UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A
(Rule 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant  x

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))

x                        Definitive Proxy Statement

o                          Definitive Additional Materials

o                          Soliciting Material Pursuant to §240.14a-12

CENTRAL PACIFIC FINANCIAL CORP.

220 South King Street

Honolulu, Hawaii 96813

(808) 544-0500

APRIL 25, 2012 ANNUAL MEETING

YOUR VOTE IS IMPORTANT

March 15, 2012

Dear Fellow Shareholder:

On behalf of your Board of Directors, we cordially invite you to attend the 2012 Annual Meeting of Shareholders of Central Pacific Financial Corp.  The Annual Meeting will be held on April 25, 2012, at 4:00 p.m., Hawaii time, at the YWCA Laniakea, Fuller Hall, 1040 Richards Street, Honolulu, Hawaii 96813.  Your Board and management look forward to greeting those shareholders able to attend the meeting.

The accompanying Notice of Annual Meeting of Shareholders and Proxy Statement describe matters to be acted upon at the Annual Meeting.  Please give these materials your prompt attention.  Then, we ask that you sign, date and mail promptly the enclosed Proxy Card in the enclosed postage-paid envelope, or use telephone or internet voting, 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,

/s/ John C. Dean

John C. Dean

President and 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 25, 2012

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 the YWCA Laniakea, Fuller Hall, 1040 Richards Street, Honolulu, Hawaii 96813, on April 25, 2012, at 4:00 p.m., Hawaii time, for the purpose of considering and voting upon the following matters:

(i)                                    Election of Directors.  To elect up to nine (9) 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.

(ii)                                Ratification of Appointment of Independent Registered Public Accounting Firm.  To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2012.

(iii)                            Amendment of 2004 Stock Compensation Plan. To approve amendments to the Company’s  2004 Stock Compensation Plan to permit certain awards to be considered “qualified performance-based compensation” under the provisions of Section 162(m) of the Internal Revenue Code.

(iv)                             Executive Compensation.  To consider an advisory (non-binding) proposal to approve the compensation of the Company’s executive officers.

(v)                                 Other Business.  To transact such other business as may properly come before the Meeting and at any and all adjournments thereof.

Only those shareholders of record at the close of business on February 24, 2012 shall be entitled to notice of and to vote at the Meeting.

YOUR VOTE IS IMPORTANT.  SHAREHOLDERS ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE PREPAID ENVELOPE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT THEY PLAN TO ATTEND THE MEETING IN PERSON.  YOU MAY ALSO DELIVER YOUR VOTE BY TELEPHONE OR INTERNET BY FOLLOWING THE INSTRUCTIONS ON YOUR PROXY CARD OR VOTING INSTRUCTION FORM.  SHAREHOLDERS WHO ATTEND THE MEETING MAY WITHDRAW THEIR PROXY AND VOTE IN PERSON IF THEY WISH TO DO SO.

CENTRAL PACIFIC FINANCIAL CORP.

220 South King Street

Honolulu, Hawaii 96813

(808) 544-0500

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

APRIL 25, 2012

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 2012 Annual Meeting of Shareholders (the “Meeting”) of the Company to be held at the YWCA Laniakea, Fuller Hall, 1040 Richards Street, Honolulu, Hawaii 96813, on April 25, 2012, 4:00 p.m., Hawaii time, and at any and all adjournments thereof.  The approximate date on which this Proxy Statement and accompanying Notice and form of proxy are first being mailed to shareholders is on or about March 15, 2012.

Matters to be Considered

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

(i)                                  Election of Directors.  To elect up to nine (9) 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.

(ii)                             Ratification of Appointment of Independent Registered Public Accounting Firm.  To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2012.

(iii)                          Amendment of 2004 Stock Compensation Plan. To approve amendments to the Company’s 2004 Stock Compensation Plan to permit certain awards to be considered “qualified performance-based compensation” under the provisions of Section 162(m) of the Internal Revenue Code.

(iv)                             Executive Compensation.  To consider an advisory (non-binding) proposal to approve the compensation of the Company’s executive officers.

(iv)                             Other Business.  To transact such other business as may properly come before the Meeting and at any and all adjournments thereof.

Record Date, Outstanding Securities and Voting Rights

The Board fixed the close of business on February 24, 2012 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 41,745,576 shares of the Company’s Common Stock, no par value, issued and outstanding on the Record Date, held by approximately 4,116 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 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.

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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”), a member broker who holds shares in street name for customers has the authority to vote on certain “routine” items if it has transmitted proxy soliciting materials to the beneficial owner but has not received instructions from that owner.  NYSE rules permit member brokers that do not receive instructions from their customers to vote on number 2 as discussed above in their discretion.  NYSE member brokers will not be permitted to vote on item numbers 1, 3 or 4 unless they receive instructions from their customers.

Vote Required to Approve the Proposals

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

Additional information regarding each of these items (also referred to as proposals) is provided in the section titled DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD OF DIRECTORS (for Items/Proposals 1 through 4 above).

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

Item 1 -    The Board recommends a vote “FOR” the election of all nominees as directors.

Item 2 -   The Board recommends a vote “FOR” ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2012.

Item 3 - The Board recommends a vote “FOR” approval of the amendments to the Company’s 2004 Stock Compensation Plan.

Item 4 -    The Board recommends a vote “FOR” the compensation of the Company’s executive officers.

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.  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.

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Voting

Voting by Mail.  Shareholders can ensure that their shares are voted at the Meeting by completing, signing, dating and mailing the enclosed proxy card in the enclosed postage-prepaid envelope.

Voting by Telephone or the Internet.  Voting by telephone or the Internet is fast and convenient and your vote is immediately confirmed and tabulated.  If you choose to vote by telephone or the Internet, instructions to do so are set forth on the enclosed proxy card.  The telephone and Internet voting procedures are designed to authenticate votes cast by use of a personal identification number, which appears on the proxy card.  These procedures allow shareholders to appoint a proxy to vote their shares and to confirm that their instructions have been properly recorded.  If you vote by telephone or the Internet, you do not have to mail in your proxy card, but your vote must be received 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 telephone or Internet voting is available.  If your bank or broker does make telephone or Internet voting available, please follow the instructions provided on the voting form supplied by your bank or broker.

If you vote by telephone or the Internet, you should not return your 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 $11,500, plus reimbursement of expenses.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on April 25, 2012.

The Company’s Proxy Statement and Form 10-K Annual Report for the fiscal year ended December 31, 2011 are available free of charge at https://www.centralpacificbank.com/2012proxy.

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 (“SEC”) for the fiscal year ended December 31, 2011.  Requests should be directed to Central Pacific Financial Corp., Attn: Investor Relations, P.O. Box 3590, Honolulu, Hawaii 96811.

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 set of materials were sent to that address to be shared by all shareholders at that address.

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Principal Shareholders

Based on filings made under Section 13(d) and Section 13(g) of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of February 24, 2012, the following were the only persons known to management of the Company to beneficially own more than 5% of the Company’s outstanding Common Stock:

(1)                                Includes 79,288 shares that, in accordance with Rule 13d-3(d)(1) under the Exchange Act, the United States Department of the Treasury has the right to acquire within sixty (60) days of February 24, 2012.

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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,” subheading “Compensation Discussion and Analysis”), as well as all directors and executive officers as a group, as of the close of business on February 24, 2012.  Unless otherwise noted, the address of each person is c/o Central Pacific Financial Corp., 220 South King Street, Honolulu, Hawaii 96813.

(*)                                 Less than one percent (1%).

(1)                                  Except as otherwise noted below, each person has sole voting and investment powers with respect to the shares listed. The numbers shown include the shares actually owned as of February 24, 2012 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 24, 2012.

(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 24, 2012 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)                                  4,132 shares of Common Stock are directly held by Ms. Camp with full voting power.  1,037 shares of Common Stock are held in her Simplified Employee Pension Plan Individual Retirement Account.  369 shares of Common Stock are held for her account and benefit under the Central Pacific Financial Corp. Directors’ Deferred Compensation Plan.  216 shares of Common Stock are those she has a right to acquire by exercise of stock options vested pursuant to the Company’s 2004 Stock Compensation Plan.  100,000 shares of Common Stock are held by Ms. Camp as trustee of her revocable living trust.

(4)                                  100,000 shares of Common Stock are held in Mr. Dean’s Roth Converted IRA account.  4,627 shares of Common Stock are held of record by Startup Capital Ventures (venture capital firm founded in 2005 and fully-invested) of which Mr. Dean is a Managing General Partner and shares voting power with other partners.  3,188 shares of Common Stock are held of record by SCV Management Co, LLC, of which Mr. Dean is a Managing Member.  10,000 shares of Common Stock are held by Mr. Dean and his wife as co-trustees of a family revocable living trust of which they share voting and investment power.  19,261 shares of Common Stock are those he has a right to acquire pursuant to the exercise of restricted stock awards.  12,584 shares of Common Stock are those he has a right to acquire pursuant to the exercise of restricted stock units.

(5)                                  251 shares of Common Stock are directly held by Mr. Fry with full voting and investment power.  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.  1,715 shares of Common Stock are held in the Central Pacific Financial Corp. Directors’ Deferred Compensation Plan.  216 shares of Common Stock are those he has a right to acquire by exercise of stock options vested pursuant to the Company’s 2004 Stock Compensation Plan.

