Toggle SGML Header (+)


Section 1: DEFR14A (DEFR14A)

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. 1)

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:
 
 
 

   

EXPLANATORY NOTE

This revised proxy statement is being refiled to correct an error in the market value of 935 RSU’s held by Mr. David Morimoto. The actual value is “$22,767” rather than “$227,770” as originally filed. No other changes have been made to the proxy statement from the original filing.


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

APRIL 26, 2019 ANNUAL MEETING
YOUR VOTE IS IMPORTANT

March 8, 2019

Dear Fellow Shareholder:

On behalf of your Board of Directors, we cordially invite you to attend the 2019 Annual Meeting of Shareholders of Central Pacific Financial Corp. The Annual Meeting will be held on Friday, April 26, 2019, 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 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,
 

 
Paul K. Yonamine
 
Chief Executive Officer
 


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

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 2019

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 26, 2019, 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 Crowe LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019.
(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 22, 2019 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 26, 2019. Our Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 2018 are accessible, free of charge, at https://www.centralpacificbank.com/2019proxy and https://www.proxyvote.com.

 
By Order of the Board of Directors,
 

 
GLENN K.C. CHING
 
Executive Vice President and Corporate Secretary
   
 
Dated: March 8, 2019
 

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

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 2019

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 2019 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 26, 2019, 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 8, 2019.

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 Crowe LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019.
(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 22, 2019 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 28,836,541 shares of the Company’s Common Stock, no par value, issued and outstanding on the Record Date, held by approximately 3,441 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”),

1

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 Crowe LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019.
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 Crowe LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019.

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

2

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 26, 2019.

The Company’s Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 2018 are available free of charge at https://www.centralpacificbank.com/2019proxy and at https://www.proxyvote.com.

In addition, the Company will provide without charge, upon the written request of any shareholder, a copy of the Company’s Annual Report on Form 10-K including the financial statements and the financial statement schedules, required to be filed with the United States Securities and Exchange Commission (the SEC”) for the fiscal year ended December 31, 2018. Requests should be directed to Central Pacific Financial Corp., Attn: Investor Relations, P.O. Box 3590, Honolulu, Hawaii 96811 or to https://www.proxyvote.com.

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

We are furnishing materials to our shareholders primarily via the internet instead of mailing printed copies of those materials to our shareholders. By doing so, we save costs and reduce the environmental impact of the Meeting. On March 8, 2019, 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.

3

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 22, 2019, 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)
55 East 52nd Street
New York, New York 10055
 
4,320,108
 
 
14.8
%
The Vanguard Group(2)
P.O. Box 2600
Valley Forge, Pennsylvania 19482
 
3,028,673
 
 
10.38
%
(1)Pursuant to Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 24, 2019, wherein BlackRock, Inc. reported sole voting power as to 4,225,081 shares of Company Common Stock, and sole dispositive power as to 4,320,108 shares of Company Common Stock.
(2)Pursuant to Schedule 13G/A filed by The Vanguard Group with the SEC on February 11, 2019, wherein The Vanguard Group reported sole voting power as to 30,595 shares of Company Common Stock, shared voting power as to 2,700 shares of Company Common Stock, sole dispositive power as to 2,998,178 shares of Company Common Stock, and shared dispositive power as to 30,495 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 22, 2019. 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
 
123,117(3
) 
 
 
*
John C. Dean
 
157,791(4
) 
 
 
*
Earl E. Fry
 
58,262(5
) 
 
 
*
Wayne K. Kamitaki
 
8,289(6
) 
 
 
*
Paul J. Kosasa
 
53,595(7
) 
 
 
*
Duane K. Kurisu
 
19,323(8
) 
 
 
*
Christopher T. Lutes
 
1,257(9
) 
 
 
*
Colbert M. Matsumoto
 
310,646(10
) 
 
1.1
%
A. Catherine Ngo
 
181,841(11
) 
 
 
*
Saedene K. Ota
 
11,359(12
) 
 
 
*
Crystal K. Rose
 
42,600(13
) 
 
 
*
Paul K. Yonamine
 
4,400(14
) 
 
 
 
Named Executive Officers
 
 
 
 
 
 
 
 
 
 
 
 
 
Blenn A. Fujimoto
 
42,059(15
) 
 
 
*
David W. Hudson
 
36,664(16
) 
 
 
*
Arnold D. Martines
 
16,465(17
) 
 
 
*
David S. Morimoto
 
20,828(18
) 
 
 
*
 
 
 
 
 
 
 
All Directors and Current Executive Officers as a Group (16 persons)
 
1,088,496(19
) 
 
3.8
%
*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 22, 2019 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 22, 2019. For restricted stock awards which have not vested, individuals have voting power with respect to such shares but no investment power.

4

(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 22, 2019 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. 12,528 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. 56,978 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. 7,545 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. 8,000 shares of Common Stock are held for Mr. Kamataki’s account and benefit under the Company’s Directors’ Deferred Compensation Plan.
(7)52,456 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)19,323 shares of Common Stock are directly held by Mr. Kurisu.
(9)1,257 shares are held jointly by Mr. Lutes and his wife.
(10)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. 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. 6,400 shares of Common Stock are directly held by Mr. Matsumoto. 25,730 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.
(11)122,268 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.
(12)1,659 shares of Common Stock are directly held by Ms. Ota. 9,700 shares of Common Stock are held for Ms. Ota’s account and benefit under the Company’s Directors’ Deferred Compensation Plan.
(13)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. 14,915 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.
(14)4,400 shares of Common Stock are held for Mr. Yonamine’s account and benefit under the Company’s Directors’ Deferred Compensation Plan.
(15)26,064 shares of Common Stock are directly held by Mr. Fujimoto. 435 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.
(16)30,592 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.
(17)5,047 shares of Common Stock are held jointly by Mr. Martines and his wife and they share voting and investment powers. 6,767 shares of Common Stock are held under Mr. Martines’s account under the Central Pacific Bank 401(k) Retirement Savings Plan. 4,238 shares of Common Stock are held under Mr. Martines’s wife’s account under the Central Pacific Bank 401(k) Retirement Savings Plan. 100 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. On May 2, 2019, 313 Restricted Stock Units of Mr. Martines’s wife will vest under the Company’s equity compensation plans, and Mr. Martines’s wife intends to take such units in shares net of taxes, and to hold title to such shares jointly with Mr. Martines.
(18)17,646 shares of Common Stock are directly held by Mr. Morimoto. 2,830 shares of Common Stock are held jointly by Mr. Morimoto and his wife and they share voting and investment powers. 277 shares of Common Stock are held under Mr. Morimoto’s account under the Central Pacific Bank 401(k) Retirement Savings Plan. 75 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.
(19)Includes 115,381 shares of Common Stock which the directors and current executive officers have the right to acquire by exercise of stock options.

