hedging. Pursuant to our Company Stock Trading Policy, executive officers and Board members are not permitted to engage in transactions that hedge their investments in Company equity.
   
 
Executive Compensation Features
 
 
Competitive Peer Analysis. Compensation decisions are made considering the compensation and performance data of our Compensation Peer Group. All components of executive compensation are reviewed at least annually in consultation with the Committee selected compensation consulting firm.
   
 
 
No Employment Agreements. None of the NEOs are covered under employment agreements that provide for any additional payments or benefits beyond what is generally available to all other employees if they terminate their employment for good reason, are terminated by the Company without cause, or voluntarily resign, assuming no change-in-control has occurred.
   
 
 
Executive Benefits. Our executives receive the same retirement, health and welfare and other benefits generally available to all employees. As noted in footnote (i) following the “Summary Compensation Table”, certain NEOs have received company-provided transportation services and spousal travel.
   
 
 
No 280G Excise Tax Gross-ups. Our executives are not entitled to any Section 280G excise tax gross-up payments.
   
 
 
Executive Retirement Benefits. Our executives are eligible to participate in the same 401(k) Plan as all other employees and the same Non-Qualified Deferred Compensation Plan available to a select group of management and highly compensated employees and are subject to the same eligibility requirements. Two NEOs earned a benefit under the Central Pacific Financial Corp. Defined Benefit Retirement Plan prior to the plan being frozen on December 31, 2002. Benefits under this plan were provided to all other employees eligible to participate in the plan prior to it being frozen.
   
 
 
One NEO is eligible to receive a fully vested nonqualified retirement benefit under a Supplemental Executive Retirement Plan (SERP) Agreement effective July 1, 2005.

Executive Compensation Philosophy and Objectives

The central principle of our compensation philosophy is that executive compensation should align with shareholders’ interests, without encouraging excessive and unnecessary risk that could threaten the overall value of the Company. The executive compensation program is designed to:

Drive performance relative to our strategic plan and goals, including financial performance.

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Balance the risk of short-term operational objectives with the need to build long-term sustainable value.
Align executives’ long-term interests with those of shareholders by placing a portion of total compensation at risk, contingent on the Company’s performance, without encouraging unnecessary and excessive risks that threaten the overall value of the Company.
Attract and retain highly qualified executives to achieve our goals and to maintain an executive management group that can provide success and stability in leadership.
Deliver compensation effectively, providing value to the executive in an appropriately risk-controlled and cost-efficient manner.
Allow flexibility in responding to changing laws, accounting standards, and business needs, as well as the constraints and dynamic conditions in the markets in which we do business.
Be supported by strong corporate governance, including oversight by the Company’s Board.

Our compensation program has multiple pay components, including a fixed annual base salary, variable annual cash incentive pay, variable annual long-term equity grants, and other benefits. We believe that over the long term, a combination of pay components is essential to drive executives to achieve strategic operating and financial goals. There is no set formula to determine the mix of the various pay components and the use of the components may change from year to year based on the Company’s circumstances, market conditions, and competitive market for executive talent. We discuss each of the pay components and the role they play in our overall compensation structure, in the “Compensation Framework” section below.

Say-on-Pay

The Company is required to hold a separate non-binding shareholder vote to approve the compensation of its NEO’s, as disclosed pursuant to the compensation disclosure rules of the SEC. This proposal, commonly known as a “Say-On-Pay” proposal, permits shareholders to endorse or not endorse the Company’s executive compensation program. Because the shareholders’ vote is advisory, it is not binding on the Board. However, when setting compensation and in determining compensation policies, the Committee took into account the results of the April 2017 shareholder advisory vote on executive compensation and will continue to consider the outcome of this vote each year.

Our shareholders approved the compensation of our NEOs as disclosed in the Proxy Statement for the 2017 annual meeting. 99.36% of our shareholders voting at the 2017 annual meeting voted in favor of the Company’s executive compensation program. The Committee believes that the result of this vote is evidence that the Company’s compensation policies and decisions are in the best interests of its shareholders and currently expects to apply similar principles going forward.

Compensation Committee Activity and Key Initiatives During 2017

The Committee evaluates existing compensation program components on an ongoing basis to maintain the Company’s competitive position to meet the goal of attracting, retaining, and motivating key executives without encouraging unnecessary and excessive risk that could pose a threat to the overall value of the Company.