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(6)                                  107,320 shares of Common Stock are directly held by Mr. Kosasa with full voting power.  923 shares of Common Stock are held jointly with his wife and they share voting and investment power.  216 shares of Common Stock are those he has a right to acquire by exercise of stock options vested pursuant to the Company’s 2004 Stock Compensation Plan.

(7)                                  13,812 shares of Common Stock are directly held by Mr. Kurisu with full voting power.

(8)                                  1,032 shares of Common Stock are directly held by Mr. Matsumoto with full voting and investment power.  26,280 shares of Common Stock are held for his account and benefit under the Central Pacific Financial Corp. Directors’ Deferred Compensation Plan.  1,193 shares of Common Stock are held by Island Insurance Foundation of which he serves as President and Director.  692 shares of Common Stock are held jointly with his wife and they share voting and investment power.  473 shares of Common Stock are those he has the right to acquire by the exercise of stock options vested pursuant to the CB Bancshares, Inc. Directors Stock Option Plan, the Agreement and Plan of Merger dated April 22, 2004 between Central Pacific Financial Corp. and CB Bancshares, Inc., the Company’s 1997 Stock Option Plan, and the Company’s 2004 Stock Compensation Plan.  500,000 shares of Common Stock are held of record by Tradewind Capital Group, Inc. of which Mr. Matsumoto is President and a Director.  Mr. Matsumoto shares voting and investment control over the shares held by Tradewind Capital Group, but disclaims beneficial ownership of such shares.

(9)                                  27,175 shares of Common Stock are directly held by Ms. Rose with full voting and investment power.  230 shares of Common Stock are held by her as trustee of her pension plan.  747 shares of Common Stock are held for her account and benefit under the Central Pacific Financial Corp. Directors’ Deferred Compensation Plan.  64 shares of Common Stock are held jointly with her husband and they share voting and investment power.  216 shares of Common Stock are those she has a right to acquire by exercise of stock options vested pursuant to the Company’s 2004 Stock Compensation Plan.

(10)                            2,600 shares of Common Stock are held in Mr. Blackmon’s individual 401(k) plan.  4,050 shares of Common Stock are held in his money purchase plan.  10,225 shares of Common Stock are held in his individual retirement account.  5,800 shares of Common Stock are held in his wife’s individual retirement account.  10,375 shares of Common Stock are held in his revocable living trust.  10,254 shares of Common Stock are those he has a right to acquire pursuant to the exercise of restricted stock awards.  7,026 shares of Common Stock are those he has a right to acquire pursuant to the exercise of restricted stock units.

(11)                           13,712 shares of Common Stock are held by Mr. Isono jointly with his wife for which he and his wife share voting and investment powers.  48 shares of Common Stock are held by his sons and wife jointly.  272 shares of Common Stock are held under his account under the Central Pacific Bank 401(k) Retirement Savings Plan.  420 shares of Common Stock are those that he has the right to acquire by the exercise of stock options vested pursuant to the Company’s 1997 Stock Option Plan.  2,078 shares of Common Stock are those that he has the right to acquire by the exercise of stock appreciation rights.  8,497 shares of Common Stock are those he has a right to acquire pursuant to the exercise of restricted stock awards.  6,089 shares of Common Stock are those he has a right to acquire pursuant to the exercise of restricted stock units.  5,886 share of Common Stock are held of record by Central Pacific Bank Foundation, of which Mr. Isono is Chairman and President.

(12)                            20,000 shares of Common Stock are held in a family trust of which Ms. Ngo and her husband are co-trustees and in which they share voting and investment power.  5,886 share of Common Stock are held of record by Central Pacific Bank Foundation, of which Ms. Ngo is a director and Vice President.  8,497 shares of Common Stock are those she has a right to acquire pursuant to the exercise of restricted stock awards.  6,089 shares of Common Stock are those she has a right to acquire pursuant to the exercise of restricted stock units.  4,627 shares of Common Stock are held of record by Startup Capital Ventures (venture capital firm founded in 2005 and fully-invested) of which Ms. Ngo is Venture Partner.  3,188 shares of Common Stock are held of record by SCV Management Co, LLC, of which Ms. Ngo is a Managing Member.

(13)                            2,688 shares of Common Stock are directly held by Mr. Rodriguez with full voting and investment power.  20,230 shares of Common Stock are held in Mr. Rodriguez’s revocable living trust.  4,589 shares of Common Stock are those he has a right to acquire pursuant to the exercise of restricted stock units.

(14)                            3,000 shares of Common Stock are directly held by Mr. Wilson with full voting and investment power.  8,497 shares of Common Stock are those he has a right to acquire pursuant to the exercise of restricted stock awards.  6,089 shares of Common Stock are those he has a right to acquire pursuant to the exercise of restricted stock units.

Section 16(a) Beneficial Ownership Reporting Compliance

The Company’s directors, executive officers and the beneficial holders of more than 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 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 2011 by any person who was at any time during year 2011 a director, officer, beneficial owner of more than 10% of the Common Stock, or any other person subject to Section 16 of the Exchange Act with respect to the Company.

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ELECTION OF DIRECTORS

The Company currently has nine (9) directors, being Alvaro J. Aguirre, James F. Burr, Christine H. H. Camp, John C. Dean, Earl E. Fry, Paul J. Kosasa, Duane K. Kurisu, Colbert M. Matsumoto and Crystal K. Rose.  The term of all directors expires at the Meeting.  Accordingly, there are up to nine (9) directors to be elected at the Meeting to serve one-year terms expiring at the 2013 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.

The nominees to serve as directors for election at the Meeting are Alvaro J. Aguirre, James F. Burr, Christine H. H. Camp, John C. Dean, Earl E. Fry, Paul J. Kosasa, Duane K. Kurisu, Colbert M. Matsumoto and Crystal K. Rose, all of whom are currently directors of the Company.

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 enclosed 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, and, as of the date hereof, 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 Crystal K. Rose, who is a director of Hawaiian Holdings, Inc. (NASDAQ ticker “HA”).

The Board recommends a vote “FOR” each of the Board nominees for director.

DIRECTORS’ AND EXECUTIVE OFFICERS’ INFORMATION

The following table sets forth certain information with respect to each of the nominees, continuing directors, and executive officers.  The term of each director expires at the Meeting.

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Director and Nominee Background and Experience

Alvaro J. Aguirre –  Mr. Aguirre was appointed as a director of the Company effective February 24, 2011, as a designee of ACMO-CPF, L.L.C. pursuant to its Investment Agreement with the Company and is being nominated to continue as a director in accordance with the requirements of that Investment Agreement.  Mr. Aguirre is a member of the Company’s Compensation Committee and Governance Committee.  Mr. Aguirre has broad skills and experience acquired through senior executive operating roles, as well as senior principal and advisory positions on Wall Street.  Mr. Aguirre served as Chief Financial Officer and member of the Board of Directors for TV Filme Inc., a Brazilian wireless cable investment of private equity firm Warburg Pincus LLC, where he directed the company through a successful initial public offering.  Mr. Aguirre has also served in senior management roles at several other media and technology businesses where he was instrumental in shaping strategy, driving growth and achieving successful financings and exits.  Mr. Aguirre gained principal investing, capital markets, and advisory experience as a managing director at Warburg Pincus LLC, an investment banker at Morgan Stanley and a corporate finance attorney at Sullivan & Cromwell LLP.  Currently, Mr. Aguirre is the Chairman of the Board and member of the Audit and Compensation Committees of Cygnus Business Media, a business to business publishing company owned by Goldman Sachs, GE Capital and other financial sponsors.  Mr. Aguirre also serves as Director of Advanstar Communications Inc., a leading business-to-business events, online and publishing platform serving the fashion, life sciences and motorsports industries.  Advanstar is owned by Anchorage Capital Group, Ares Management, Veronis Suhler Stevenson and other financial sponsors.  Mr. Aguirre has also served in various not for profit capacities, including as Chairman of the Town of Tiburon Planning Commission. Mr. Aguirre’s business, management and financial background, and skill and expertise in operating companies makes him a valuable resource to the Board.

James F. Burr –  Mr. Burr was appointed as a director of the Company effective February 24, 2011, as a designee of Carlyle Financial Services Harbor, L.P. pursuant to its Investment Agreement with the Company and is being nominated to continue as a director in accordance with the requirements of that Investment Agreement.  Mr. Burr has over 23 years of financial and banking experience.  Before joining Carlyle, Mr. Burr served in several senior and executive positions at Wachovia Bank, including Corporate Treasurer, Assistant Treasurer, Controller of the Corporate and Investment Bank, Product Controller of Treasury/Balance Sheet Management and Structured Products and Mortgage Analyst.  Mr. Burr is a Certified Public Accountant (inactive), and spent three (3) years as an auditor at Ernst & Whinney (now known as Ernst & Young).  Mr. Burr currently serves as a Director of the Bank of N.T. Butterfield, located in Bermuda. Mr. Burr’s banking and financial experience, as well as his accounting background, provides the Board with a knowledgeable, experienced resource on management of a financial institution.

Christine H. H. Camp – Ms. Camp has over twenty-two (22) years experience in real estate, and her company Avalon Group, 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.  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 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’s real estate, financial, and public company knowledge and experience gained from her prior and current positions, makes her a valuable resource to the Board and management in many areas, but particularly in connection with the Company’s real-estate lending and other real-estate related activities, to include the evaluation of real estate related risks, investments, opportunities, and asset management oversight.

