SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

______________________

T	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-10777

CENTRAL PACIFIC FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

Hawaii	99-0212597
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

220 South King Street, Honolulu, Hawaii 96813

(Address of principal executive offices) (Zip Code)

(Registrant’s telephone number, including area code)

Large accelerated filer T

Accelerated filer £

Non-accelerated filer £

Smaller reporting company £

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

Forward-Looking Statements

Item 1. Financial Statements

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended
March 31,
(Amounts in thousands, except per share data) 2008 2007

Interest income:
  Interest and fees on loans and leases $ 70,294 $ 76,166
  Interest and dividends on investment securities:
    Taxable interest 9,271 8,712
    Tax-exempt interest 1,389 1,363
    Dividends 24 33
  Interest on deposits in other banks 4 35
  Interest on Federal funds sold and securities purchased under agreements to resell 21 10
  Dividends on Federal Home Loan Bank stock 122 98
    Total interest income 81,125 86,417

Interest expense:
  Interest on deposits:
    Demand 137 138
    Savings and money market 3,785 6,284
    Time 14,729 15,835
  Interest on short-term borrowings 1,923 505
  Interest on long-term debt 9,694 9,968
    Total interest expense 30,268 32,730

    Net interest income 50,857 53,687
Provision for loan and lease losses 34,272 2,600
    Net interest income after provision for loan and lease losses 16,585 51,087

Other operating income:
  Service charges on deposit accounts 3,543 3,444
  Other service charges and fees 3,415 3,357
  Income from fiduciary activities 1,005 761
  Equity in earnings of unconsolidated subsidiaries 283 257
  Fees on foreign exchange 194 221
  Loan placement fees 153 259
  Gains on sales of loans 1,798 1,367
  Income from bank-owned life insurance 1,870 1,031
  Other 2,018 455
    Total other operating income 14,279 11,152

Other operating expense:
  Salaries and employee benefits 17,364 16,406
  Net occupancy 2,853 2,504
  Equipment 1,395 1,230
  Amortization of core deposit premium 668 685
  Amortization of mortgage servicing rights 501 510
  Communication expense 1,085 1,148
  Legal and professional services 2,413 2,327
  Computer software expense 863 799
  Advertising expense 682 623
  Foreclosed asset expense 2,590 -
  Other 1,046 4,244
    Total other operating expense 31,460 30,476

     Income (loss) before income taxes (596 ) 31,763
Income taxes (2,254 ) 11,628
     Net income $ 1,658 $ 20,135

Per share data:
   Basic earnings per share $ 0.06 $ 0.66
   Diluted earnings per share 0.06 0.65
   Cash dividends declared 0.25 0.24

Shares used in computation:
  Basic shares 28,686 30,699
  Diluted shares 28,801 30,988

See accompanying notes to consolidated financial statements.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
(Amounts in thousands, except per share data)	2008			2007		2008			2007

Interest income:
Interest and fees on loans and leases	$	65,677		$	77,070	$	135,971		$	153,236
Interest and dividends on investment securities:
Taxable interest		9,308			8,866		18,579			17,578
Tax-exempt interest		1,416			1,365		2,805			2,728
Dividends		11			60		35			93
Interest on deposits in other banks		3			39		7			74
Interest on Federal funds sold and securities purchased under agreements to resell		22			109		43			119
Dividends on Federal Home Loan Bank stock		171			24		293			122
Total interest income		76,608			87,533		157,733			173,950

Interest expense:
Interest on deposits:
Demand		179			141		316			279
Savings and money market		2,980			6,166		6,765			12,452
Time		11,706			17,424		26,435			33,257
Interest on short-term borrowings		2,357			303		4,280			808
Interest on long-term debt		8,002			10,616		17,696			20,584
Total interest expense		25,224			34,650		55,492			67,380

Net interest income		51,384			52,883		102,241			106,570
Provision for loan and lease losses		87,800			1,000		122,072			3,600
Net interest income (loss) after provision for loan and lease losses		(36,416	)		51,883		(19,831	)		102,970