Role of Executives in Compensation Committee Deliberations. The Committee may request that the Executive Chair and/or the President & CEO be present at Committee meetings to discuss executive compensation and evaluate the performance of both the Company and individual executives. Other executives may be requested to attend Committee meetings to provide pertinent financial, legal, or operational information. Executives in attendance may provide their insights and suggestions, but only independent Committee members may vote on decisions regarding executive compensation and other Company compensation matters for recommendation to the Board.

The President & CEO and the Executive Chair do not provide recommendations for their own compensation. The Committee may discuss compensation with them, but the Committee makes final deliberations in an executive session. Based on these deliberations, the Committee submits its recommendations to the entire group of independent members of the Board for approval. Compensation decisions for the President & CEO are based on a variety of factors including but not limited to, Company performance, regulatory restrictions and guidance, periodic market reviews, and recommendations from

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independent external executive compensation consultants and legal counsel. For all other executives, the Committee considers the President & CEO’s proposals. For all of the NEOs, including the President & CEO, the Committee obtains and considers input from outside advisors including review of market and peer compensation data and trends in making its recommendations to the Board.

In 2017, the Committee completed the following initiatives and actions related to executive compensation:

Incentive Plan Review. Reviewed and discussed the various compensation and incentive arrangements regarding their merits and to confirm they do not encourage any unnecessary and excessive risk that may threaten the value of the Company. These reviews included analysis and feedback from the designated senior risk officer (“SRO”), our SVP, Director of Enterprise Risk Management & Internal Audit & Credit Review, as well as, consultation and perspective from Human Resources, Finance, Compliance, Corporate Legal, Credit and Risk, outside legal counsel and executive compensation consultants, where appropriate.
Executive Incentive Plan Actions
Approved the 2016 Annual Incentive Compensation Plan payments for Managing Committee members, including NEOs, based on the achievement of corporate, business plan and personal goals.
Approved the 2017 Business Plan goals for Managing Committee members.
Approved the 2017 Annual Incentive Plan design for both Managing Committee members, including NEOs and Non-Managing Committee participants.
Approved the 2017 Long Term Equity Grant plan design for Managing Committee members, including NEOs.
Approved the 2018 Annual Incentive Plan design for both Managing Committee members, including NEOs and Non-Managing Committee participants.
Approved the 2018 Long Term Equity Grant plan design for Managing Committee members, including NEOs.
Board and Committee Performance and Compensation Actions
Reviewed results of the 2016 Compensation Committee Self-Assessment.
Other Committee Actions
Reviewed the independence of McLagan and its consultants.
Received a 2017 regulatory update from McLagan.
Approved an update to the Compensation Peer Group.
Approved the 2017 Equity Grant Budget.
Updated and approved the Stock Ownership Guidelines.
Reviewed executive and director stock ownership levels as related to the Stock Ownership Guidelines.

Pay Level and Benchmarking

Benchmarking is an important part of our executive compensation review process. It includes an external review against peer companies and an internal review, based on pay equity, job scope, responsibility and experience. McLagan, an executive compensation consulting firm, is retained to provide consultation to the Committee on the Company’s NEO compensation as compared to our peers.

The Committee retained McLagan in July 2017 to conduct a market analysis using our Compensation Peer Group in preparation for the annual review of executive compensation in November with any adjustments to occur in April 2018. McLagan reported the market data for all Managing Committee members, including the NEOs, at the November Compensation Committee meeting. On average, target direct compensation, including base pay, short-term cash incentives, and long-term equity grants, fell below the market median for our top five executives when compared to the Compensation Peer Group, but within an appropriate range of the market median after taking

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into account each NEO’s unique value and contribution to the Company, individual performance, experience, internal pay equity relationships and individual roles versus the benchmark positions. Details on the Compensation Peer Group are provided below in the section titled “Compensation Peer Group”.

Compensation Peer Group

The Committee reviews the Compensation Peer Group’s composition on an annual basis and modifies the group as necessary to ensure alignment with the Company’s compensation philosophy, structure, and targeted performance levels. For the 2017 analysis of executive compensation, the Compensation Peer Group was adjusted by eliminating three banks that were no longer relevant for comparison based upon their asset size. The resulting group is comprised of 20 peers, with median assets of $5.9 billion.