John C. Dean – Since April 20, 2011, Mr. Dean has served as President and Chief Executive Officer, and a Director, of the Company and the Bank.  From June 2010 through April 20, 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 years (30), including as the Chief Executive Officer and then Chairman of the Board of Silicon Valley Bancshares and Silicon Valley Bank, the President and Chief Executive Officer of Pacific First Bank, the Chairman and Chief Executive Officer of First Interstate Bancorp and First Interstate Bank of Washington, the Chairman  and Chief Executive Officer  of First Interstate Bank of Oklahoma and as an executive of First Interstate System, Inc., National Funding Corporation and Bank of America. Since 2003, Mr. Dean has been the managing general partner of Startup Capital Ventures and 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 is a graduate of the Wharton School of the University of Pennsylvania, with an MBA in Finance, and currently serves as an advisor to the board of the Wharton School. Mr. Dean’s extensive experience in leading financial institutions through difficult economic cycles and his overall management expertise makes him a valuable contributor to the Board and the overall success of the Company.

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Earl E. Fry – For the last twelve (12) years, Mr. Fry has served as 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 $650 million.  As Chief Financial Officer of Informatica Corporation, Mr. Fry has effected, among other things, numerous major capital and financial transactions, to include credit lines, equity offerings, convertible rate issuances, stock/bond buyback plans, eleven technology acquisitions, and he has established development and support centers in Bangalore, India, Dublin, Ireland, and Tel Aviv, Israel, and he established Informatica’s enterprise risk management program.  In addition, Mr. Fry also oversees and manages the Global Customer Support, Consulting Services, Human Resources, Legal and Contracts Administration, Information Technology, Investor Relations and Finance areas of Informatica Corporation.  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 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 Certified Public Accountant and 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 and 2012.  Mr. Fry brings extensive finance, public company, and auditing knowledge and experience to the Board and Company, and he thus is highly qualified to Chair the Company’s and Bank’s Audit Committees.

Paul J. Kosasa – Mr. Kosasa has been President and Chief Executive Officer of MNS Ltd., doing business and more commonly known as ABC Stores, for the past thirteen (13) years, and has been with ABC Stores for thirty-two (32) 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 who 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, on recommendation of the Company’s President and Chief Executive Officer John C. Dean, on recommendation of the Company’s Governance Committee, and with the unanimous approval of the Company’s Board.  Mr. Kurisu has served on the Board of Directors of the Bank since September 2004.  Mr. Kurisu 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, development and consulting, radio; (iii) sports – professional baseball, sports equipment; (iv) food – bakery, restaurants, nutraceuticals.  He is the Chairman, Chief Executive Officer and owner of aio, LLC, a holding company for brands focused on Hawaii and the Pacific in the areas of media, sports and food.  He is also Chairman and Chief Executive Officer of Hawaii Winter Baseball, Inc. (professional baseball), director and vice president of Nutricopia, Inc. (nutraceuticals), Chief Executive Officer of PacificBasin Communications, LLC (publishing), and a partner in Kurisu and Fergus (real estate).  Mr. Kurisu serves on number Boards, to include the aio Foundation, Island Holdings, Inc., Oahu Publications, Inc., Obun Hawaii, LLC, Tradewinds Capital, the Public Land Development Corporation, and the Advisory Board of the Kravis Leadership Institute, 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 will bring 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. 

Colbert M. Matsumoto – Mr. Matsumoto is the Chairman of the Board and Chief Executive Officer of Island Insurance Company, Ltd., Hawaii’s largest locally owned and managed property and casualty insurance company, and has served in that capacity since 1999.  Mr. Matsumoto is also the Chairman of the Board and President of Island Holdings, Inc., a corporate holding company.  Mr. Matsumoto also serves as President and a director of Tradewind Capital Group, Inc., an investment and asset management company.  Mr. Matsumoto is also an attorney (presently on inactive status), has been a member of the Hawaii State Bar Association for over thirty-four (34) years, and was a partner with the law firm of Fujiyama Duffy & Fujiyama until 1994 when he established his own law firm named Matsumoto LaFountaine & Chow until departing that firm to join Island Insurance Company, Ltd.  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 and business strategy and planning.

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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 (30) 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 and the Executive Committee of its Board of Directors.  Given the limited number of publicly traded companies in Hawaii, Ms. Rose brings additional experience as a director of another Hawaii-based publicly traded company. Ms. Rose 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 as the Company’s and the 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.  

Executive Officer Background and Experience

Set forth below is information concerning the current executive officers of the Company:

Glen L. Blackmon – Mr. Blackmon joined the Company and the Bank as Executive Vice President and Chief Information Officer, effective June 6, 2011.  Prior to joining the Company and the Bank, Mr. Blackmon was the Managing Principal and a founder of Trinity M&A Group LLC, a mergers and acquisitions advisory services and consulting firm based in Houston, Texas.  Mr. Blackmon’s broad career experience includes executive positions in multiple industries including financial services, technology/internet and third party administration business services.  Mr. Blackmon has served for the following companies and in the respective roles and positions: Internet America, Inc., President and Chief Operating Officer, Houston, Texas; AcademicPlanet, Inc., Chairman and Chief Financial Officer, Houston, Texas; Square One Bank, Chief Operating Officer and Chief Financial Officer, Durham, North Carolina; Union Bank of Jamaica, Ltd., General Manger of Information Technology, Kingston, Jamaica; U.S. Pension Services, Board Member, Chief Financial Officer and Chief Information Officer, Tampa, Florida; Baxter Eder Marketing, Board Member and Chief Financial Officer, Palo Alto, California; Silicon Valley Bank, Executive Vice President, Chief Information Officer and Chief Financial Officer, Santa Clara, California; First Interstate Information Systems, President, Des Moines, Iowa; First Insterstate Management Services, President, Milwaukee, Wisconsin; Financial Institutions Analysts & Consultants, Principal, Los Angeles, California; First Interstate Results Consulting Group, Director – Western U.S. Services, Los Angeles, California; Deloitte Haskins & Sells (Deloitte Touche), Consulting Manager, Chicago, Illinois; Union National Bank, Vice President and Senior Operations/Finance Officer, Tulsa, Okalahoma; Lakeside National Bank, Systems Operations Officer, Lake Charles, Louisiana; and, Coastal Bank Group, Operations Manager, Dickinson, Texas.

David W. Hudson – Mr. Hudson was appointed Executive Vice President, Community Banking Manager of the Bank and the Company, effective March 11, 2011.  Prior to his appointment, Mr. Hudson was Senior Vice President, Community Banking Manager for the Bank.  As Community Banking Manager, Mr. Hudson oversees the Bank’s entire branch network, comprising thirty-four (34) branches throughout the State of Hawaii, to include branches on the islands of Oahu, Hawaii, Maui, and Kauai.  Mr. Hudson has more than twenty-five (25) years of experience in the finance industry in Hawaii and California.  He started his banking career in corporate, international and commercial real estate lending with Crocker National and First Nationwide banks.  More recently, Mr. Hudson’s career has focused on retail and branch banking.  Prior to joining the Bank in 2009, Mr. Hudson spent six (6) years as Senior Vice President of the consumer and business banking division of Hawaii-based American Savings Bank.  In addition, Mr. Hudson has also served at Honfed Bank and Bank of America in Hawaii and California in various positions from process design executive to consumer region executive.

Denis K. Isono – Ms. Isono has over thirty-nine (39) years of banking and financial experience in the Hawaii market.  Before joining the Company and the Bank, Mr. Isono was employed by Bank of Hawaii ($10 billion in assets) for eighteen (18) years and held various senior management positions to include Executive Vice President, Operations, and Senior Vice President, Controller.  In addition, Mr. Isono also began his banking career at City Bank where he worked for six (6) years.  Mr. Isono is a Certified Public Accountant, Certified Management Accountant, Certified Bank Auditor, Certified Internal Auditor, and a graduate of the Stanford University Executive Program and the University of Hawaii Advanced Management Program.  Mr. Isono also spent six (6) years with Ernst & Ernst, and held the position of Audit Supervisor.

Lance A. Mizumoto – Mr. Mizumoto has over twenty-five (25) years of experience in banking.  Prior to joining the Bank in 2005, Mr. Mizumoto had been at First Hawaiian Bank for nine (9) years, where he served in numerous managerial positions, to include serving as Senior Vice President and Division Manager for First Hawaiian Bank’s Corporate Hawaii Division and Trade Finance Department, with responsibility for managing and overseeing a portfolio consisting primarily of the top companies in Hawaii.  Prior to First Hawaiian Bank, Mr. Mizumoto was employed at Bank of Hawaii for ten (10) years, where he served in various senior line officer positions, with responsibility for substantial sized corporate portfolios.  And, before Bank of Hawaii, Mr. Mizumoto worked six (6) years for Hawaii-based International Savings & Loan, principally in various lending areas, to include serving as Residential Loan Originations Manger and Secondary Loan Marketing Manager.