Other operating income:
Service charges on deposit accounts		3,511			3,463		7,054			6,907
Other service charges and fees		3,710			3,414		7,125			6,771
Income from fiduciary activities		990			854		1,995			1,615
Equity in earnings of unconsolidated subsidiaries		131			167		414			424
Fees on foreign exchange		112			171		306			392
Investment securities gains		253			-		253			-
Loan placement fees		213			283		366			542
Net gain on sales of residential loans		2,241			1,403		4,039			2,770
Income from bank-owned life insurance		845			1,183		2,715			2,214
Other		(75	)		600		1,943			1,055
Total other operating income		11,931			11,538		26,210			22,690

Other operating expense:
Salaries and employee benefits		18,648			16,888		36,012			33,294
Net occupancy		3,266			2,593		6,119			5,097
Equipment		1,433			1,325		2,828			2,555
Amortization of core deposit premium		669			685		1,337			1,370
Amortization of mortgage servicing rights		612			500		1,113			1,010
Communication expense		1,125			938		2,210			2,086
Legal and professional services		2,615			2,110		5,028			4,437
Computer software expense		809			893		1,672			1,692
Advertising expense		700			635		1,382			1,258
Goodwill impairment		94,279			-		94,279			-
Foreclosed asset expense		3,984			-		6,574			-
Loss on sales of commercial real estate loans		1,671			-		1,671			-
Write down of assets		22,424			-		22,424			-
Other		8,048			4,764		9,094			9,008
Total other operating expense		160,283			31,331		191,743			61,807

Income (loss) before income taxes		(184,768	)		32,090		(185,364	)		63,853
Income tax expense (benefit)		(38,510	)		11,074		(40,764	)		22,702
Net income (loss)	$	(146,258	)	$	21,016	$	(144,600	)	$	41,151

Per share data:
Basic earnings (loss) per share	$	(5.10	)	$	0.69	$	(5.04	)	$	1.34
Diluted earnings (loss) per share		(5.10	)		0.68		(5.04	)		1.33
Cash dividends declared		0.25			0.24		0.50			0.48

Shares used in computation:
Basic shares		28,652			30,555		28,670			30,627
Diluted shares		28,652			30,798		28,670			30,894

See accompanying notes to consolidated financial statements.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months Ended
March 31,
(Dollars in thousands) 2008 2007

Cash flows from operating activities:
Net income $ 1,658 $ 20,135
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses 34,272 2,600
Depreciation and amortization 1,864 1,742
Amortization of intangible assets 1,169 1,195
Net amortization of investment securities 462 564
Share-based compensation 612 1,262
Deferred income tax expense 6,776 4,572
Net gain on sale of loans (1,798 ) (1,367 )
Proceeds from sales of loans held for sale 353,790 195,552
Originations of loans held for sale (352,083 ) (209,124 )
Tax benefits from share-based compensation (40 ) -
Equity in earnings of unconsolidated subsidiaries (283 ) (257 )
Increase in cash surrender value of bank-owned life insurance (1,870 ) (1,026 )
Net change in other assets and liabilities (18,274 ) (6,304 )
Net cash provided by operating activities 26,255 9,544

Cash flows from investing activities:
Proceeds from maturities of and calls on investment securities held to maturity 19,187 12,386
Proceeds from maturities of and calls on investment securities available for sale 201,684 241,987
Purchases of investment securities available for sale (213,065 ) (221,038 )
Net loan originations (151,089 ) (62,605 )
Proceeds from bank-owned life insurance 843 -
Purchases of premises and equipment (2,527 ) (1,417 )
Distributions from unconsolidated subsidiaries 620 527
Contributions to unconsolidated subsidiaries - (167 )
Net cash used in investing activities (144,347 ) (30,327 )

Cash flows from financing activities:
Net increase (decrease) in deposits (222,698 ) 1,138
Proceeds from long-term debt 30,000 100,000
Repayments of long-term debt (30,365 ) (35,344 )
Net increase (decrease) in short-term borrowings 352,375 (54,269 )
Cash dividends paid (7,190 ) (7,380 )
Tax benefits from share-based compensation 40 -
Repurchases of common stock (1,825 ) (1,972 )
Proceeds from issuance of common stock 194 95
Proceeds from stock option exercises - 984
Net cash provided by financing activities 120,531 3,252

Net increase (decrease) in cash and cash equivalents 2,439 (17,531 )
Cash and cash equivalents at beginning of period 82,129 135,648
Cash and cash equivalents at end of period $ 84,568 $ 118,117