When benchmarking is used to help determine the actual pay levels of each NEO, the Committee compares comparable positions in the Peer Group and also considers issues of internal pay equity, scope of responsibilities and experience.

The criteria used to select the Peer Group were as follows:

1. Publicly-traded United States banks with executive compensation reported in public filings.
2. Focus on Western banks with assets ranging between $2.5 billion and $8 billion plus Territorial Bancorp Inc. and Columbia Banking Systems Inc., and non-Western banks in major metropolitan areas with assets ranging between $3 billion and $8 billion.
3. Excludes banks under TARP restrictions and thrift institutions.
4. Excludes banks with currently outstanding public severe enforcement actions.

The selection criteria resulted in a group of twenty (20) peers. The Company was positioned at the forty-eighth (48th) percentile in terms of asset size at the time of most recent comprehensive review of the Peer Group members.

The Committee approved the following Peer Group for compensation benchmarking for 2017.

Rank
Company Name
Ticker
City
State
1
Columbia Banking System Inc.
COLB
Tacoma
WA
2
Union Bkshs Corp
UBSH
Richmond
VA
3
CVB Financial Corp.
CVBF
Ontario
CA
4
Legacy Texas Finl Group Inc
LTXB
Plano
TX
5
TowneBank
TOWN
Portsmouth
VA
6
Opus Bank
OPB
Irvine
CA
7
Independent Bank Corp.
INDB
Rockland
MA
8
First Financial Bankshares
FFIN
Abilene
TX
9
American SB FSB
HE
Honolulu
HI
10
HomeStreet Inc.
HMST
Seattle
WA
11
Westamerica Bancorp.
WABC
San Rafael
CA
12
Sandy Spring Bancorp Inc.
SASR
Olney
MD
13
Hanmi Financial Corp.
HAFC
Los Angeles
CA
14
TriCo Bancshares
TCBK
Chico
CA
15
Century Bancorp Inc.
CNBKA
Medford
MA
16
Washington Trust Bancorp Inc.
WASH
Westerly
RI
17
Pacific Premier Bancorp
PPBI
Irvine
CA
18
Heritage Financial Corp.
HFWA
Olympia
WA
19
CU Bancorp
CUNB
Los Angeles
CA
20
Territorial Bancorp Inc.
TBNK
Honolulu
HI

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2017 Executive Compensation

Compensation Framework

 
Compensation Element /
Purpose
Fixed or
At Risk
Annual or
Long
Term
Cash
or
Equity
2017 Highlights
Annual Cash Compensation
Base Salary
Reflects each executive’s position, individual performance, experience, and expertise. In general, our compensation structure sets base pay at approximately the 50thpercentile relative to peer banks.
Fixed
Annual
Cash
There were no adjustments in base salary for NEO’s in 2017
 
 
 
 
 
 
Annual Cash Incentives
Provides variable compensation based on achievement of Company, Business Plan and Personal objectives.
At Risk
Annual
Cash
Funding of the 2017 Annual Incentive Compensation Plan (“ICP”) Pool
 
 
 
No change in funding methodology from 2016 to 2017.
 
 
 
Funding of the pool is determined and approved by the Committee and is subject to Net Income performance against our annual target (budget).
 
 
 
Based on the Company’s Net Income performance against target, it was calculated that the pool should be funded at 112.5% of target funding.
 
 
 
An additional multiplier was available in the plan if the average customer experience goal was exceeded. This resulted in an additional one percent (1%) funding of the incentive pool. Management recommended and the Committee approved the additional funding be allocated to Non-Managing Committee employees.
 
 
 
 
 
 
 
 
Individual ICP Awards
 
 
 
Individual awards are determined based on pool funding, overall corporate, business plan and personal performance.
 
 
 
Individual awards may range from 0% to 150% of target.
 
 
 
For 2017, incentive plan payments for NEOs ranged between 47% to 75% of base salary.

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Compensation Element /
Purpose
Fixed or
At Risk
Annual or
Long
Term
Cash
or
Equity
2017 Highlights
Long Term Equity Incentive Compensation
Performance Share Units (PSUs)
Provides incentives to motivate and retain executives and to reward for long term Return on Assets (ROA) performance against target
At Risk
Long Term
Equity
Consistent with prior years, the Committee continued to use a mix of performance-based PSUs and time-based RSUs.
 