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A. Catherine Ngo – Ms. Ngo is an experienced executive who has served in various capacities in the financial industry during the last nineteen (19) years, including as General Partner and Venture Partner of Startup Capital Ventures, 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.  She 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.  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 100 employees.  President & Chief Executive Officer John C. Dean has worked with Ms. Ngo for the last nineteen (19) years; they (together with a few others) founded and were co-general partners of Startup Capital Ventures.  For the last twelve (12) years preceding that, Ms. Ngo was an executive officer at SVB (where Mr. Dean served as Chief Executive Officer and Chairman of the Board from 1993-2003).

Raymond William (“Bill”) Wilson — Mr. Wilson was appointed as Chief Credit Officer and Executive Vice President of the Company and the Bank effective February 16, 2011.  Mr. Wilson joined the Bank in June of 2010 as Executive Vice President, Special Credits, with fifteen (15) years of U.S. and international experience in credit risk management in public and private companies, as well as fourteen (14) years of credit and lending experience at Westpac Banking Corporation (“Westpac”), a major international financial institution, where he served in various capacities from 1980 to 1994.  After leaving Westpac, Mr. Wilson co-founded Drexel Oceania, an international merchant bank engaged in capital raising and financial advisory work for companies and financial institutions in North America, Asia and Australia.  Prior to joining the Bank, Mr. Wilson assumed various interim Chief Financial Officer and Chief Operating Officer positions for domestic and international public and private corporations undergoing transition, including Chief Financial Officer of Gryphon Gold Corporation, a publicly traded junior minerals exploration company; Chief Financial Officer of El Capitan Precious Metals, Inc., a publicly traded junior minerals exploration company; and Chief Operating Officer of Petaluma Butane Distributors, Inc., an umbrella company for a group of private operating companies and commercial and real estate holdings.

CORPORATE GOVERNANCE AND BOARD MATTERS

During the fiscal year ended December 31, 2011, the Board held a total of twelve (12) meetings, including monthly, annual and special meetings.  Each incumbent director attended at least 75% of the total number of these Board meetings (except for Director Burr who attended 70% of the Board meetings) and 75% of the total number of meetings held by all committees of the Board on which he or she served during 2011.  The Company expects directors to attend the annual meetings of shareholders.  The directors who attended last year’s annual meeting of shareholders were Christine Camp, John Dean, Earl Fry, Paul Kosasa, Duane Kurisu and Crystal Rose.

The Board has three (3) standing committees: an Audit Committee, a Compensation Committee, and a Governance Committee.  The Board formerly had an Executive Committee, but it was deemed unnecessary and dissolved effective as of January 26, 2011.

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

* = Member

C = Chair

(1)  Mr. Kurisu was appointed to the Audit Committee on January 25, 2012.

Interested parties may communicate directly with the Chair of the Board or with the non-management or independent directors as a group, by writing to: Crystal K. Rose, Bays Deaver Lung Rose & Holma, 1099 Alakea Street, 16th Floor, Honolulu, Hawaii 96813.  Alternatively, concerns may be made known and communicated directly to the Chair of the Board 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).

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Audit Committee

The Audit Committee held ten (10) meetings during 2011.  The responsibilities of the Audit Committee are described below under the subheading “Report of the Audit Committee”.  The Audit Committee operates under a Charter adopted by the Board.  The Charter of the Audit Committee is available on the Company’s website (www.centralpacificbank.com).  The current members of the Company’s Audit Committee are Earl E. Fry (Chair), Christine H. H. Camp, Duane K. Kurisu, and Crystal K. Rose, 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, and that each member has accounting or related financial management expertise, as such qualification is defined under the rules of the NYSE, and that Mr. Fry is an “audit committee financial expert” within the meaning of the rules of the SEC.  No member of the Audit Committee serves on the audit committee of any other publicly registered company.

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

Compensation Committee

The Compensation Committee held nine (9) meetings during 2011.  The Compensation Committee’s primary purpose is to assist the Board in discharging the Board’s responsibilities relating to compensation of the Company’s executive officers by evaluating and recommending to the Board approval of executive officer benefit, bonus, incentive compensation, severance, equity-based or other compensation plans, policies and programs of the Company and providing all required disclosures on executive compensation for inclusion in the Company’s proxy statement.  The functions of the Compensation Committee are further described in “Compensation of Directors and Executive Officers” below, under the subheading “Compensation Discussion and Analysis.”  The Charter of the Compensation Committee is available on the Company’s website (www.centralpacificbank.com).  The current members of the Company’s Compensation Committee are Christine H. H. Camp (Chair), Alvaro J. Aguirre, Earl E. Fry, 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 Committee has historically engaged a compensation consultant to provide input on both Board and executive compensation issues.  In 2011 the Committee retained McLagan, an AonHewitt Company.  McLagan is a compensation consulting and performance benchmarking firm focused exclusively on the financial services sector.

In 2011, the Compensation Committee engaged McLagan to provide market benchmarking information and advisory services related to executive and director compensation plan design features, positioning to market, and regulatory compliance. McLagan was engaged directly by the Compensation Committee and McLagan consultants reported directly to the Committee for its services in these capacities. The 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.

Governance Committee

The Governance Committee held four (4) meetings during 2011.  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 Paul J. Kosasa (Chair), Alvaro J. Aguirre, Christine H. H. Camp, and Crystal K. Rose, each of whom is “independent” within the meaning of the listing standards of the NYSE.

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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.

Equity Grant Guidelines

The Company has Equity Grant Guidelines (“Equity Guidelines”) which are to be considered in connection with grants of Company equity whether in the form of Company stock, stock options, or other forms of equity grants made by the Company to directors, officers or employees of the Company or any of its subsidiaries.  The Equity Guidelines set forth guidelines regarding how and when grants may be made, including how grants are to be approved and documented.

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 2011 and all nominees (other than Mr. Dean who is President and Chief Executive Officer and Ronald K. Migita, the Company’s former Chief Executive Officer and President) are “independent” within the meaning of the rules of the NYSE.  All of the directors and nominees (other than Messrs. Dean and Migita) 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 and none were found to be material as they relate to director independence:

During 2011, 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: current directors - Paul J. Kosasa, Duane K. Kurisu, Colbert M. Matsumoto, Crystal K. Rose; former directors - Richard J. Blangiardi, B. Jeannie Hedberg, Mike K. Sayama, Maurice H. Yamasato.

During 2011, 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:  current directors - Christine H. H. Camp, John C. Dean, Earl E. Fry, Paul J. Kosasa, Duane K. Kurisu, Colbert M. Matsumoto, Crystal K. Rose; former directors - Richard J. Blangiardi, B. Jeannie Hedberg, Ronald K. Migita, Mike K. Sayama, Maurice H. Yamasato, Dwight L. Yoshimura.

During 2011, the following directors and nominees served on boards of non-profit, community, charitable and/or cultural organizations, which received monetary donations from the Bank:  current directors – Christine H. H. Camp, Paul J. Kosasa, Colbert M. Matsumoto, Crystal K. Rose; former directors - Richard J. Blangiardi, Ronald K. Migita, Mike K. Sayama, Maurice H. Yamasato.  For 2011, 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, and with respect to the current directors, the amount received by such organizations ranged from a low of $540 to a high of $17,500 with, the average donation being approximately $4,800 (with respect to our current directors, ten donations were made in 2011, totaling $48,163; with respect to our former directors, two donations were made in 2011 totaling $25,500).

During 2011, the following directors and nominees served on boards 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 are on no more favorable terms than for other similarly situated matters:  Duane K. Kurisu and Colbert M. Matsumoto.

During 2011, the following directors served 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 are on no more favorable terms than for other similarly situated matters:  current directors - Paul J. Kosasa, Duane K. Kurisu, Colbert M. Matsumoto; former directors - Richard J. Blangiardi, Mike K. Sayama.

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Company director Duane K. Kurisu is a director of Tradewind Capital Group, Inc. (“TCG”) and of Island Holdings Inc., which owns TCG.  See information above for Colbert M. Matsumoto regarding the PTA construction loan.  Mr. Kurisu had no direct involvement in the PTA loan transaction and it was made on no more favorable terms than for other similarly situated transactions.

Company director Duane K. Kurisu is a director and holds a less than a 5% ownership interest in Oahu Publications, Inc. (“OPI”) which publishes Honolulu Star Advertiser/Midweek (“Honolulu Star”).  Mr. Kurisu is sole owner and Chief Executive Officer of PacificBasin Communications, LLC which publishes Hawaii Business magazine and Honolulu magazine.  In 2011, the Bank paid a total amount of $495,932 for print and online advertising in these publications: $416,592 in the Honolulu Star; $43,460 in Hawaii Business Magazine; and, $35,880 in Honolulu magazine. Mr. Kurisu had no direct involvement with any transaction involving the placement of advertising and they were made on no more favorable terms than for other similarly situated transactions.  OPI has a term loan with CPB ($6,800,000 loan made on 6/17/11, outstanding balance of $6,228,375 as of 12/31/11).  Regarding said term loan, the largest aggregate amount of principal outstanding during 2011 was $6,800,000 as of 6/17/11; amount of principal paid during 2011 was $571,625; amount of interest paid during 2011 was $153,632; rate of interest was 4.30%.  OPI also has a line of credit with CPB ($960,000 line made on 6/17/11, outstanding balance of $0 as of 12/31/11).  Regarding said line, the largest aggregate amount of principal outstanding during 2011 was $960,000 as of 6/17/11; amount of principal paid during 2011 was $960,000; amount of interest paid during 2011 was $2,493; rate of interest was 4.19%.