5

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 2018 by any person who was at any time during year 2018 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.

6

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 2020 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. 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 December 2014.

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.

7

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 and Mr. Yonamine, who are also executive officers, 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)
52
2004
 
 
 
 
DEAN, John C.
Executive Chair (non-executive officer), Central Pacific Financial Corp. and Central Pacific Bank (7/1/2015—9/30/18); 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)
71
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)
60
2005
 
 
 
 
KAMITAKI, Wayne K.
President and Chief Executive Officer, Maui Varieties, Ltd. (1990—present) (retail)
67
2015
 
 
 
 
KOSASA, Paul J.
President and Chief Executive Officer, MNS, Ltd., doing business as ABC Stores (1999—present) (retail)
61
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)
65
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)
51
2018

8

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, Island Holdings, Inc. (2010—present) (insurance/investment); President, Island Holdings, Inc. (2010—6/2018) (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)
66
2004
 
 
 
 
NGO, A. Catherine
President, Central Pacific Financial Corp.; President and Chief Executive Officer, Central Pacific Bank (10/1/2018—present); President and Chief Executive Officer, Central Pacific Financial Corp. and Central Pacific Bank (7/1/2015—9/30/18); 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)
58
2015
 
 
 
 
OTA, Saedene K.
President, Sae Design, Inc. (2007—present) (design and marketing); President, Maui Thing LLC (2010—present) (retail)
50
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)
61
2005
 
 
 
 
YONAMINE, Paul K.
Chairman and Chief Executive Officer, Central Pacific Financial Corp.; Executive Chairman, Central Pacific Bank (10/1/2018—present); Non-executive Chairman, GCA Corporation (10/1/18—present) (investment banking); Executive Chairman, GCA Corporation (6/2017—9/30/18) (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)
61
2017

9

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
 
 
 
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)
60
2016
 
 
 
 
HUDSON, David W.
Executive Vice President, Community Banking, Central Pacific Financial Corp. and Central Pacific Bank (3/11/2011—present)
60
2011
 
 
 
 
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)
54
2014
 
 
 
 
MORIMOTO, David S.
Executive Vice President, Chief Financial Officer and Treasurer, 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)
51
2015
(1)All directors of the Company are also directors of the Bank.
(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.
Board Experience & Diversity
3
directors with banking experience
3
directors with technology experience
4
female directors
7
independent directors with financial acumen
3
directors with other public company board experience
9
directors with Asian and/or Native
Hawaiian ancestry

Director Background and Experience

Christine H. H. Camp—Ms. Camp has over twenty-nine (29) 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

10

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—From July 1, 2015 to September 30, 2018, Mr. Dean was 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-five (35) 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.

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

11

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 is 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 twenty (20) years, and has been with ABC Stores for thirty-nine (39) 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-one (21) 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 was appointed Vice Chair of the Company and the Bank effective April 1, 2018. He is Chairman of the Board 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 Tradewind Capital Group, Inc., an investment and asset management company. Mr. Matsumoto was a practicing attorney for twenty-one (21) years before assuming his current executive management positions. He is former Chairman and Trustee of the Employees’ Retirement System of the State of Hawaii, and 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.

A. Catherine Ngo—Ms. Ngo was appointed President and Chief Executive Officer of the Bank and President of the Company effective July 1, 2015. Ms. Ngo served as Chief Executive Officer of the Company from July 1, 2015 to September 30, 2018. Prior to that, Ms. Ngo served as President and Chief Operating Officer of the Company and

12

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-six (26) 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-four (24) 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, and Nisei Veterans Memorial Center. 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, provides 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, 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-seven (37) 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.

Paul K. Yonamine—Mr. Yonamine was appointed Chairman and Chief Executive Officer of the Company, and Executive Chairman of the Bank, effective October 1, 2018. Mr. Yonamine serves as Non-executive Chairman of GCA Corporation, the largest independent M&A firm in Japan, and served as the Executive Chairman of GCA Corporation from June 2017 to September 30, 2018. 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

13

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:

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-eight (38) 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 Industries of Hawaii, Inc.

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-five (35) 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.

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-three (23) 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 and Treasurer of the Company and the Bank effective July 1, 2015. Prior to that, Mr. Morimoto was Senior Vice President, Treasurer of the Company and the Bank from March 1, 2005 to June 30, 2015. Mr. Morimoto has more than twenty-seven (27) 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.

14

CORPORATE GOVERNANCE AND BOARD MATTERS

During the fiscal year ended December 31, 2018, the Board held a total of eight (8) 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 2018. 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, Earl Fry, Paul Kosasa, Duane Kurisu, Colbert Matsumoto, Catherine Ngo and Crystal Rose. Except for Earl Fry, those directors who do not reside on the island of Oahu did not attend last year’s annual meeting of shareholders on Oahu.

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

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

Name of Director
Audit
Committee
Compensation
Committee
Governance
Committee
Non-Employee Directors:
 
 
 
Christine H. H. Camp
 
*
 
Earl E. Fry
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
*= Member
C= Chair
VC= Vice Chair

Interested parties may communicate directly with the Chairman by writing to: Paul K. Yonamine, 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 Chairman or to the Lead Independent Director or to the non-management or independent directors as a group, through procedures set forth in the Company’s Complaint Policy which is available on the Company’s website (www.centralpacificbank.com).

Audit Committee

The Audit Committee held eleven (11) meetings during 2018. 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), 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 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 the rules of the SEC. Neither Mr. Kamitaki nor 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

15

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 five (5) meetings during 2018. 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 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 2018 the Committee retained McLagan, an AonHewitt Company. McLagan is a compensation consulting and performance benchmarking firm focused exclusively on the financial services sector.

In 2018, 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.

Governance Committee

The Governance Committee held four (4) meetings during 2018. 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), Paul J. Kosasa (Vice Chair), and Duane K. Kurisu, each of whom is “independent” within the meaning of the listing standards of the NYSE.

16

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 2018 and all nominees (other than John C. Dean who is the former Executive Chair of the Company, A. Catherine Ngo who is President of the Company, and Paul K. Yonamine who is Chairman and Chief Executive Officer of the Company) are “independent” within the meaning of the rules of the NYSE. All of the directors and nominees (other than Mr. Dean, Ms. Ngo, and Mr. Yonamine) 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 2018, 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 2018, 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 2018, 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, Earl E. Fry, Duane K. Kurisu, Colbert M. Matsumoto, A. Catherine Ngo, Saedene K. Ota, and Crystal K. Rose. For 2018, 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 2018 totaled $34,400.