 
 
2/3 of the annual grant is in PSUs that cliff vests after three years based on attainment of three-year average ROA for 2017, 2018 and 2019.
 
 
 
1/3 of annual grant is in RSUs that step vests with one-third vesting each year for three years.
Restricted Stock Units (RSUs)
Provides incentives for retention and long-term creation of shareholder value over the three year period.
At Risk
Long Term
Equity
Goal tied to longer performance period. To balance the use of Net Income, which is used to fund the annual cash incentive plan, the long term incentive equity compensation performance metric is Return on Assets, (“ROA”), in which the ROA target is a three year average ROA for 2017, 2018 and 2019 with cliff vesting in 2020 based on attainment of goal.
 
 
 
 
 
 
 
Benefits & Perks
Health, Welfare, Retirement Programs and Perquisites
NA
Annual
NA
Executives receive the same health, welfare and retirement benefits generally available to all other employees.
 
 
 
 
The company provided transportation services and spousal travel benefits for certain NEOs in 2017.

Salary

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

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

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The base salaries of all NEOs were within acceptable ranges of the peer benchmarks. The table below shows the NEOs’ annual base salaries at the beginning of 2017. There were no adjustments to NEOs’ base salaries during 2017.

Name
Position
1/1/2017
A. Catherine Ngo
President & Chief Executive Officer
$
400,000
 
David S. Morimoto
Executive Vice President,
Chief Financial Officer & Treasurer
$
270,000
 
Blenn A. Fujimoto1
Executive Vice President,
Consumer Lending & Wealth Management
$
230,000
 
David W. Hudson
Executive Vice President,
Community Banking
$
227,000
 
Arnold D. Martines
Executive Vice President,
Commercial Markets
$
225,000
 
1. Mr. Fujimoto’s position changed from Executive Vice President, Specialized Markets to Executive Vice President, Consumer Lending & Wealth Management effective April 1, 2017, with no adjustment to base salary.

Annual Variable Cash Compensation

We use annual variable cash compensation to focus executives’ attention on current strategic priorities to drive achievement of short-term corporate objectives and to align their interests with our shareholders. Our NEOs participate in an Annual Incentive Compensation Plan under which the Committee approves an incentive pool with funding tied to threshold achievement of eighty-five percent (85%) of budgeted Net Income. At threshold, the incentive pool is funded at fifty percent (50%); funding increases based on the level of Net Income results and is capped at one hundred fifty percent (150%). Actual opportunity for each executive is based on a percentage of base pay. If the pool funding is in excess of the collective formula amounts for NEOs, the remaining balance may be provided as a funded discretionary distribution to NEOs based on performance and/or may be used to increase the incentive opportunity available to non-NEOs.

Budgeted Net Income for 2017 was set during the 2017 budgeting process and was determined with consideration of our continued improvement and outlook in financial performance, including loan and deposit growth, credit risk profile, operational efficiencies and capital position.

In line with our 2017 customer experience initiative, the Plan includes a customer experience multiplier in the incentive pool funding calculation. The multiplier is based on the Company’s overall customer feedback score, and could increase or decrease the final pool by ten percent (10%).

Incentive pool funding based on actual results is summarized in the table below with maximum funding capped at one hundred fifty percent (150%) of target funding, subject to increase by up to ten percent (10%) if the maximum customer experience multiplier were achieved.

Description
Net Income
Pool
Funding %
Incentive Pool
Funding
Threshold Funding @ 85% of Net Income Target
$
39,805,500
 
 
50
%
$
520,143
 
Target Funding @ 100% of Net Income Target1
$
46,830,000
 
 
100
%
$
1,040,285
 
Maximum Funding @ 115% of Net Income Target
$
53,854.500
 
 
150
%
$
1,560,428
 
Maximum Funding @ 115% of Net Income Target Plus Maximum CX Goal 10%
 
 
 
 
 
 
$
1,716,470
 
Actual 2017 Net Income @ 105% of Target Net Income
$
49,142,000
 
 
112.5
%
$
1,170,321
 
Customer Experience (CX) Goal Multiplier2
 
 
 
 
1
%
$
10,403
 
Approved Incentive Pool Funding
 
 
 
 
112.5
%
$
1,170,321
 
1. Target incentive opportunity is based on a percentage of base pay for all participants in the Executive Annual Incentive Compensation Plan, including individual participants beyond the NEOs.
2. Management recommended and the Committee approved the transfer of the Customer Experience multiplier funding to the incentive pool for non-Managing Committee employees.