Company director Colbert M. Matsumoto is the President and a director of Tradewind Capital Group, Inc. (“TCG”) which is the sole member of Island-Waipahu, LLC (“Island-Waipahu”).  Island-Waipahu and M&M Investments, Inc. (“M&M”) each hold 50% membership interests in Plantation Town Apartments LLC (“PTA”).  PTA has a construction loan to develop a residential condominium project in Waipahu, Hawaii.  Regarding said construction loan, the largest aggregate amount of principal outstanding during 2011 was $7,071,293 (as of January 1, 2011); the amount outstanding as of December 31, 2011, was $5,006,121; the amount of principal paid during 2011 was $2,246,355; the amount of interest paid during 2011 was $349,880; and, the rate of interest was 5.50% effective December 5, 2009.  Demand for this project has been adversely impacted by restrictive affordable-housing criteria, weakened economic conditions, and tightened credit markets.  Mr. Matsumoto is President and a director and holds less than a 5% ownership interest in Island Holdings, Inc., which owns TCG.  TCG is a majority shareholder in Century Computers, Inc. (“CCI”) and Mr. Matsumoto serves as a director of CCI.  Prior to TCG’s investment in CCI and Mr. Matsumoto’s election as a Director of CCI, CCI was a vendor to the Bank and provided various information technology and business process services, and in 2011 was paid $184,464 for such services.  Mr. Matsumoto had no direct involvement in these 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 of Atlas Insurance Agency, Inc. (“Atlas”), he is Chief Executive Officer and Chairman of the Board of Island Insurance Company, Ltd. (“Island”), and he is President and Chairman of the Board of Island Holdings, Inc. which owns both Atlas and Island. In 2011, 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 received a total of $142,400 in commissions.  In addition, Atlas paid the Bank $41,487 in rent for space in the Bank’s Hilo office building.  Mr. Matsumoto had no direct involvement in these transactions and they were made on no more favorable terms than for other similarly situated transactions.  Mr. Matsumoto is a director of OPI which publishes the Honolulu Star.  In 2011, the Bank paid Honolulu Star $416,592 for print and online advertising.  Mr. Matsumoto is a Trustee of the Employees Retirement System of the State of Hawaii (“ERS”).  In 2011, CPB’s subsidiary, Central Pacific HomeLoans, Inc. paid ERS $703,173 in rent for space in City Financial Tower.  Mr. Matsumoto is a Director and Chairman of the Board of Tradewind Insurance Company, Ltd. which provides workers compensation insurance coverage to the Bank under a policy with a term ending March 1, 2012, for which it received a premium of $115,969.  Mr. Matsumoto had no direct involvement in these transactions and they were made on no more favorable terms than for other similarly situated transactions.

Company director Paul J. Kosasa is President and Chief Executive Officer of ABC Stores.  In 2011, the Bank paid ABC Stores $89,709 for the right to lease space in various ABC Stores locations for the placement of Bank ATMs.

Richard J. Blangiardi, who resigned as Company director on February 18, 2011, is General Manager of KGMB and KHNL (owned by Raycom Media) television stations and is an employee of Raycom Media which also owns television station KFVE.  In 2011, the Bank paid KGMB $114,100, KHNL $10,000, KFVE $29,950, and hawaiinewsnow.com $40,862, totaling $194,912, for the purchase of television advertising.  Mr. Blangiardi had no direct involvement in these transactions and they were made on no more favorable terms than for other similarly situated transactions.

Mike K. Sayama, who resigned as Company director on February 18, 2011, is a Vice President of Hawaii Medical Service Association (“HMSA”).  In 2011, the Bank paid $245,287 to HMSA in rent for the Bank’s Keeaumoku Branch which is located in one of HMSA’s buildings (which amount, when combined with all other amounts paid to HMSA in 2011, comprises significantly less than 2% of HMSA’s 2010 gross revenues).  Mr. Sayama had no direct involvement in these transactions and they were made on no more favorable terms than for other similarly situated transactions.

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Loans to Related Persons

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

Policy Regarding Transactions with Related Persons

The Company has a Board approved written policy (“Policy Regarding Transactions with Related Persons”) which sets forth the process and procedures for the review, approval, ratification and disclosure of any transaction with a related person (“transaction” and “related person” being as defined by Item 404 of SEC Regulation S-K).  Transactions with related persons that affect a director’s independence are reviewed by the Company’s Governance Committee.  Transactions with related persons that involve loans are reviewed by the Bank’s Board Directors Loan Committee.  All other transactions with related persons that are material to the financial statements 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.  The Board has determined that having two separate individuals serve as Chief Executive Officer and Chairman, respectively, is in the best interests of the Company and its shareholders at this time.  Accordingly, on April 20, 2011, John C. Dean was appointed President and Chief Executive Officer of the Company and the Bank, and Crystal K. Rose was appointed as the Chair of the Board of the Company and the Bank.  Prior to these appointments, Mr. Dean had served as Executive Chairman of the Company and the Bank, and Ms. Rose was the lead director of the Board of the Company and the Bank.  The Chief Executive Officer is responsible for setting the strategic direction and the day-to-day leadership and performance of the Company, while the Chair of the Board provides overall leadership to the Board, works with the Chief Executive Officer to prepare Board meeting agendas and chairs meetings of the Board.  This leadership structure allows the Chief Executive Officer to focus on his operational responsibilities, while keeping a measure of independence between the oversight functions of the Board and those operating decisions.  All members of the Board are outside (non-management) directors with the sole exception of Mr. Dean.  As the Board’s Lead Director until April 20, 2011, and as Chair of the Board since April 20, 2011, Ms. Rose presided over all meetings of the non-management directors in executive sessions, acted as liaison and facilitated communications between the Board and the principal executive, and ensured 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 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 effective February 1, 2010, reports directly to the Company’s and Bank’s respective Audit Committees.  In addition, the Bank also has an additional board level Trust Committee and Directors Loan Committee which provide board level oversight over the Bank’s trust activities and lending activities respectively.  The Company’s and Bank’s Audit Committees perform the required and customary risk oversight functions of an Audit Committee, to 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, to 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, General Counsel, and Compliance Manager 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.  All Company and Bank executive officers report regularly to the Company’s and Bank’s Board of Directors.

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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 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 qualification as independent, 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, to include aspiring to having individuals serving on the Board representing different professions, industries, backgrounds, experiences, cultures, ethnicities, races, and gender, representative of Hawaii’s multi-cultural, multi-ethnic, and multi-racial population and community.

Identifying and Evaluating Nominees. The Board seeks to identify candidates for director positions that are best qualified and suited to meet the needs of the Company and to present these candidates for shareholder approval, as and when director positions become open and available.  The Governance Committee will first identify, review, evaluate and recommend to the Board, nominees for director positions.  The Board will then vote whether or not to recommend such nominees to the Company’s shareholders for election.

In identifying potential director nominees, the Governance Committee will search within the State of Hawaii and may search outside the State of Hawaii for any potential director candidates, and in this regard, may utilize the services of a professional search firm.  While the same general criteria set forth above shall be applied in evaluating a candidate’s qualifications, it is difficult to enumerate all of the attributes, skills and qualities that the Governance Committee and/or Board may, at any given point in time, determine, consider and value in evaluating, selecting and recommending director nominees.  Accordingly, the Governance Committee and the Board exercise their discretion and consider any circumstances, experiences, attributes, skills, qualities, and factors applicable to any director nominee with the intent and purpose of having the best qualified and best 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 year 2013 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, 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.

Communications with the Board

Shareholders of the Company and others may send written communications directly to the Board, addressed to: Board of Directors of Central Pacific Financial Corp., 220 South King Street, 22nd Floor, Honolulu, Hawaii 96813.  Any such communication may be directed to the attention of the Chair of the Board or the Chair of any Board Committee (such as, for example, the Chair of the Audit Committee or the Chair of the Governance Committee) or to the 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 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.  However, nothing that is stated in this paragraph shall override any requirements imposed on any shareholder communications under the Company’s Articles of Incorporation (as amended) or Bylaws (as amended) or other governing documents or by any law, rule or regulation.

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REPORT OF THE AUDIT COMMITTEE

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

As of February 23, 2012, the Audit Committee is comprised of four (4) non-management directors and operates pursuant to a written charter that was readopted by our Board in December, 2011.  The charter is also available on our website at https://www.centralpacificbank.com.  During 2011, the Audit Committee held ten (10) meetings, including three (3) private sessions with executive management, four (4) private sessions with the independent auditors, and three (3) private sessions with the Director of Enterprise Risk Management and Internal Audit and Credit Review Coordinator.  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, that three (3) members have accounting or related financial management expertise, as such qualifications are defined under the rules of the NYSE, and that two (2) members are “audit committee financial experts” within the meaning of the rules of the SEC, being Earl E. Fry, Chair of the Audit Committee, and Christine H. H. Camp.  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 the matters required to be discussed by Statement on Auditing Standards No. 114, The Auditor’s Communication With Those Charged With Governance adopted by the PCAOB.  The Committee has received the written disclosures and the letter from the independent accountants required by Independence Standards Board Standard No. 1, Independent Discussions with Audit Committees, as adopted by the PCAOB, 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 2011, 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 2011 be included in the Company’s Annual Report on Form 10-K for such fiscal year.