During 2018, the following directors and nominees served on boards of, or were involved in fundraising on behalf of, non-profit, community, charitable and/or cultural organizations, which received monetary donations from the Central Pacific Bank Foundation: Christine H. H. Camp, John C. Dean, Earl E. Fry, Paul J. Kosasa, Duane K. Kurisu, Colbert M. Matsumoto, A. Catherine Ngo, Saedene K. Ota, and Crystal K. Rose. For 2018, 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 2018 totaled $161,527.

During 2018, 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. ABC Stores has a fleet of retail convenience stores in Waikiki and other tourist locations in Hawaii and these locations are prime spots for the Bank to place its ATMs for use by tourists. In 2018, the Bank paid a total of $58,798.44 total to place 17 Bank ATMs in ABC Stores (10 in Waikiki and seven in other tourist locations on Oahu, Maui, Kauai, and Hawaii islands). The Bank does not pay any premium or provide any preferential terms to ABC Stores, the arrangement is made on no more favorable terms than for other similarly situated transactions, and Mr. Kosasa had

17

no direct involvement in the Bank’s ATM contract with ABC Stores. This arrangement is not a large dollar arrangement for ABC Stores; the value to ABC Stores being the ATM convenience afforded its customers. This arrangement is beneficial to the Bank as it generates fee revenue for the Bank due to the heavy tourist traffic in Waikiki and the other tourist areas where these ATMs are located.

Company director Duane K. Kurisu is 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, and HILuxury magazine. Mr. Kurisu is also sole owner and co-manager of PacificBasin Communications LLC which publishes Hawaii Business magazine and Honolulu magazine. In 2018, the Bank paid a total amount of $371,084 for advertising of the Bank’s brand, products and services, in the foregoing media, detailed as follows: $174,126 for the Honolulu Star Advertiser newspaper; $22,780 for the MidWeek newspaper; $22,556 for the Hawaii Tribune Herald newspaper; $17,041 for The Garden Island newspaper; $14,558 for the West Hawaii Today newspaper; $59,437 for Hawaii Business magazine; $15,420 for HILuxury magazine; and, $45,166 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 $43,649 (for base rent, common area maintenance fees, real property taxes, and general excise taxes) in 2018. Mr. Kurisu had no involvement with any of the aforementioned transactions and they were made on no more favorable terms than for other similarly situated transactions.

Company director Colbert M. Matsumoto is Chairman of the Board and a minority owner (<10%), of Island Holdings, Inc. (“Island Holdings”), 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 2018, out of the insurance premiums which the Company and its subsidiaries paid for insurance policies that Atlas placed on behalf of the Company and its subsidiaries, Atlas Insurance received a total of $112,575 in commissions (based on premiums on the Company’s corporate insurance policies totaling $1,338,128, of which the Company paid $197,097 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. Atlas Insurance paid the Bank $38,409 (for base rent, common area maintenance fees, real property taxes, and general excise taxes) for space in the Bank’s Hilo office building. 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 Herald, The Garden Island and West Hawaii Today newspapers, and HILuxury magazine. In 2018, the Bank paid the following amounts for advertising of the Bank’s brand, products and services, in the foregoing media, detailed as follows: $174,126 for the Honolulu Star Advertiser newspaper; $22,780 for the MidWeek newspaper; $22,556 for the Hawaii Tribune Herald newspaper; $17,041 for The Garden Island newspaper; $14,558 for the West Hawaii Today newspaper; and $15,420 for HILuxury magazine; for a total of $266,481. 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 Bank since 2003 and currently

18

holds the position of Vice President and Senior Private Banking Manager, a non-executive officer position. In 2018, 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 or their immediate family members have an interest, in the ordinary course of its business as a bank. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the Bank and do not involve more than the normal risk of collectability or present other unfavorable features.

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). Loans subject to the lending restrictions set forth in Federal Reserve Board Regulation O are reviewed by the Bank’s Board Directors’ Loan Committee and approved by the Bank’s Board. All other loans to related persons are reviewed by the Bank’s Board Directors’ Loan Committee and reported to the Audit Committee quarterly. All other transactions with related persons are reviewed by the Company’s Audit Committee.

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. Paul K. Yonamine, currently serves as Chairman of the Company’s and Executive Chairman of the Bank’s Board of Directors, and Chief Executive Officer of the Company. A. Catherine Ngo currently serves as President for the Company and President and Chief Executive Officer for the Bank and also serves on the Company’s and Bank’s Board of Directors. Colbert M. Matsumoto currently serves as Vice Chair of the Board of Directors of the Company and the Bank. Nine (9) of the twelve (12) Company’s and Bank’s Board of Directors are independent outside (non-employee) directors. As the Board’s former Chair and now as its Lead Independent Director, Ms. Rose previously presided over and once again presides over all meetings of the non-management directors in executive sessions, acts as liaison and facilitates communications between the Board and the principal executive 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. The Company’s Board has adopted a resolution providing that the Board Committee Chairs, and Lead Independent Director shall serve terms of four (4) years. When the Board Committee Chair/Lead Independent Director begins their fourth year of their term, a Vice Chair shall be appointed who shall assume the Board Committee Chair/Lead Independent Director position upon the end of the current Board Committee Chair’s/Lead Independent Director’s term.

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, Directors’ Loan Committee, and Compliance Committee which provide board level oversight over the Bank’s trust activities, lending activities, and compliance and cyber security

19

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.

Cyber security incidents compromising non-public personal financial information may produce material adverse effects to the Bank’s business, including but not limited to, reputational harm, loss of intellectual property, disruption of key business operations, governmental fines/penalties, and litigation/remediation costs. Under the direction of its Chief Information Security Officer (“CISO”), the Bank maintains a formal information security management program to address cyber security risks. The program leverages industry frameworks and standards with the goal of ensuring appropriate controls are established and are frequently assessed for adequacy. Major components of the program include safeguarding customer information, third party vendor oversight and incident response.

The Board and the Bank’s Compliance Committee regularly receive reports and briefings from the CISO and Chief Legal Officer relating to a full range of cyber security issues, the Bank’s risk posture to protect against cyber security threats, and policies that are intended to adequately implement the program. Annually, the Board reviews and approves the formal written information security program policy including information security risk appetite; obtaining confirmation that the plan is designed to address the dynamic changes in the threat landscape and whenever there is a material change in the Bank’s cyber security risks. The CISO periodically keeps the Board abreast of efforts relating to compliance, risk assessments, results of audits, examinations, penetration and vulnerability testing, security breaches or violations and recommended changes to the Bank’s information security program. This periodic reporting includes the annual review of the FDIC requirements relating to cyber security and the Gramm-Leach-Bliley Act.