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 31,190 $ 31,051
Income taxes 1,315 1,160
Cash received during the period for:
Income taxes

Supplemental disclosure of noncash investing and financing activities:
Net change in common stock held by directors' deferred compensation plan $ 20 $ 11
Reclassification of loans to other real estate 2,000 -
Transfer of loans to loans held for sale 60,080 -

See accompanying notes to consolidated financial statements.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six Months Ended
	June 30,
(Dollars in thousands)	2008			2007

Cash flows from operating activities:
Net income (loss)	$	(144,600	)	$	41,151
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan and lease losses		122,072			3,600
Depreciation and amortization		3,881			3,515
Goodwill impairment		94,279			-
Write down of assets		22,424			-
Foreclosed asset expense		6,574			-
Amortization of intangible assets		2,450			2,380
Net amortization of investment securities		691			859
Share-based compensation		1,164			2,176
Net gain on investment securities		(253	)		-
Deferred income tax expense (benefit)		(4,504	)		4,363
Net gain on sales of residential loans		(4,039	)		(2,770	)
Loss on sale of commercial real estate loans		1,671			-
Proceeds from sales of loans held for sale		817,958			421,200
Originations of loans held for sale		(721,898	)		(437,300	)
Tax benefits from share-based compensation		(40	)		-
Equity in earnings of unconsolidated subsidiaries		(414	)		(424	)
Increase in cash surrender value of bank-owned life insurance		(2,706	)		(2,203	)
Increase in income tax receivable		(48,051	)		(2,660	)
Net change in other assets and liabilities		(13,159	)		(8,186	)
Net cash provided by operating activities		133,500			25,701

Cash flows from investing activities:
Proceeds from maturities of and calls on investment securities held to maturity		20,058			15,644
Proceeds from maturities of and calls on investment securities available for sale		311,868			394,853
Purchases of investment securities available for sale		(292,694	)		(378,709	)
Net loan originations		(351,783	)		(95,126	)
Proceeds from sales of loans originated for investment		64,901			-
Proceeds from sales of securitized residential mortgage loans		20,838			-
Proceeds from bank-owned life insurance		843			-
Purchases of premises and equipment		(3,764	)		(4,296	)
Distributions from unconsolidated subsidiaries		632			577
Contributions to unconsolidated subsidiaries		(845	)		(2,668	)
Acquisition of minority interests, net of cash acquired		(3,150	)		-
Net cash used in investing activities		(233,096	)		(69,725	)

Cash flows from financing activities:
Net increase (decrease) in deposits		(82,089	)		70,374
Proceeds from long-term debt		30,000			150,000
Repayments of long-term debt		(60,736	)		(72,693	)
Net increase (decrease) in short-term borrowings		259,186			(77,405	)
Cash dividends paid		(14,367	)		(14,714	)
Tax benefits from share-based compensation		40			-
Repurchases of common stock		(1,824	)		(12,184	)
Proceeds from issuance of common stock		350			250
Proceeds from stock option exercises		9			1,017
Net cash provided by financing activities		130,569			44,645

Net increase in cash and cash equivalents		30,973			621
Cash and cash equivalents at beginning of period		82,129			135,648
Cash and cash equivalents at end of period	$	113,102		$	136,269

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	61,371		$	64,940
Income taxes		12,920			15,811

Supplemental disclosure of noncash investing and financing activities:
Net change in common stock held by directors' deferred compensation plan	$	44		$	22
Net reclassification of loans to other real estate		7,401			-
Net transfer of loans to loans held for sale		162,984			-
Securitization of residential mortgage loans into trading mortgage backed securities		4,995			-

See accompanying notes to consolidated financial statements.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Central Pacific Financial Corp. (referred to herein as “the Company,” “we,” “us,” or “our”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These interim condensed consolidated financial statements and notes should be read in conjunction with the Company’s consolidated financial statements and notes thereto filed on Form 10-K for the fiscal year ended December 31, 2007. In the opinion of management, all adjustments necessary for a fair presentation have been made and include all normal recurring adjustments. Interim results of operations are not necessarily indicative of results to be expected for the year.

Certain prior period amounts in the consolidated financial statements and the notes thereto have been reclassified to conform to the current period presentation. Such reclassifications had no effect on net income (loss) or shareholders’ equity for any periods presented.