Respectfully submitted by the current members of the Audit Committee of the Board:

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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

DIRECTOR COMPENSATION

The following table shows, for the year ending December 31, 2011, information on compensation earned by or awarded to each non-employee director who served on the Company’s Board during 2011.

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During 2011, there were a number of changes to the membership of the Board and committees of the Company, many of which have been described in (a) above. Set forth below is the composition of the committees of the Board, following the closing/funding of the Company’s $325 million private placement on February 18, 2011. Alvaro J Aguirre was appointed to Board committees following regulatory approvals on February 24, 2011.

Non-employee directors of the Company and the Bank have been eligible to participate in the Company’s 1997 Stock Option Plan and continue to be eligible to participate in the Company’s 2004 Stock Compensation Plan.  The table below shows the aggregate number of unexercised stock option awards and unvested restricted stock awards for each Director as of December 31, 2011.

(b)         For each Director other than Messrs. Aguirre and Burr, 216 of the vested unexercised stock options represent options that were granted on March 11, 2009 as their Company annual board retainer in lieu of cash.  The remaining unexercised stock options represent vested, unexercised stock options granted under the 1997 Stock Option Plan on September 15, 2004 related to the merger with CB Bancshares, Inc.

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Retainer & Meeting Fees

From January 1, 2011 through March 31, 2011, the Company and the Bank respectively paid each of their non-employee directors $800 per Board meeting attended and $600 per Board committee meeting attended plus a prorated annual retainer of $5,000 was provided to each non-employee Company director and $7,500 to each non-employee Bank director.  Beginning April 1, 2011, there was a change in the fee structure.  A flat dollar annual retainer was implemented with no separate meeting fees.  In addition, the new fee structure permitted a Director to elect to receive 0%, 50% or 100% of fees paid in equity.  The Board Chair received a retainer of $125,000, the Audit Committee Chair, a retainer of $100,000, and the Compensation, Governance and Senior Loan Committee Chairs, a retainer of $90,000.  All other non-employee directors received a retainer of $75,000.  These annual retainers were paid in one lump sum and reduced by any directors’ fees paid from January 1, 2011 through March 31, 2011.  Mr. Dean did not receive any fees.

Directors Stock Opportunity

Non-employee directors of the Company and the Bank are eligible to participate in the Company’s 2004 Stock Compensation Plan.  The Company determines annually if any grants will be made under the Plan.  For 2011, the non-employee directors of both the Company and the Bank determined that any grants of equity to non-employee directors, other than the opportunity to elect to receive all or a portion of the Company retainer fee in the form of full value shares for 2011, were not appropriate.

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 and/or chair and meeting fees.  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 on a previous page.  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.  No Director elected to defer fees in 2011.

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.

During 2011, the Compensation Committee met to review and discuss various compensation and incentive arrangements to ensure these arrangements do not encourage any unnecessary and excessive risk that may threaten the value of the Company.  These reviews included analysis and feedback from the designated senior risk officer (SRO), our SVP, Director of Enterprise Risk Management and Internal Audit and Credit Review Coordinator, as well as consultation and perspective from Human Resources, Corporate Legal, Credit and Risk, outside legal counsel and executive compensation consultants, where appropriate.  The table below lists the arrangements reviewed.

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The Compensation Committee’s review and discussion of the risks that face the Company concluded that the Company’s and Bank’s compensation philosophies, complemented by the appropriate balance and mix of cash and equity compensation, are adequate and the compensation arrangements and incentive plans are not reasonably likely to encourage unnecessary and excessive risk that may threaten the overall value of the financial institution.

Summary of the specific findings from the review included:

The Compensation Committee certifies that:

(1) It has reviewed with the senior risk officers, the Senior Executive Officers’ (“SEOs”, also known as NEOs) compensation plans and has made all reasonable efforts to ensure that these plans do not encourage SEOs to take unnecessary and excessive risks that threaten the value of the Company.

(2) It has reviewed with the senior risk officers the employee compensation plans and has made all reasonable efforts to limit any unnecessary risks these plans pose to the Company.

(3) It has reviewed the employee compensation plans to eliminate any features of these plans that would encourage reasonably likely manipulation of reported earnings of the Company to enhance the compensation of any employee.

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 the 2011 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 ending December 31, 2011.  Respectfully submitted by the current members of the Compensation Committee of the Board:

COMPENSATION DISCUSSION AND ANALYSIS

Set forth below is a discussion of the Company’s compensation policies for 2011, applicable to the individuals serving as the Company’s Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and the three (3) other most highly paid executives.  We refer to these executive positions as our Named Executive Officers (“NEOs”).

Say-on-Pay

The Company is required to permit a separate non-binding shareholder vote to approve the compensation of its executives, 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 will not be binding on the Board.  However, when setting compensation and in determining compensation policies, the Compensation Committee took into account the results of the April 2011 shareholder advisory vote on executive compensation and will continue to consider the outcome of this vote each year.

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Our shareholders approved the compensation of our NEOs as disclosed in the proxy statement for the 2011 annual meeting and approved the Board’s recommendation to hold advisory votes on an annual basis.  Approximately 98% of votes cast were voted in favor of the Company’s executive compensation.  The Committee believes that the results of these votes, is evidence that the Company’s compensation policies and decisions are in the best interests of its shareholders and expects to apply similar principles going forward.

Executive Summary

The Company’s and Bank’s overall financial performance began to improve in 2011 due to a reduction in credit costs and credit risk exposure and a $325 million capital raise from accredited investors in a private placement. As a result of the progress made toward a return to profitability, the Board approved and the NEOs received an adjustment in salary—initially through cash denominated performance units, and later in the year through restricted stock units.  Additional adjustments in salary were limited to a modest increase for Mr. Isono as a result of his promotion to Executive Vice President, Chief Financial Officer.  A decision was made to forgo annual incentives for the third year in a row, which extends to all executives, regardless of whether they are eligible to receive cash incentives under the TARP restrictions.  However, NEOs received a TARP compliant performance based long term restricted stock grant with a mandatory two-year cliff vesting period. These compensation decisions further emphasize the Board’s commitment to pay for performance in alignment with the interests of our shareholders

The compensation decisions and actions in 2011, recommended by the Compensation Committee and approved by the Board, were impacted by the following key factors:

Compensation Philosophy and Objectives

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

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Our compensation program has multiple pay components, including a fixed annual salary, variable annual cash incentive pay, variable long-term equity incentives, and other benefits. We believe that over the long term, a combination of pay components is essential to drive executives to achieve different goals.  Our compensation structure sets base compensation and the other short and long term cash and equity pay components allow us to develop the appropriate total compensation opportunity for our executives.  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.  The Company participated in the U.S. Treasury’s Capital Purchase Program under the Troubled Asset Relief Program (“TARP”).  As a result of the Company’s participation in TARP, in accordance with the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009, certain restrictions applied to our NEOs’ total compensation.  We discuss each of the pay components and the role they play in our overall compensation structure, in the “Compensation Framework” section. We describe the TARP restrictions in the “Other Issues Relevant to Executive Compensation” section.

Role of the Compensation Committee

The Compensation Committee is responsible for assisting the Board in overseeing the design and administration of our executive compensation program and the Company’s compensation policies, practices, and incentive plans for non-executives.   Such 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.  Appropriate reviews would include at least semi-annual discussions with the Committee appointed senior risk officer to ensure all incentive and bonus compensation plans, structures and arrangements, including those for NEOs, do not have a reasonable likelihood to encourage excessive and unnecessary risk taking and do not pose a threat to the Company’s safety and soundness or the Company’s financial stability.  The Committee also evaluates and recommends to the Board, appropriate policies and decisions relative to executive officer compensation and benefits, including determination of performance and payout targets under the Company’s annual and long-term incentive plans.  It also oversees preparation of executive compensation disclosures for inclusion in our Proxy Statement.

As a result of the Company participating in the United States Department of the Treasury’s Capital Purchase Program, the Compensation Committee’s role is expanded to ensure compliance with the Capital Purchase Program’s requirements.  For further information, see the “Other Issues Relevant to Executive Compensation” section.

Role of Executives in Compensation Committee Deliberations

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

The President & CEO does not provide recommendations for changes in his own compensation. The Compensation Committee discusses the President & CEO compensation with him, but the Committee makes final deliberations and all votes regarding the recommendation of his compensation to the full Board are made in an executive session, without the President & CEO present. The Committee initiates any changes in the President & CEO compensation based on a variety of factors including but not limited to, Company performance, regulatory restrictions/guidance, periodic market reviews, and recommendations from independent external executive compensation consultants. For executives other than the President & CEO, the Committee uses the President & CEO’s proposals and input from outside advisors in making its recommendations to the full Board.

Compensation Committee Activity and Key Initiatives During 2011

The Compensation 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 Company’s safety and soundness, and financial stability.  In 2011, the Compensation Committee met nine (9) times and completed the following initiatives and actions:

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Pay Level and Benchmarking

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

The peer group used to benchmark 2011 compensation to market remained identical to the group developed in late 2010 and was comprised of twenty-one (21) banks selected based on the following criteria:

1)              Publicly-traded non-thrift United States banks with executive compensation reported in public filings.