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 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 2018 attendees from the Company were Christine H.H. Camp, Earl E. Fry, A. Catherine Ngo, and Paul K. Yonamine. In addition, in 2018, Saedene K. Ota, attended a Bank Board Training Forum at a Bank Director conference.

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

20

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

Shareholder Nominees. In accordance with the policies set forth in the Company’s Corporate Governance Guidelines and the Company’s Bylaws (as amended), the Governance Committee will consider properly submitted director nominees for election at the 2020 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 26, 2020), 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 26, 2020) 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 Chairman of the Board or the Chair of any Board Committee (such as, for example, the Chair of the Audit Committee or the Chair of the Governance Committee) or to the Lead Independent Director or to the non-management or independent directors. Shareholders and others sending such communications should include the following in their written communication: (a) such shareholder(s) and others should identify himself/herself/itself/themselves, and if a shareholder, provide reasonably satisfactory proof of their ownership of the Company’s Common Stock; (b) such shareholder(s) and others should state in reasonable detail and communicate with reasonable clarity and specificity their issue or concern; and (c) such shareholder(s) and others should include their contact information (at a minimum, phone number and address). Shareholders and others who wish to communicate anonymously with the Board or any group of the Board should refer to the Company’s Complaint Policy available on the Company’s website (www.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.

ENVIRONMENTAL AND SOCIAL RESPONSIBILITY

The Bank, both directly and through the Central Pacific Bank Foundation (“CPB Foundation”), is committed to supporting the communities it serves through its investments, charitable contributions and community service. The Bank believes that a commitment to social, environmental, and economic responsibility is important to the Bank’s success.

Environmental Contributions

Supporting Renewable Resources: The Bank continued its program to improve the energy profile of its facilities and branches in 2018. In the past few years, Bank branches on Oahu and the Big Island, as well as another main facility, have been upgraded with roof-mounted photovoltaic solar panels which provide approximately 25% of the energy needs for the four branches and facilities with photovoltaic solar panels.

21

Energy Savings: The Bank’s headquarters has been an ENERGY STAR certified building since 2004. The Bank has commenced LED lighting installation in its headquarters, another main facility, and branches, focusing on common areas where lights are always left on. The Bank is using Variable Frequency Drives for its headquarters’ HVAC and pumping systems. The use of Variable Frequency Drives reduces energy use by modulating the speed of fans and pumps depending on need and determined by sensor and set points. Further energy savings at the Bank’s headquarters is expected to be achieved through a transformer replacement program that is expected to be completed in 2019.

Social Contributions

Central Pacific Bank Foundation: The CPB Foundation was established in 2007 to strengthen Hawaii communities by creating opportunities for youth and fostering social progress. The CPB Foundation awarded over $461,000 to 36 organizations in 2018.
Community Service: Bank employees logged more than 9,500 volunteer hours during 2018, benefitting approximately 190 charities.
Central Pacific Bank Works for You Scholarship Fund: For the 2017-2018 academic year, the CPB Foundation awarded three college scholarships totaling $9,000 for dependents of Bank employees. Eligible recipients also have the opportunity to renew their scholarship each subsequent academic year, for up to four years, or up to $12,000. Since 2012, the CPB Foundation has provided $29,000 to fund 20 college scholarships.
Central Pacific Bank Walks for You: The employees of the Bank conduct an annual charity walk with proceeds raised through a wide range of fundraising activities. In 2018, approximately $100,000 was raised for four charitable organizations selected by Bank employees. Since its inception, this event has raised over $860,000, which amount includes a 50% match from the CPB Foundation, to benefit 32 charitable organizations in Hawaii.
Commitment to Community Support: In 2018, the Central Pacific Bank Foundation donated a total of $55,000 to The Salvation Army to aid in services being deployed on Hawaii Island in response to Kilauea’s volcanic eruptions, the Hawaii Red Cross in response to the Kauai and East Oahu flooding, and the Hawai’i Community College Emergency Student Aid Fund, which went towards supporting students who have been impacted by emergency situations, including but not limited to the recent volcanic activity on Hawaii Island, and to allow them to continue their educational endeavors. Finally, the Bank launched “Mission Possible - Make A Positive Difference” in 2018 to show its support for Hawaii Island. The Hawaii Island community was suffering from the impact of the volcanic activity, and the declining visitor traffic was affecting many businesses and their employees. The mission was to send two randomly selected Bank employees and their guests every week over a 16 week period to Hawaii Island and make a positive difference by spending at least $100. The Bank’s objective was to lead the business community in taking action, spreading the word via mainstream and social media, and to set an example for other corporations to follow.
Commitment to Education: Approximately 36% of the grants awarded by the CPB Foundation in 2018 went towards education. This included support for the Manoa Heritage Center which connects educators and students through Native Hawaiian cultural resources, and Pacific Aviation Museum Pearl Harbor which provides STEM training for Hawaii Educators. Both the Bank and the CPB Foundation have contributed to programs and scholarship opportunities for University of Hawaii students in various programs. The CPB Foundation helps economically disadvantaged individuals, many of whom are the first in their families to attend college, to fulfill their potential through the University of Hawaii at Manoa College Opportunities Program Central Pacific Bank Rising Scholars scholarship. This program provides a free, intensive six-week summer academic and residential program to prepare students for a successful freshman year, and provides ongoing counseling support.
2018 United Way Campaign: Due to the generosity of Bank employees and a match from the Central Pacific Bank Foundation, the Bank had a successful corporate United Way campaign in 2018. Aloha United Way, Hawaii Island United Way, Kauai United Way, and Maui United Way will benefit from approximately $400,000 in funding that will allow many local organizations carry on their important work to support our community across the islands.

22

Employee Support: The Bank increased its minimum hourly rate of pay twice in 2018. The minimum hourly rate was increased to $15.25 per hour in January 2018 and then to $16 per hour in December 2018. In addition, the Bank increased the starting pay rates of many job categories of the Bank in 2018.