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

~~In September 2006,~~On January 1, 2008, we adopted the ~~FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”).~~ following new accounting pronouncements:

·	SFAS 157 – Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,”

·	SFAS 159 – Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,”

·	EITF 06-10 – Emerging Issues Task Force Issue 06-10, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements,” and

·	SAB 109 – Staff Accounting Bulletin No. 109, “Written Loan Commitments Recorded at Fair Value Through Earnings.”

The ~~standard defines fair value, establishes~~adoption of these pronouncements did not have a framework for measuring fair value in accounting principles generally accepted in the United States of America and expands disclosure about fair value measurements. The pronouncement applies under other accounting standards that require or permit fair value measurements. Accordingly, the statement does not require any new fair value measurement.material impact on our consolidated financial statements.

In February 2008, the FASB amended SFAS 157 through the issuance of FSP FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13” and FSP FAS 157-2, “Effective Date of FASB Statement No. 157.” FSP FAS 157-1 is effective upon the initial adoption of SFAS 157 and amends SFAS 157 to exclude from its scope certain accounting pronouncements that address fair value measurements associated with leases. FSP FAS 157-2 is effective upon issuance and delays the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, for nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). We adopted the provisions of SFAS 157 for financial assets and liabilities beginning January 1, 2008 and such adoption did not have a material impact on our consolidated financial statements (see Note 12). As permitted under SFAS 157, we plan to adopt the provisions of SFAS 157 for nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in our financial statements on a recurring basis effective January 1, 2009. We are evaluating the impact of the adoption of SFAS 157 for nonfinancial assets and nonfinancial liabilities on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We adopted the provisions of SFAS 159 beginning January 1, 2008 and such adoption did not have a material impact on our consolidated financial statements.

In March 2007, the FASB ratified EITF No. 06-10 “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements” (“EITF 06-10”). EITF 06-10 requires that an employer recognize a liability for the postretirement benefit obligation related to a collateral assignment arrangement in accordance with SFAS No. 106 “Employers’ Accounting for Postretirement Benefits Other Than Pensions” (if deemed part of a postretirement plan) or Accounting Principles Board Opinion 12 “Omnibus Opinion-1967” (if not part of a plan). The consensus is applicable if, based on the substantive agreement with the employee, the employer has agreed to (a) maintain a life insurance policy during the postretirement period or (b) provide a death benefit. The EITF also reached a consensus that an employer should recognize and measure the associated asset on the basis of the terms of the collateral assignment arrangement. We adopted the provisions of EITF 06-10 beginning January 1, 2008 and such adoption did not have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) establishes principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest (minority interest) in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination or a gain from a bargain purchase and determining what information should be disclosed to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) is to be applied prospectively to business combinations for which the acquisition date is on or after fiscal years beginning after December 15, 2008. We are currently assessing the impact of this ~~statement~~pronouncement on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent's equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. SFAS 160 clarifies that changes in a parent's ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this statement requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation date. SFAS 160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. We are evaluating the impact of this ~~new~~ pronouncement on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement 133” (“SFAS 161”). SFAS 161 enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how (a) an entity uses derivative instruments; (b) derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities; and (c) derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. Specifically, SFAS 161 requires (1) disclosure of the objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation; (2) disclosure of the fair values of derivative instruments and their gains and losses in a tabular format; (3) disclosure of information about credit-risk-related contingent features; and (4) cross-reference from the derivative footnote to other footnotes in which derivative-related information is disclosed. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. We are evaluating the impact of this ~~new~~pronouncement on our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. SFAS 162 is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411. We are evaluating the impact of this pronouncement on our consolidated financial statements.

In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (FSP EITF 03-6-1”). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. We are evaluating the impact of this pronouncement on our consolidated financial statements.

