KBRA Affirms Ratings for Central Pacific Financial Corp.; Revises Outlook to Positive

KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Honolulu, Hawaii-based Central Pacific Financial Corp. (NYSE: CPF) ("Central Pacific" or "the company"). In addition, KBRA affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for its main subsidiary, Central Pacific Bank. The Outlook for all long-term ratings is revised to Positive from Stable.

Key Credit Considerations

The revision to Positive Outlook from Stable Outlook reflects Central Pacific’s entrenched presence in the Hawaiian banking market, where its solid deposit market share (12%) and favorable market dynamics support a best-in-class deposit franchise in the KBRA-rated universe in terms of mix (29% NIB component) and cost (0.90% in 2Q26). The plentiful, low-cost deposit base supports an attractive liquidity position (79% loan-to-deposit ratio) and respectable NIM. While profitability has yet to meaningfully surpass the current rated peer average (ROA of 1.1% during 1H26), we believe there is good momentum for stronger earnings from continued back-book loan repricing and commercial loan growth. Moreover, earnings on a risk-adjusted basis, as measured by RORWA, have exceeded peers in recent years, reflecting CPF’s comparatively lower-risk balance sheet.

Another component of the change in Outlook is the company’s conservative balance sheet positioning, including a lower loan-to-deposit ratio, below-average investor CRE concentration (195% of Tier 1 capital plus ACL at the bank at 2Q26), and strong capital position (CET1 ratio of 12.7% at 2Q26). Moving forward, we do not expect a material change in the liquidity profile or CRE exposure, although loan growth is expected to pick up following several years of portfolio remixing from residential to commercial categories. That said, capital ratios could drift lower over the medium term, with management targeting a CET1 ratio of 11%–12% over time, likely through a combination of greater share repurchase activity and loan growth. However, we continue to view this as a comfortable level for the rating category, though movement toward the higher end of the range would be preferable to support upward rating momentum.

Asset quality has remained pristine in recent years, with most NCO activity largely stemming from the purchased consumer portfolio, which is higher-yielding, though slightly higher-risk. Meanwhile, the core Hawaiian lending and mainland CRE book have performed well. Looking ahead, we are mindful of growing mainland exposure, which could reach 20% of loans over time, though underwriting remains conservative and management generally partners with larger banks. We also recognize the concentration inherent in CPF’s Hawaiian footprint, given the state’s somewhat cyclical economy and reliance on tourism. As such, geographic concentration remains a greater risk factor than for many higher-rated peers.

Rating Sensitivities

Given the Positive Outlook, a rating upgrade is possible over the medium term, which could be supported by further earnings improvement, sound asset quality, and maintenance of its strong liquidity, capital, and funding positions. Conversely, a downgrade is not expected, though unexpected credit problems, more aggressive capital or liquidity management, or emerging earnings headwinds could result in negative rating action.

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