Economic Involvement

Affordable Housing: From awarding $10,000 affordable housing grants to Honolulu Habitat for Humanity and Hawaii Homeownership, to organizing a team of volunteers to help build a home or partnering with Hawaii Homeownership that provides support to first-time home buyers, the Bank and CPB Foundation continued to support increasing homeownership in Hawaii in 2018.
Support for the Homeless: In September 2018, the Bank sponsored an application on behalf of Kahauiki Village for the 2018 Strong Communities Award, presented by the Federal Home Loan Bank of Des Moines. Kahauiki Village is a plantation style community off Nimitz Highway that was built to house Hawaii’s homeless families. This effort was spearheaded by Director Christine Camp. With the assistance of Bank employees, Kahauiki received more than 8,000 votes and finished in first place, winning $15,000. The Bank has also provided financial literacy training for residents of Kahauiki Village.
Commitment to Small Businesses in Hawaii: For the fourth year in a row, the Bank was awarded the U.S. Small Business Administration (“SBA”) lender of the year in Category II (for mid-sized lenders). The Bank originated 102 SBA 7(a) loans, the most among all Hawaii banks, in all categories in the fiscal year ending September 30, 2018. Additionally, for the second straight year, the Bank’s total SBA loans in Hawaii exceeded the Hawaii SBA 7(a) loans originated by the three largest Hawaii banks combined (66). This highlights the Bank’s commitment to the small business community of Hawaii.
Disaster Loan Programs: During 2018, the Bank offered both a personal loan program and a loan payment deferral option to qualified individuals whose property, belongings or livelihoods were affected by recent natural disasters declared in the state of Hawaii.
Commitment to Fostering Financial Literacy: Bank employees are involved in providing financial literacy education to the next generation. In 2018, the Bank sponsored Junior Achievement events and approximately 25 Bank employees volunteered time to teach financial literacy courses to children.
Community Reinvestment Act (“CRA”): The Bank is rated “Outstanding” by the FDIC for CRA performance for its most recent examination period of September 8, 2014 to July 5, 2017. CRA requires banks to help meet the credit needs of the communities in which they operate.

23

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 22, 2019, 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 2019. The charter is also available on our website at https://www.centralpacificbank.com. During 2018, the Audit Committee held eleven (11) meetings, including five (5) private sessions with the independent auditors, four (4) private sessions with internal audit, five (5) private sessions with executive management, and two (2) 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 2018, 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, 2018 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, 2019:

 
Earl E. Fry, Chair
 
Wayne K. Kamitaki
 
Christopher T. Lutes

24

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. Such review occurred in October 2018. There were no changes in Board fees in 2018 nor are there any changes to be implemented for 2019.

The following change to the board structure occurred effective March 1, 2018:

The Central Pacific Financial Corp. (“CPF” or the “Company”) and Central Pacific Bank (“CPB” or the “Bank”) Board of Directors approved the appointment of Christopher T. Lutes as director on the Central Pacific Financial Corp. and Central Pacific Bank Board of Directors.

The following change to the board structure occurred effective April 1, 2018:

The position of Vice Chair was added to the board and the Board of Directors approved the appointment of Colbert M. Matsumoto as Vice Chair of the Central Pacific Financial Corp. and Central Pacific Bank Board of Directors.

The following changes to the board structure occurred effective October 1, 2018:

The Board of Directors approved the appointment of Paul K. Yonamine as Chairman of the Central Pacific Financial Corp. and Central Pacific Bank Board of Directors.
The Board of Directors approved the appointment of John C. Dean as Chairman Emeritus of 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 2018. For newly appointed director, Christopher T. Lutes, a prorated retainer for 2018 was paid based on his appointment effective March 1, 2018. 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 Vice Chair
$
120,000
 
Director and Audit Committee Chair
$
115,000
 
Director and Compensation Committee Chair
$
107,500
 
Director and Compliance Committee Chair
$
107,500
 
Director and Loan Committee Chair
$
105,000
 
Director and Trust Committee Chair
$
105,000
 
Director
$
90,000
 

25

Director Compensation

The following table shows, for the year ended December 31, 2018, information on compensation earned by our directors who served on the Company Board during 2018, other than A. Catherine Ngo’s compensation and Paul K. Yonamine’s compensation as an employee, which are disclosed in the 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
$
53,856
 
$
53,644
 
$
 
$
 
$
 
$
 
$
107,500
 
John C. Dean
$
 
$
 
$
 
$
 
$
 
$
266,324
 
$
266,324
 
Earl E. Fry
$
58,376
 
$
56,624
 
$
 
$
 
$
 
$
 
$
115,000
 
Wayne K. Kamitaki
$
53,856
 
$
53,644
 
$
 
$
 
$
 
$
 
$
107,500
 
Paul J. Kosasa
$
45,017
 
$
44,983
 
$
 
$
 
$
 
$
 
$
90,000
 
Duane K. Kurisu
$
52,505
 
$
52,495
 
$
 
$
 
$
 
$
 
$
105,000
 
Christopher T. Lutes1
$
37,529
 
$
37,471
 
$
 
$
 
$
 
$
 
$
75,000
 
Colbert M. Matsumoto
$
60,022
 
$
59,978
 
$
 
$
 
$
 
$
 
$
120,000
 
Saedene K. Ota
$
54,336
 
$
50,664
 
$
 
$
 
$
 
$
 
$
105,000
 
Crystal K. Rose
$
62,415
 
$
62,585
 
$
 
$
 
$
 
$
 
$
125,000
 
Paul K. Yonamine2
$
45,297
 
$
44,703
 
$
 
$
 
$
 
$
 
$
90,000
 
1.Fees for Christopher T. Lutes represent ten (10) months of service on the CPF/CPB Board of Directors, based on his March 1, 2018 appointment date.
2.Paul K. Yonamine was hired as an employee of Central Pacific Bank on October 1, 2018. Mr. Yonamine’s 2018 director fees, paid in June 2018, were not adjusted due to his employment with the Bank. Beginning in 2019, Mr. Yonamine will only be compensated as an employee of Central Pacific Bank.
(a)Board Member A. Catherine Ngo is omitted from this table because Ms. Ngo’s compensation is disclosed in the Summary Compensation Table. Board Member, Paul K. Yonamine’s compensation as an employee of the Company and Bank beginning October 1, 2018, is omitted from this table because Mr. Yonamine’s compensation as an employee is disclosed in the Summary Compensation Table.
(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, either issued from the 2013 Stock Compensation Plan or through the Directors Deferred Compensation (DDC) Plan, under which stock purchase orders in lots of 100 were placed on the market. Actual amounts paid in equity were less than 100% of total fees. The amounts in this column include the following payments made in stock:
Colbert M. Matsumoto received 2,013 shares (in addition to those listed in column (c)) having a fair market value of $29.81 per share, a total value of $60,008. Remaining fees of $14 were paid in cash.
Saedene K. Ota received 1,800 shares (in addition to those listed in column (c)) having a fair market value of $29.8023 per share, a total value of $53,644. Remaining fees of $692 were paid in cash.
Paul K. Yonamine received 1,500 shares (in addition to those listed in column (c)) having a fair market value of $29.8023 per share, a total value of $44,703. Remaining fees of $594 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 in lots of 100 were placed on the market. Therefore, actual amounts 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 1,800 shares having a fair market value of $29.8023 per share, a total of $53,644. Remaining fees of $53,856 were paid in cash.
Earl E. Fry received 1,900 shares having a fair market value of $29.8023 per share, a total value of $56,624. Remaining fees of $58,376 were paid in cash.
Wayne K. Kamitaki received 1,800 shares having a fair market value of $29.8023 per share, a total value of $53,644. Remaining fees of $53,856 were paid in cash.