3. LOANS AND LEASES

Loans, excluding loans held for sale, consisted of the following at the dates indicated:

	March 31,			December 31,			June 30,			December 31,
	2008			2007
	(Dollars in thousands)
(Dollars in thousands)							2008			2007

Commercial, Financial and Agricultural	$	379,721		$	385,521		$	389,042		$	385,521
Real Estate:
Construction		1,196,297			1,226,138			1,092,426			1,226,138
Mortgage-Residential		1,074,721			1,036,779			1,084,685			1,036,702
Mortgage-Commercial		1,282,015			1,243,383			1,272,526			1,243,383
Consumer		202,871			209,166			196,590			209,166
Leases		53,373			53,303			53,307			53,303
		4,188,998			4,154,290			4,088,576			4,154,213
Unearned income		(12,402	)		(12,585	)		(10,620	)		(12,508	)
Total loans and leases	$	4,176,596		$	4,141,705		$	4,077,956		$	4,141,705

4. ALLOWANCE FOR LOAN AND LEASE LOSSES

	Three Months Ended						Three Months Ended						Six Months Ended
	March 31,						June 30,						June 30,
	2008			2007
	(Dollars in thousands)
(Dollars in thousands)							2008			2007			2008			2007

Balance, beginning of period	$	92,049		$	52,280		$	72,108		$	50,614		$	92,049		$	52,280
Provision for loan and lease losses		34,272			2,600			87,800			1,000			122,072			3,600
		126,321			54,880			159,908			51,614			214,121			55,880
Charge-offs		(54,810	)		(4,835	)		(74,257	)		(843	)		(129,067	)		(5,678	)
Recoveries		597			569			399			638			996			1,207
Net charge-offs		(54,213	)		(4,266	)		(73,858	)		(205	)		(128,071	)		(4,471	)
Balance, end of period	$	72,108		$	50,614		$	86,050		$	51,409		$	86,050		$	51,409

The increase in the Allowance during the three months ended March 31, 2008 was primarily due to an increase in the number of loans that were downgraded, as well as an increase in specific reserves on certain impaired loans.

As a result of the downturn in the California residential construction market, which began in 2007 and has continued through the ~~first~~second quarter of 2008, some of our borrowers are finding it increasingly difficult to repay amounts due on their outstanding balances as they primarily rely on the proceeds received from the sales of homes to repay their loans. ~~Accordingly,~~In turn, the collateral values securing some of these loans have significantly declined in value as evidenced by appraisals received in the first and second quarters of 2008. Current appraisals reflect market values that have dropped more than 50% from the market values indicated in appraisals obtained in the latter part of 2007. These factors have contributed to increases in the number of loan downgrades, nonaccrual loans, specific reserves on certain impaired loans and certain loan loss factors for specified pools of loans during the six months ended June 30, 2008. Additionally, our methodology for determining the adequacy of the Allowance has required that we increase our reserve levels on these loans.

Net charge-offs for the three and six months ended June 30, 2008 included charge-offs of loans ~~be downgraded. We also increased the amount~~transferred to loans held for sale of ~~specific reserves for certain~~$51.0 million and $79.5 million, respectively, and were primarily concentrated on loans with direct exposure to ~~this~~the California residential construction market. ~~Deterioration of the economy in the United States generally as well as the economies of Hawaii and/or California, and any further deterioration in~~

In July 2008, we reduced our exposure to the California residential construction market by selling certain non-performing assets with a combined carrying amount of $44.2 million at June 30, 2008. No gain or loss was recorded on the sale as the carrying values of these assets were written down to their sales price at June 30, 2008. Upon completion of the sale, our remaining asset exposure to the California residential construction sector was $102.1 million.

5. SECURITIZATIONS

During the second quarter of 2008, we securitized certain residential mortgage loans with an outstanding principal balance of $25.6 million that were previously held in our ~~borrowers’ ability~~loan portfolio, with a U.S. Government sponsored entity. After the securitizations, we continued to ~~repay~~hold mortgage-backed securities and service the residential mortgage loans. We recorded a servicing asset related to the securitizations of $0.3 million. At June 30, 2008, the unsold mortgage-backed securities that we received were categorized as trading securities and were therefore recorded at their ~~loans, may require us to increase~~fair value of $5.1 million. Any gains or losses realized on the sale of such securities and any subsequent changes in unrealized gains and losses are reported in our ~~Allowance in the future, increase our provision for loan and lease losses and may result in increased net charge-offs.~~consolidated statement of operations.