2)              Focus on Western banks; non-Western banks in major metropolitan areas were also included

3)              Fourth quarter 2010 assets ranging between $2.3 billion to $6.5 billion.

Of the twenty-one peer banks, nine were TARP participating companies and two of these nine converted their TARP Preferred Stock into common shares.  One peer bank, First State Bancorp in Albuquerque, NM (assets $2.3B), failed in 2011, reducing the peer group to twenty.

The Compensation Committee reviews the Compensation Peer Group’s composition on an annual basis and modifies the group as necessary to ensure alignment with the Company’s compensation philosophy, structure, and targeted performance levels.  When benchmarking is used to help determine the actual pay levels of each NEO, the Compensation Committee compares comparable positions in the peer group and also considers issues of internal pay equity, scope of responsibilities and experience.

Target Total Executive Compensation

The Compensation Committee compares NEO base salary, total cash and total direct compensation to the Compensation Peer Group.

Compensation Peer Group

The Compensation Committee approved the following peer group for compensation benchmarking in 2011.  Peers were selected based on the criteria identified earlier.

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Compensation Framework

In early 2011, the Compensation Committee retained McLagan to conduct our annual market analysis.  The analysis compared proposed adjustments to total compensation to market using the CPF Peer Group target level performance.   Results of the market comparison from a total compensation perspective showed John Dean’s compensation 10% below the market median and the aggregate compensation of the top five officers was slightly above market. In an effort to support teamwork, non-CEO NEOs were compensated with little variation in base salaries and no variation in variable compensation, therefore the focus is on total compensation to market of the group, rather than the individual. The market analysis results were used in determination and support of compensation adjustments described below for 2011.

Mix of Compensation – Historically, our compensation structure has been designed with a balance between salary and variable compensation with a majority of an executive’s direct compensation at-risk.  We moved away from this mix of compensation for the past several years due to the Company’s financial condition by suspending both long and short term incentive opportunities.  In 2011, the Board approved an adjustment to salaries through annual salary performance units.  In addition, to focus on the long term, TARP compliant performance based long term restricted stock grants were made.

Elements of Compensation – Generally, our executive compensation program consists of the following components to be used in the appropriate combination to meet our compensation philosophy and objectives including responding to changing financial conditions and regulatory restrictions and guidance.

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 Compensation 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. Based on the previously discussed decision to minimize variation in compensation among the non-CEO NEOs, there is very little differentiation in base salaries.

In making salary decisions, the Compensation 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 an effect on total compensation.  Before recommending salary changes to the Board, the Committee reviews the projected total compensation based on the proposed salaries.

Salary Adjustments Made in 2011 –A temporary annual increase in salary was implemented effective January 1, 2011, in the form of annual salary performance units that accrued and were earned equally each pay period over the course of the calendar year.  From January 1, 2011 through April 30, 2011, the annual salary performance units were in the form of cash denominated performance units.  Thereafter, the annual salary units were granted in the form of restricted stock units.  Receipt of both the cash denominated performance units and the restricted stock units is deferred until January 1, 2013.  Effective October 1, 2011, Denis Isono, former Executive Vice President and Chief Operations Officer, was promoted to Executive Vice President and Chief Financial Officer and received a promotional increase in base pay.

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The table below summarizes the NEOs’ annualized salaries in 2011 and the projected annualized salaries for 2012.

1.               Promoted from Executive Vice President, Chief Operations Officer to Executive Vice President, Chief Financial Officer on October 1, 2011 and received a $10,000 per annum promotional increase.

2.               Resigned on November 30, 2011.

3.               Hired as Executive Vice President, Chief Information Officer on June 6, 2011.

4.               Promoted from Executive Vice President, Special Credits to Executive Vice President, Chief Credit Officer on February 16, 2011.

5.               Included in Mr. Dean’s 2011 annualized salary is $206,664 in annual salary performance units. The other non-CEO NEOs 2011 annualized salary includes $100,000 in annual salary performance units, with the exception of Glen L. Blackmon, who received a prorated annual amount of $75,000 for the year.

Annual Cash Incentives

Generally, we use annual incentives to focus executives’ attention on current strategic priorities and drive achievement of short-term corporate objectives.  Management presented and the Compensation Committee accepted a recommendation to forgo annual incentive plans for 2011 performance to continue to support the Company’s expense reduction efforts, as well as to comply with cash incentive prohibitions under TARP.  Although not all NEOs were in the top five most highly compensated employees for 2011, management has chosen to treat its NEOs as if they were all bonus-limited in designing their compensation. There was one NEO, Mr. Wilson, who qualified for a bonus payment in 2011, due to his promotion to Chief Credit Officer

In February 2011, Mr. Wilson was appointed Executive Vice President and Chief Credit Officer (“CCO”). Prior to his appointment he was Executive Vice President of Special Credits and made a significant impact on improving the Company’s asset quality and reducing its credit risk exposure.  In his newly appointed role, Mr. Wilson continues to oversee these efforts and is developing long-term strategies for quality loan growth.  In lieu of providing him an equity grant, which was planned upon approval of his CCO appointment, in May 2011 the Compensation Committee and the Board approved a cash bonus payment of $35,000.

The Company recognizes that a key component to its success and progress in recovery is managing and leveraging information resources to strengthen its competitive position and improve profitability.  To that end, Glen L. Blackmon was selected to fill the newly created position of Executive Vice President, Chief Information Officer in June 2011.  Mr. Blackmon brings a wealth of proven experience and knowledge in technology and information management across multiple industries. As part of his employment offer, the Compensation Committee and Board of Directors approved a $75,000 sign-on bonus.

Long-Term Incentives

We use long-term incentives (“LTIs”) to encourage ownership, foster retention, and align executives’ interests with the long-term interests of shareholders.  For 2011, NEOs received a TARP compliant performance based long term restricted stock grant with a mandatory two-year cliff vesting period from date of grant. This grant is designed to align compensation to market and provide a long term focus on improved profitability.

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Other Compensation

The NEOs participate in our broad-based employee benefit plans, such as medical, dental, 401(k) and profit sharing, deferred compensation plan, supplemental disability and term life insurance programs.   The total amounts of these items are reflected in the “All Other Compensation” column of the Summary Compensation Table.  The Compensation Committee believes that these items enhance the effectiveness of our key executives and are consistent with industry practices in comparable banking companies. The Compensation Committee regularly reviews the perquisites we provide.

Other Issues Relevant to Executive Compensation - Emergency Economic Stabilization Act of 2008 (“EESA”) and American Recovery and Reinvestment Act of 2009 (“ARRA”)

On January 9, 2009, as part of the Capital Purchase Program under TARP in accordance with the EESA and pursuant to the terms of a Letter Agreement, dated January 9, 2009 and the related Securities Purchase Agreement—Standard Terms (collectively, the “Securities Purchase Agreement”), the Company issued and sold to the U.S. Treasury (i) 135,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B, without par value and having a liquidation preference of $1,000 per share (the “TARP Preferred Stock”), and (ii) a ten-year warrant to purchase up to 1,585,748 shares of the Company’s common stock, no par value, at an exercise price of $12.77 per share (on a pre-reverse split basis), for an aggregate purchase price of $135 million in cash. Concurrently with the Private Placement, the TARP Preferred Stock was exchanged for 5,620,117 common shares and the warrant was amended to reflect an exercise price of $10 per share and to reduce the number of common shares under the warrant to 79,288 to give effect to the 20 for 1 reverse stock split on February 2, 2011 pursuant to an Exchange Agreement between U.S. Treasury and the Company. As of June 22, 2011, the U.S. Treasury holds 2,770,117 common shares and the amended warrant, which has not been exercised.

Executive Compensation Limitations under EESA, ARRA and the Securities Purchase Agreement.  Under EESA, ARRA and the Securities Purchase Agreement, as amended by the Exchange Agreement, the Company is subject to certain restrictions with respect to the compensation of its Senior Executive Officers and other specified employees until such time as the U.S. Treasury ceases to own any equity or debt securities acquired from the Company pursuant to TARP (the “Securities”). It is the Company’s intent to fully comply with applicable restrictions as issued by the U.S. Treasury, FDIC, SEC and any other governing body.  In addition, it is the intent of the Company to comply with guidance from the FRB and FDIC with respect to sound incentive compensation policies.

For purposes of these restrictions and guidance, “Senior Executive Officers” or “SEOs” are defined as (1) the principal executive officer, (2) the principal financial officer and (3) the three most highly compensated executive officers other than the principal executive and financial officers as determined under applicable SEC rules. The Company has determined the following executive officers of the Company constitute “SEOs”:  Mr. Dean, Mr. Isono, Mr. Rodriguez (prior to resignation), Ms. Ngo, Mr. Wilson, and Mr.  Blackmon, and they are the same group of executives included in the Company’s definition of Named Executive Officers, (NEOs).

Unnecessary and Excessive Risk.  In accordance with regulatory restrictions and guidance, the Company has taken and will continue to take the appropriate steps to prevent incentivizing SEOs from taking unnecessary and excessive risks that threaten the value of the Company during the period the U.S. Treasury holds the Securities.

General Prohibition.  ARRA included an additional compensation standard prohibiting the use of any compensation plan that encourages manipulation of reported earnings.