26

Paul J. Kosasa received 1,509 shares having a fair market value of $29.81 per share, a total value of $44,983. Remaining fees of $45,017 were paid in cash.
Duane K. Kurisu received 1,761 shares having a fair market value of $29.81 per share, a total value of $52,495. Remaining fees of $52,505 were paid in cash.
Christopher T. Lutes received 1,257 shares having a fair market value of $29.81 per share, a total value of $37,471. Remaining fees of $37,529 were paid in cash.
Colbert M. Matsumoto received 2,012 shares having a fair market value of $29.81 per share, a total value of $59,978.
Saedene K. Ota received 1,700 shares having a fair market value of $29.8023 per share, a total value of $50,664.
Crystal K. Rose received 2,100 shares having a fair market value of $29.8023 per share, a total value of $62,585. Remaining fees of $62,415 were paid in cash.
Paul K. Yonamine received 1,500 shares having a fair market value of $29.8023 per share, a total value of $44,703.
(g)This column represents the compensation John C. Dean earned as Chairman Emeritus and employee of the Company. He earned a base salary of $225,000 and earned other compensation (total of $41,324), including $1,620 in parking benefits, $1,854 in group life fringe benefits, $7,650 in 401(k) Company contributions, $26,298 in transportation services, $3,902 in security services.

The table below sets forth the Board positions held by Directors and the composition of the Audit, Compensation and Governance Committees of the Central Pacific Financial Corp. and Central Pacific Bank Board for 2018.

Board Member
Combined CPF and CPB Board Position
Audit Committee
Compensation Committee
Governance Committee
Christine H. H. Camp
Member
 
M
 
John C. Dean
Member
 
 
 
Earl E. Fry
Member
C
 
 
Wayne Kamitaki
Member
M
C
 
Paul J. Kosasa1
Member
 
 
M
Duane K. Kurisu
Member
 
 
M
Christopher T. Lutes2
Member
M
 
 
Colbert M. Matsumoto3
Vice Chair
 
 
 
A. Catherine Ngo
Member
 
 
 
Saedene Ota
Member
 
M
 
Crystal K. Rose
Lead Independent Director
 
M
C
Paul K. Yonamine4
Chairman
 
 
 

“C” = Chair; “M” = Member

1.Paul J. Kosasa is Vice Chair of the Governance Committee
2.Christopher T. Lutes joined the Board on March 1, 2018
3.Colbert M. Matsumoto was appointed Vice Chair of the Board on April 1, 2018
4.Paul K. Yonamine was appointed Chairman of the Board on October 1, 2018

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.

27

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, 2018.

Name
Unexercised
Vested
Stock
Options
(a)
(b)
Christine H. H. Camp
 
216
 
John C. Dean1
 
50,813
 
Earl E. Fry
 
216
 
Wayne K. Kamitaki
 
0
 
Paul J. Kosasa
 
216
 
Duane K. Kurisu
 
0
 
Christopher T. Lutes
 
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 figure represents 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. Such stock options, if not exercised, will expire on March 11, 2019.

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.

28

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, 2018. Respectfully submitted by the members of the Compensation Committee of the Board who participated in the review discussion and recommendation:


Wayne K. Kamitaki, Chair
 
Christine H. H. Camp
 
Saedene K. Ota
 
Crystal K. Rose

 

29

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) discusses our 2018 executive compensation program, and more specifically as it relates to the individuals serving as the Company’s Chairman and CEO, Paul K. Yonamine (“CEO”), President, A. Catherine Ngo, Chief Financial Officer (“CFO”), David S. Morimoto and the three (3) other most highly paid executive officers, David W. Hudson, Executive Vice President, Community Banking, Arnold D. Martines, Executive Vice President, Commercial Markets, and Blenn A. Fujimoto, Executive Vice President, Consumer Lending and Wealth Management. 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 2018 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 2018 Net Income and 2018 to 2020 average Return on Assets, respectively.

2018 Executive Compensation Highlights

Strong incentive compensation with short and long term performance alignment. In 2018, 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 (2018, 2019 and 2020) average Return on Assets (ROA), which cliff vests at the end of the 3-year performance period, based upon the degree to which the goal is achieved. The other one-third (1/3) of the Long Term Equity Grant vests ratably over the 3-year time period.
Type of Compensation
Earnings Opportunity
Relevant
Performance
Metric
2018 Outcomes
Cash
Annual Cash Incentive (“ICP”)
Executive Incentive 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.
2018 Net Income compared to 2018 Budgeted Net Income
The Company achieved 102% of the Net Income goal (adjusted to exclude a non-recurring income tax benefit), which resulted in the pool being funded at 105% of target. In addition, the Company was able to add an additional 2.5% of funding due to exceeding a Customer Experience goal. The result was the overall incentive pool being funded at 107.5% of target. Individual payouts vary based on attainment of corporate, business plan, and personal goals.
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 (2018, 2019, 2020)
Not yet earned
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 2/15/19

30

We believe our Executive Compensation is consistent with our Solid Financial Performance. The Company continued to realize solid growth on its balance sheet and ended the year with $5.8 billion in assets, primarily due to a strong increase in loan balances across all lines of business. Asset quality remained strong as non-performing assets were 0.05% of total assets at December 31, 2018. An increase in other operating expense was offset by higher gains in net interest income and other operating income, resulting in improvement in the efficiency ratio. Net income adjusted to exclude the impact of Tax Reform in the prior year, increased by 21.0%, 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 2018 with an increase to $0.21 per share in the second quarter. Key factors contributing to the Company’s financial performance in 2018 included strong 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, 2018 were as follows:
Net income was $59.5 million compared to $49.1 million in 2017 (adjusted to exclude the impact of Tax Cuts and Jobs Act)
Return on Assets was 1.05% compared to 0.89% in 2017 (adjusted to exclude the impact of Tax Cuts and Jobs Act)
Efficiency ratio improved to 63.59% compared to 64.19% in 2017 (Efficiency ratio for 2017 has been revised to reflect the reclassification of amortization of investments in low-income housing tax credit (LIHTC) partnerships from total other operating expense to income tax expense, in connection with a change in accounting policy adopted in the fourth quarter of 2018 related to the Company’s investments in LIHTC partnerships)
Total loans and leases increased by $307.8 million, or by 8.2%, over 2017
Total deposits decreased by $9.9 million, or by 0.2%, over 2017
Increase in quarterly cash dividend from $0.18 to $0.19 per share in the first quarter and from $0.19 to $0.21 per share in the second quarter
Non-performing assets declined by 24.5% to $2.7 million at year-end 2018 compared to $3.6 million at year-end 2017


Emphasis on variable pay for Chairman and CEO, Paul K. Yonamine. 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 our CEO. The peer group benchmark for our CEO is the market median for Executive Chairs or CEO’s of the Compensation Peer Group.