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The pool funding percentage is calculated using the following interpolation table, based on percentage of target Net Income achieved, rounded to the nearest whole percentage (up or down per standard rounding) of such target Net Income:

% of Net Income Target
Pool Funding
85% to 90%
50.00% to 75.00%
91% to 99%
77.50% to 97.50%
100%
100%
101% to 110%
102.50% to 125.00%
111% to 115%
130.00% to 150.00%

Performance goals are focused on a common set of corporate and business plan goals aligned with the board approved budget, annual business plan, and a variety of personal performance goals, focused on financial results, leadership and development.

A summary of the incentive opportunities and goal weightings is as follows:

 
Target Incentive
Opportunity as
a % of Base Salary
Annual Performance Goal Categories
 
Effective Date
Corporate
Business
Plan
Personal
Executive
1/1/2017
Goal Weighting
A. Catherine Ngo
 
65
%
 
60
%
 
10
%
 
30
%
David S. Morimoto
 
40
%
 
50
%
 
20
%
 
30
%
Blenn A. Fujimoto
 
30
%
 
40
%
 
30
%
 
30
%
David W. Hudson
 
30
%
 
40
%
 
30
%
 
30
%
Arnold D. Martines
 
30
%
 
40
%
 
30
%
 
30
%

Achievement of performance goals is based on a five point rating scale as follows:

Performance Rating
% Achieved
5
 
200
%
4
 
150
%
3
 
100
%
2
 
50
%
1
 
0
%

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The following performance results indicate ratings received based on the rating scale above:

In February 2018, the Committee approved the payment of cash incentives to NEOs. The amount of the awards was based on the results of corporate, business plan and personal goals compared to target. The table below summarizes the performance rating in each category.

Goals
Performance
Rating
Goals Assigned
NEOs
CORPORATE GOALS
Net Income: $46.830 Million – Achieved $49.142 Million
 
3.00
 
All NEOs
 
 
 
 
 
ROA: 0.84% – Achieved 0.89%
 
3.00
 
All NEOs
 
 
 
 
 
BUSINESS PLAN GOALS
Customer Experience Differentiation
 
3.50
 
Blenn A. Fujimoto
David W. Hudson
Arnold D. Martines
 
 
 
 
 
Efficiency
 
3.0
 
David S. Morimoto
David W. Hudson
Arnold D. Martines
 
 
 
 
 
Target Markets
 
4.0
 
Blenn A. Fujimoto
 
 
 
 
 
Risk
 
3.0
 
A. Catherine Ngo
David S. Morimoto
Blenn A. Fujimoto
David W. Hudson
Arnold D. Martines
   
 
PERSONAL GOALS
Varies
All NEOs

Personal goals are customize for each NEO and are assigned to the following categories: (1) Customer Experience/Process Improvement (2) Financial Results (3) Personal/Professional Development (4) Job Specific Duties & Major Projects

Based on the NEOs’ performance ratings, the table below summarizes the payment attained by each NEO in each category, as well as the overall award achieved.

 
 
 
 
Total
Target
Award @
112.5%
of Target
Calculated Award Based on Goal
Name
Base Pay
ICP
%
Target
ICP$
Corporate
Business
Plan
Personal
Total
Rounded
Award
Plus / -
15%
Final
Award
a
b
c
d
e
f
g
h
i
j
k
l
A. Catherine Ngo
$
400,000
 
 
65
%
$
260,000
 
$
292,500
 
$
175,500
 
$
29,250
 
$
93,308
 
$
298,058
 
$
300,000
 
 
 
 
$
300,000
 
David S. Morimoto
$
270,000
 
 
40
%
$
108,000
 
$
121,500
 
$
60,750
 
$
24,300
 
$
44,105
 
$
129,155
 
$
130,000
 
$
19,500
 
$
150,000
 
Blenn A. Fujimoto
$
230,000
 
 
30
%
$
69,000
 
$
77,625
 
$
31,050
 
$
29,109
 
$
34,931
 
$
95,090
 
$
100,000
 
$
15,000
 
$
115,000
 
David W. Hudson
$
227,000
 
 
30
%
$
68,100
 
$
76,613
 
$
30,645
 
$
25,857
 
$
32,637
 
$
89,139
 
$
90,000
 
$