CENTRAL PACIFIC FINANCIAL CORPCPF
CENTRAL PACIFIC FINANCIAL CORP Income Taxes Disclosure
16. INCOME TAXES
Components of income tax expense (benefit) for the years ended December 31, 2025, 2024 and 2023 are presented below. The Company does not have pretax income from continuing foreign operations or foreign tax expense.
| Year Ended December 31, | |||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current expense: | |||||||||||||||||
| Federal | $ | 29,299 | $ | 5,744 | $ | 5,538 | |||||||||||
| State | 6,993 | 112 | 1,404 | ||||||||||||||
| Total current | 36,292 | 5,856 | 6,942 | ||||||||||||||
| Deferred (benefit) expense: | |||||||||||||||||
| Federal | (12,576) | 6,800 | 9,300 | ||||||||||||||
| State | (2,915) | 1,971 | 1,911 | ||||||||||||||
| Total deferred | (15,491) | 8,771 | 11,211 | ||||||||||||||
| Provision for income taxes | $ | 20,801 | $ | 14,627 | $ | 18,153 | |||||||||||
The table below provides the updated requirements of ASU 2023-09 for 2025. Income tax expense (benefit) for the periods presented differed from the "expected" tax expense (computed by applying the U.S. federal corporate tax rate of 21% for the years ended December 31, 2025, 2024 and 2023, to income before income taxes) for the following reasons. The Company does not have pretax income from continuing foreign operations or foreign tax expense.
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| (Dollars in thousands) | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| U.S. Federal statutory tax rate | $ | 20,639 | 21.00 | % | $ | 14,288 | 21.00 | % | $ | 16,133 | 21.00 | % | |||||||||||||||||||||||
| Effect of: | |||||||||||||||||||||||||||||||||||
| State and local income taxes, net of Federal income tax effect * | 3,221 | 3.28 | % | 1,646 | 2.42 | % | 2,619 | 3.41 | % | ||||||||||||||||||||||||||
| Tax credits: | |||||||||||||||||||||||||||||||||||
| Amortization of low-income housing tax credit partnerships, net of tax benefits | 264 | 0.27 | % | 880 | 1.29 | % | 700 | 0.91 | % | ||||||||||||||||||||||||||
| Other tax credits | (663) | (0.67) | % | (142) | (0.21) | % | — | — | % | ||||||||||||||||||||||||||
| Nontaxable and nondeductible items: | |||||||||||||||||||||||||||||||||||
| Tax-exempt interest income | (1,203) | (1.22) | % | (868) | (1.28) | % | (702) | (0.91) | % | ||||||||||||||||||||||||||
| Tax-exempt income from bank-owned life insurance | (1,565) | (1.59) | % | (1,370) | (2.01) | % | (1,023) | (1.33) | % | ||||||||||||||||||||||||||
| Other | 92 | 0.09 | % | 443 | 0.65 | % | 293 | 0.38 | % | ||||||||||||||||||||||||||
| Other adjustments | 16 | — | % | (250) | (0.36) | % | 133 | 0.17 | % | ||||||||||||||||||||||||||
| Total | $ | 20,801 | 21.16 | % | $ | 14,627 | 21.50 | % | $ | 18,153 | 23.63 | % | |||||||||||||||||||||||
* State taxes in Hawaii made up the majority (greater than 50 percent) of the tax effect in this category.
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below. Net deferred tax assets are included in other assets on the Company's consolidated balance sheets.
| December 31, | |||||||||||
| (Dollars in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets | |||||||||||
| Lease liability | $ | 6,839 | $ | 8,530 | |||||||
| Allowance for credit losses | 12,790 | 12,643 | |||||||||
| Accrued expenses | 3,497 | 2,576 | |||||||||
| Employee retirement benefits | 1,785 | 1,765 | |||||||||
| Federal and state tax credit carryforwards | — | 1,590 | |||||||||
| State net operating loss carryforwards | 2,986 | 2,890 | |||||||||
| Deferred compensation | 4,836 | 4,207 | |||||||||
| Premises and equipment | 4,173 | 4,460 | |||||||||
| Other | 3,359 | 1,667 | |||||||||
| Total deferred tax assets | 40,265 | 40,328 | |||||||||
| Deferred tax liabilities | |||||||||||
| Right-of-use lease asset | 6,644 | 8,210 | |||||||||
| Intangible assets | 2,321 | 2,257 | |||||||||
| Available-for-sale and held-to-maturity investment securities | 1,242 | 5,749 | |||||||||
| Unamortized loan cost | 2,460 | 2,605 | |||||||||
| Other | 607 | 575 | |||||||||
| Total deferred tax liabilities | 13,274 | 19,396 | |||||||||
| Less: Deferred tax valuation allowance | 3,374 | 3,106 | |||||||||
| Net deferred tax assets | $ | 23,617 | $ | 17,826 | |||||||
Income tax payments, net of refunds, by jurisdictions is as follows for the periods presented:
| Year Ended December 31, | |||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Income tax payments, net of refunds, by jurisdiction: | |||||||||||||||||
| Federal | $ | 20,466 | $ | (8,712) | $ | 7,283 | |||||||||||
| Hawaii | — | (593) | — | ||||||||||||||
| Other | 886 | 92 | 30 | ||||||||||||||
| Total | $ | 21,352 | $ | (9,213) | $ | 7,313 | |||||||||||
Federal income tax payments in the table above includes a cash payment made to a third party for the purchase of transfer tax credits of $8.4 million in 2025. Federal income tax payments in 2024 and 2023 do not include any cash payments made to third parties for the purchase of transfer tax credits.
In assessing the realizability of our net DTA, management considers whether it is more likely than not that some portion or all of the DTA will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income and tax-planning strategies in making this assessment.
As of December 31, 2025, the valuation allowance on our net DTA totaled $3.4 million, which related to our DTA from net apportioned net operating loss ("NOL") carryforwards for California state income tax purposes as the state has suspended the
use of NOL carryforwards for tax years 2024 through 2026. The net change in the valuation allowance was an increase of $0.3 million in 2025, compared to a decrease of $1.3 million in 2024.
Net of this valuation allowance, the Company's net DTA totaled $23.6 million as of December 31, 2025, compared to a net DTA of $17.8 million as of December 31, 2024, and is included in other assets in the Company's consolidated balance sheets.
The U.S. Federal and most of the state NOL carryforwards, except for California, have been utilized as of December 31, 2025. At December 31, 2025, the Company had NOL carryforwards for California state income tax purposes of $34.9 million, which are available to offset future taxable income. The California state NOL carryforwards will begin to expire if not utilized beginning in 2031.
Utilization of the NOL carryforwards and credits may be subject to annual limitations due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before they are able to be utilized. The Company does not expect any previous ownership changes, as defined under Sections 382 and 383 of the Internal Revenue Code, to result in an ultimate limitation that will materially reduce the total amount of net operating loss carryforwards that can be utilized.
At December 31, 2025, the Company did not have any material unrecognized tax benefits that, if recognized would favorably affect the effective income tax rate in future periods.
The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. As of December 31, 2025, the Company’s federal tax returns for 2021 and prior years, and its state tax returns for 2020 and prior years, were no longer subject to examination by the respective taxing authorities. However, tax periods that are otherwise closed may still be subject to audit to the extent that tax attributes, such as net operating losses or tax credit carryforwards, are utilized in subsequent years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 25, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.