31

CEO Target Compensation versus Compensation Peer Group Median


1.Peer group data is of our Compensation Peer Group based on an analysis completed by McLagan in October 2018.
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 2018:

Focus on the Long Term
In 2018, the long term incentive plan design performance measure was 3-year average ROA. For our 2018 grant, 2/3 cliff vests based upon the attainment of our 3-year (2018, 2019, 2020) average ROA target.
Focus on Shareholder Support
99.74% approval from shareholders in our most recent Say on Pay vote for 2018. (vote submitted annually)
During 2018, the Company repurchased 1,155,157 shares of common stock, or approximately 3.8% of its common stock outstanding as of December 31, 2017.
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 63.59% from 64.19% in 2017.
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
In 2018 as a result of the benefit of the Tax Cuts and Job Act, we increased our starting pay rate twice to $15.25/hour on January 1, 2018 and $16.00/hour effective December 1, 2018. These changes support our focus on creating an environment in which employees are engaged and empowered to do their best every day.
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.
Focus on Risk
Take actions to manage and mitigate the Bank’s top risks with a focus on compliance and information security.
 

32

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 Chairman & CEO and the President.
 
 
 
 
Independent Compensation Consultant. The Committee has retained McLagan, an Aon 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 2018, the Committee held five (5) 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 compensation plans, structures, and arrangements 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. Reviews are conducted with the advice of 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.
 
 
 

33

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 2018 Long Term Equity Grant, which comprises 2/3 of the total 2018 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.
 
 
 
 
Limitations on Pledging. Directors and executive officers of the Company may not pledge the Company’s stock as collateral for a loan without the prior consent of the Company’s Chairman and CEO or President.
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 relocation benefits.
 
 
 
 
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.

34

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.
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 NEOs, 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 or the Committee. However, when setting compensation and in determining compensation policies, the Committee took into account the results of the April 2018 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 2018 annual meeting. 99.74% of our shareholders voting at the 2018 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 2018

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 Chairman & CEO and/or the President 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.

35

The Chairman & CEO and/or the President 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 Chairman & CEO and the President are based on a variety of factors including but not limited to, Company performance, regulatory restrictions and guidance, periodic market reviews, and recommendations from independent external executive compensation consultants and legal counsel. For all other executives, the Committee considers the Chairman & CEO and/or the President proposals. For all of the NEOs, including the Chairman & CEO and the President, 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 2018, 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 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 Compensation Actions
Approved the 2017 Annual Incentive Compensation Plan payments for Managing Committee members, including NEOs, based on the achievement of corporate, business plan and personal goals.
Reviewed and approved changes to 2019 base salary and incentive opportunity for Managing Committee members, including NEOs.
Approved the 2019 Annual Incentive Plan design both for Managing Committee members, including NEOs, and for Non-Managing Committee participants.
Approved the 2019 Long Term Equity Grant plan design for Managing Committee members, including NEOs.
Board and Committee Performance and Compensation Actions
Reviewed results of the 2017 Compensation Committee Self-Assessment.
Other Committee Actions
Reviewed Board of Directors Fees for 2018
Reviewed the independence of McLagan and its consultants.
Reviewed the independence of Manatt, Phelps & Phillips, LLP and its advisors.
Received a 2018 regulatory update from McLagan.
Approved an update to the Compensation Peer Group.
Approved the 2018 Equity Grant Budget.
Updated and approved the Stock Ownership Guidelines.
Reviewed executive and director stock ownership levels as related to the Stock Ownership Guidelines.
Reviewed and approved the 2018 Proxy Compensation Discussion and Analysis.
The Committee approved the appointment of Paul K. Yonamine as Chairman & CEO of CPF and Executive Chairman of CPB
The Committee approved the appointment of A. Catherine Ngo as President of CPF and President and CEO of CPB.

36

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.

Each year, with assistance from McLagan, the Compensation Committee reviews the compensation practices of our peers in order to assess the competitiveness of the compensation arrangements of our NEOs. Although benchmarking is an active tool used to measure compensation structures among peers, it is only one of the tools used by the Compensation Committee to determine total compensation. Benchmarking is used by the Compensation Committee primarily to ascertain competitive total compensation levels (including base salary, equity awards, cash incentives, and employee benefits) with comparable institutions. Peer performance, market factors, our performance and personal performance are all factors that the Compensation Committee considers when establishing total compensation, including incentives.

Compensation Peer Group

The Compensation Committee reviews the composition of the Compensation Peer Group on an annual basis and modifies the group as necessary as a result of mergers, changes to banks within the group, or changes within the Company. The 2018 compensation peer group was selected based on certain current market criteria, including the following:

1.Publicly-traded United States banks with executive compensation reported in public filings.
2.Western banks with assets between $2.5 billion and $8 billion (except for Territorial Bancorp and Columbia Banking System) or Non-Western banks located in a metro area with assets between $3 billion and $8 billion.
3.Excludes thrifts (except for Territorial Bancorp and American Savings Bank)
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.

Rank
Company Name
Ticker
City
State
1
Columbia Banking System Inc.
COLB
Tacoma
WA
2
Union Bankshares Corp
UBSH
Richmond
VA
3
CVB Financial Corp.
CVBF
Ontario
CA
4
LegacyTexas 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
Century Bancorp Inc.
CNBKA
Medford
MA
15
TriCo Bancshares
TCBK
Chico
CA
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

37

2018 Executive Compensation

Compensation Framework

 
Compensation Element /
Purpose
Fixed or
At Risk
Annual or
Long
Term
Cash
or
Equity
2018 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 50th percentile relative to peer banks.
Fixed
Annual
Cash
All NEOs received an adjustment in base salary effective 4/1/18 to further align with market.
 
 
 
Additionally, Mr. Morimoto received an additional adjustment in base salary effective 10/1/2018 due to an increase in responsibility.
 