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Prohibition on Bonus, Retention Awards or Incentive Compensation.  During the period the U.S. Treasury holds the Securities, the Company will be prohibited from paying or accruing any bonus, retention award or incentive compensation to the top five (5) most highly compensated employees (“MHCEs”) for the applicable period.  While the Company’s SEOs and MHCEs are not always the identical group, to demonstrate good faith compliance with this restriction, the Company has taken the position that all SEOs will be treated as though they were MHCEs, with the exception of the bonuses provided to Messrs. Wilson and Blackmon as a result of their promotion and offer of employment, respectively.  These restrictions do not apply to “long term” restricted stock that (1) does not “fully” vest while the Securities remain outstanding, (2) has a value that is one-third or less of the total amount of annual compensation of the employee receiving the restricted stock and (3) is subject to such other terms and conditions as U.S. Treasury may determine is in the public interest.

Clawbacks.  Any incentive or bonus payments paid to an SEO and the next twenty most highly-compensated employees during the period that the U.S. Treasury holds the Securities must be subject to a “clawback” if the payments were based on materially inaccurate financial statements or any other materially inaccurate financial performance metric criteria.

Golden Parachute Payment Prohibition.  The Company may not make any “golden parachute payments” to SEOs or the next five most highly compensated employees during the period the U.S. Treasury holds the Securities. For these purposes, the term “golden parachute payment” generally means any payment to a subject individual made on account of any termination from employment.

Deduction Limitations.  EESA also applies an amended deduction limitation under Section 162(m) of the Internal Revenue Code to the Company for the period that U.S. Treasury holds the Securities.  Under this new deduction limitation, the deduction limit for remuneration paid to SEOs during any taxable years was reduced from $1 million to $500,000.  The $500,000 deduction limit is computed without regard to “performance-based compensation” and certain deferrals of income.

Limitation on Luxury Expenditures.  ARRA requires the Board, during the period that U.S. Treasury holds the Securities, to have in place a Company-wide policy prohibiting excessive or luxury expenditures, as identified by the U.S. Treasury.

CEO and CFO Certifications of Compliance.  ARRA requires the CEO and CFO to provide to the SEC, written certifications of compliance with the EESA and ARRA executive compensation and corporate governance requirements.

As the Compensation Committee reviews the Company’s compensation arrangements going forward, it will continue to take into account, and the Company will comply with, the restrictions set forth in EESA and ARRA and related regulations, as they are promulgated.

Letter Agreements of the SEOs.  In connection with the issuance of the Securities, each of the NEOs that was or is a SEO for purposes of the Capital Purchase Program executed a letter agreement acknowledging and agreeing to the following:

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Adjustment or Recovery of Awards

Although we do not have a separate policy regarding recovery or clawback of incentive awards in the event of misstated or restated financials results, with our participation in the Capital Purchase Program, as discussed above, we are required to ensure that any executive incentive compensation plan does include such a provision for inaccurate financial statements or incentive criteria.  The Company has complied with this requirement for all incentive plans that have been reviewed and finalized.  Our long-term incentive plan currently permits us to cancel or terminate outstanding awards for any reason (which would include misstated or restated financial results).  In addition, Section 304 of the Sarbanes-Oxley Act provides the ability to recover incentive awards if we are required to restate our financial statements due to noncompliance with any financial reporting requirements as a result of misconduct.  In that case, the CEO and CFO must reimburse us for (1) any bonus or other incentive- or equity-based compensation received during the twelve (12) months following the first public issuance of the non-complying document, and (2) any profits realized from the sale of our securities during those twelve (12) months.  Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires the Securities and Exchange Commission to direct national securities exchanges to prohibit the listing of any security that fails to adopt a compliant clawback policy for any current or former executive officer if the company is required to file a financial restatement as a result of material noncompliance with applicable securities laws.  This clawback applies to incentive-based compensation during the 3-year period preceding the date on which the issuer is required to prepare an accounting restatement, based on the erroneous data, in excess of what would have been paid to the executive officer under the accounting restatement.  The NYSE has not yet promulgated final rules implementing Section 954 of the Dodd-Frank Act.

Timing of Equity Grants

On October 25, 2006, we adopted guidelines regarding the equity grant process and related controls.  The guidelines, which were reviewed and readopted (with minor changes) on  May 20, 2011, are to help ensure that all equity grants are reported and disclosed correctly and accurately, are properly accounted for, and receive proper tax treatment.  The grant guidelines are designed to avoid making regular grants during a regularly scheduled Company blackout period, to avoid having the timing of grant dates be affected by material nonpublic information, and to confirm the use of no less than the closing price of our stock on the grant date.

Stock Ownership Guidelines

On July 27, 2005, the Board adopted stock ownership guidelines applicable to all Directors and executive officers of the Company and the Bank, which were reviewed and amended on January 30, 2008 and April 28, 2010.  The purpose of the guidelines was to define meaningful ownership level expectations for these individuals to more closely align their interests with our shareholders.  Under the guidelines, Directors and certain executives of the Company and Bank were expected to own Common Stock with a value equal to a multiple of their annual retainer or base salary, as applicable, within a specified time period.  Although many of the Company’s Directors and executives had met or made significant progress towards the ownership goals, because the guidelines are defined in terms of share value, and not as a number of shares, meeting the guidelines given the decline in our stock price proved unworkable. As a result, on January 26, 2011, the Board terminated the stock ownership guidelines.  The Company remains committed to the principles from which these guidelines were formed and continues to expect Directors and executives to maintain a meaningful stock ownership in the Company.

Employment Agreements

None of the current NEOs has an employment agreement with the Company and each is employed on an “at will” basis.

Change-In-Control Agreement

None of the current NEOs has a change in control agreement.

Tax and Accounting Considerations

We consider tax and accounting implications in designing our compensation programs.  For example, in selecting long-term incentive compensation elements, the Compensation Committee reviews the projected expense amounts and expense timing associated with alternative types of awards.  Under current accounting rules (i.e., Financial Accounting Standard ASC Topic 718), we must expense the grant-date fair value of share-based grants such as restricted stock, performance shares, and SARs settled in our stock.  The grant-date fair value is amortized and expensed over the service period or vesting period of the grant.  In contrast, awards that are not share-based (e.g., phantom stock) are expensed based on a value that may fluctuate widely over the vesting period and is not fixed at grant date.  In selecting appropriate incentive devices, the Compensation Committee reviews extensive modeling analyses and considers the related tax and accounting issues.  Section 162(m) of the Internal Revenue Code generally places a limit on the tax deduction for compensation in excess of $1 million paid to the chief executive officer and the other four most highly compensated executive officers of a corporation in a taxable year.  In addition, our participation in the Capital Purchase Program has reduced this limit to $500,000 for our NEOs and expanded the definition of what is includable in “compensation”.  The Committee has retained the flexibility, however, to pay compensation which is not deductible for tax purposes because it believes that doing so permits it to take into consideration factors that are consistent with good corporate governance and the best interests of our shareholders.

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Conclusion

2011 was a significant year for the Company.  Our financial condition, financial performance and credit risk profile all improved together with an overall reduction in our nonperforming assets, which allowed us to significantly reduce our allowance for loan and lease losses.  We believe we made progress towards our goal to achieve sustainable profitability and to manage liquidity and expenses. In light of the improved condition of the Company and in recognition of the contributions of the leadership team, the Compensation Committee, and the Board fully supported the decision to enhance base salary with periodic annual salary performance units and to award a long term performance based grant of restricted stock to all NEOs.

The Compensation Committee and the Board believe that, in the longer term, it is important to provide market based compensation that will attract and retain highly talented executives with the appropriate competencies and skills necessary for the Company’s success.   Such compensation would include the full range of compensation components, including incentive awards that would vary with our financial performance based on achieving our strategic plan and goals without encouraging excessive and unnecessary risk that could threaten the overall value of the Company. Equally important is the need to maintain shareholder confidence and comply with regulatory executive compensation restrictions and guidance by developing appropriate compensation structures.

Therefore, the Compensation Committee evaluates our compensation program and its related components on an ongoing basis.   Adjustments are made to the compensation structure as appropriate to maintain the Company’s competitive position for executive talent, consistent with our compensation philosophy and objectives, and within the parameters of regulatory restrictions and guidance.  The Committee intends this Compensation Discussion and Analysis to provide full, transparent disclosure of what we believe to be a thoughtfully designed compensation structure which focuses on the achievement of short term objectives, and affirms the philosophy for driving long-term shareholder value.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

As of December 31, 2011, the Compensation Committee of the Company was composed entirely of the following four (4) independent Directors: Christine H. H. Camp (Chair), Alvaro J. Aguirre, Earl E. Fry, and Crystal K. Rose.  This list of members reflects a change in composition of the Committee effective February 18, 2011 for Camp and Rose and February 24, 2011 for Aguirre. None of the Compensation Committee members were or are former officers or employees of the Company.  Relationships that members of the Compensation Committee have had and/or maintain with the Company are described in the “Corporate Governance and Board Matters-Director Independence and Relationships” section.

EXECUTIVE COMPENSATION

The table below summarizes the total compensation earned by each of the NEOs for the fiscal year ending December 31, 2011, 2010 and 2009 to the extent such executives served during such periods.  The material terms of compensation of the NEOs are discussed in the Compensation narrative following the Option Exercises and Stock Vested table.

SUMMARY COMPENSATION TABLE

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