 
 
 
 
 
Annual Cash Incentives
Provides variable compensation based on achievement of Company, Business Plan and Personal objectives.
At Risk
Annual
Cash / Equity
Funding of the 2018 Annual Incentive Compensation Plan (“ICP”) Pool
 
 
 
No change in funding methodology from 2017 to 2018.
 
 
 
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 105% of target funding.
 
 
 
An additional multiplier was available in the plan if the average customer experience goal was exceeded. This resulted in an additional two and one-half percent (2.5%) funding of the incentive pool.
 
 
 
 
For 2018, 50% of the award is payable in cash, 50% in equity with a three year time vest. The percentage of the award payable in cash increases as performance exceeds target. The entire incentive award is payable in cash if 107% of target Net Income is achieved.
 
 
 
 
 
 
 
 
 
 
Individual ICP Awards.
 
 
 
 
Individual awards are determined based on pool funding and overall corporate, business plan and personal performance.
 
 
 
 
Individual awards may range from 0% to 150% of target.
 
 
 
 
Plan allows for up to a plus or minus 15% adjustment to award.
 
 
 
 
For 2018, incentive plan payments for NEOs ranged between 21% to 71% of annual base salary.

38

 
Compensation Element /
Purpose
Fixed or
At Risk
Annual or
Long
Term
Cash
or
Equity
2018 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 vest after three years based on attainment of three-year average ROA for 2018, 2019 and 2020.
 
 
 
1/3 of annual grant is in RSUs that vests one-third per 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
 
 
 
 
 
 
 
 
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 relocation benefits for certain NEOs in 2018.

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.

39

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 2018 and with subsequent adjustments to base salaries during 2018.

Name
Position
1/1/2018
4/1/2018
10/1/2018
Paul K Yonamine1
Chairman & Chief Executive Officer
 
 
 
 
 
 
$
562,500
 
A. Catherine Ngo
President
$
400,000
 
$
450,000
 
 
 
 
David S. Morimoto
Executive Vice President, Chief Financial Officer & Treasurer
$
270,000
 
$
300,000
 
$
350,000
 
David W. Hudson
Executive Vice President,
Community Banking
$
227,000
 
$
250,000
 
 
 
 
Arnold D. Martines
Executive Vice President,
Commercial Markets
$
225,000
 
$
250,000
 
 
 
 
Blenn A. Fujimoto
Executive Vice President,
Consumer Lending & Wealth Management
$
230,000
 
$
250,000
 
 
 
 
1.Paul K. Yonamine was hired as Chairman & CEO on October 1, 2018.

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%) for achievement of one hundred fifteen percent (115%) or more of budgeted Net Income. 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. For 2018, the incentive opportunity was a combination of cash and equity with the equity component subject to a three (3) year time vest. The amount of cash earned versus equity increases as the percentage attainment of Net Income increases. At 107% of Net Income, 100% of the incentive is paid in cash.

Budgeted Net Income for 2018 was set during the 2018 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 2018 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 up to 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
Cash
Equity
Threshold Funding @ 85% of Net Income Target
$
49,142,750
 
 
50
%
$
296,330
 
$
275,404
 
Target Funding @ 100% of Net Income Target
$
57,815,000
 
 
100
%
$
592,660
 
$
550,809
 
Maximum Funding @ 115% of Net Income Target
$
66,487,250
 
 
150
%
$
1,715,203
 
$
0.00
 
Maximum Funding @ 115% of Net Income Target Plus Maximum CX Goal of 10%
 
 
 
 
 
 
$
1,886,723
 
$
0.00
 
Actual 2018 Net Income @ 105% of Target Net Income
$
58,793,000
1 
 
105.0
%
$
742,357
 
$
458,285
 
Customer Experience (CX) Goal Multiplier
 
 
 
 
2.5
%
$
30,016
 
 
 
 
Approved Incentive Pool Funding
 
 
 
 
 
 
$
772,373
 
$
458,285
 
1.Actual Net Income excludes a non-recurring income tax benefit.

40

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
1/1/2018
Goal Weighting
Paul K. Yonamine1
 
0
%
 
na
 
 
na
 
 
na
 
A. Catherine Ngo
 
65
%
 
60
%
 
10
%
 
30
%
David S. Morimoto
 
40
%
 
50
%
 
20
%
 
30
%
David W. Hudson
 
30
%
 
40
%
 
30
%
 
30
%
Arnold D. Martines
 
30
%
 
40
%
 
30
%
 
30
%
Blenn A. Fujimoto
 
30
%
 
40
%
 
30
%
 
30
%
1.Due to Paul K. Yonamine’s October 1, 2018 date of hire, no incentive opportunity target was set for him for 2018. In 2019, Mr. Yonamine’s incentive opportunity target will be seventy five percent (75%) of annual base salary.

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%

41

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

In February 2019, 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: $57.815 Million – Achieved $58.793 Million
3.00
All NEOs
 
 
 
ROA: 1.01% – Achieved 1.03%
3.00
All NEOs
 
 
 
BUSINESS PLAN GOALS
Customer Experience Differentiation
3.50
David W. Hudson
Blenn A. Fujimoto
 
 
 
Efficiency
3.50
David S. Morimoto
Arnold D. Martines
 
 
 
Target Markets
4.00
Blenn A. Fujimoto
 
 
 
Risk
3.50
A. Catherine Ngo
David S. Morimoto
David W. Hudson
Arnold D. Martines
Blenn A. Fujimoto
 
 
 
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. Due to Paul K. Yonamine’s October 1, 2018 date of hire he was not a participant in the annual cash incentive plan, however, as a result of his strong leadership on the Company’s digital, sales, and Japan market strategies, the Committee recommended and the Board approved an incentive payment of $135,000.

 
 
 
 
Total
Target
Award @
105% of
Target
Calculated Award Based on Goal
Name
Base Pay
ICP
%
Target
ICP$
Corporate
Business
Plan
Personal
Total
Rounded
Award
Plus /
Minus
15%
Final
Award
a
b
c
d
e
f
g
h
i
j
k
l
A. Catherine Ngo
$
437,500
 
 
65
%
$
284,375
 
$
298,594
 
$
179,156
 
$
37,324
 
$
101,223
 
$
317,703
 
$
320,000
 
 
 
 
$
320,000
 
David S. Morimoto
$
305,000
 
 
40
%
$
122,000
 
$
128,100
 
$
64,050
 
$
32,025
 
$
57,645
 
$
153,720
 
$
160,000
 
$
15,000
 
$
175,000
 
David W. Hudson
$
244,250
 
 
30
%
$
73,275
 
$
76,939
 
$
30,776
 
$
28,852
 
$
37,623
 
$
97,251
 
$
100,000
 
$