5.6. GOODWILL AND OTHER INTANGIBLE ASSETS

The following table presents the changes in goodwill allocated to each of our reportable segments during the six months ended June 30, 2008:

	Hawaii			Commercial
(Dollars in thousands)	Market			Real Estate			Total

Balance, beginning of period	$	150,423		$	94,279		$	244,702
Additions		120			-			120
Reductions		(29	)		-			(29	)
Impairment charge		-			(94,279	)		(94,279	)
Balance, end of period	$	150,514		$	-		$	150,514

At June 30, 2008, we experienced a decline in our market capitalization which we determined to be an indicator that an impairment test was required under SFAS 142. As a result of the impairment test performed, we determined that the remaining goodwill associated with our Commercial Real Estate reporting segment was impaired and we recorded an impairment charge of $94.3 million in the second quarter of 2008.

Other intangible assets include a core deposit premium and mortgage servicing rights. The following table presents changes in other intangible assets for the ~~three~~six months ended ~~March 31,~~June 30, 2008:

	Core			Mortgage			Core			Mortgage
	Deposit			Servicing			Deposit			Servicing
	Premium			Rights
	(Dollars in thousands)
(Dollars in thousands)							Premium			Rights

Balance, beginning of period	$	28,750		$	11,222		$	28,750		$	11,222
Additions		-			815			-			3,513
Amortization		(668	)		(501	)		(1,337	)		(1,113	)
Balance, end of period	$	28,082		$	11,536		$	27,413		$	13,622

The gross carrying value and accumulated amortization related to the core deposit premium and mortgage servicing rights are presented below:

	March 31, 2008							December 31, 2007							June 30, 2008							December 31, 2007
	Gross							Gross							Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated					Carrying		Accumulated					Carrying		Accumulated
	Value		Amortization			Net		Value		Amortization			Net
	(Dollars in thousands)
(Dollars in thousands)															Value		Amortization			Net		Value		Amortization			Net

Core deposit premium	$	44,642	$	(16,560	)	$	28,082	$	44,642	$	(15,892	)	$	28,750	$	44,642	$	(17,229	)	$	27,413	$	44,642	$	(15,892	)	$	28,750
Mortgage servicing rights		21,335		(9,799	)		11,536		20,520		(9,298	)		11,222		24,033		(10,411	)		13,622		20,520		(9,298	)		11,222

Based on the core deposit premium and mortgage servicing rights held as of ~~March 31,~~June 30, 2008, estimated amortization expense for the remainder of fiscal 2008, the next five succeeding fiscal years and all years thereafter are as follows:

	Estimated Amortization Expense				Estimated Amortization Expense
			Mortgage				Mortgage
	Core Deposit		Servicing		Core Deposit		Servicing
	Premium		Rights
	(Dollars in thousands)
(Dollars in thousands)					Premium		Rights

2008 (remainder)	$	2,006	$	1,276	$	1,337	$	795
2009		2,674		1,454		2,674		1,730
2010		2,674		1,250		2,674		1,536
2011		2,674		1,068		2,674		1,351
2012		2,674		916		2,674		1,188
2013		2,674		788		2,674		1,044
Thereafter		12,706		4,784		12,706		5,978
	$	28,082	$	11,536	$	27,413	$	13,622

~~7. SHARE REPURCHASE~~

8.9. SHARE-BASED COMPENSATION

	Three Months Ended						Three Months Ended						Six Months Ended
	March 31,						June 30,						June 30,
	2008			2007
	(Dollars in thousands)
(Dollars in thousands)							2008			2007			2008			2007

Salaries and employee benefits	$	612		$	1,262		$	553		$	914		$	1,164		$	2,176
Income tax benefit		(245	)		(506	)		(222	)		(366	)		(467	)		(872	)
Net share-based compensation effect	$	367		$	756		$	331		$	548		$	697		$	1,304

In accordance with SFAS 123R, we are required to base initial share-based compensation expense on the estimated number of awards for which the requisite service and performance is expected to be rendered.

Stock Option ~~Plans~~

We have adopted stock option plans for the purpose of granting options to purchase the Company’s common stock to directors, officers and other key individuals. Option awards are granted with an exercise price equal to the market price of the Company’s common stock at the date of grant; those option awards generally vest based on three or five years of continuous service and have 10-year contractual terms. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined in the stock option plans below). We have historically issued new shares of common stock upon exercises of stock options and purchases of restricted awards.

In February 1997, we adopted the 1997 Stock Option Plan (“1997 Plan”) basically as a continuance of the 1986 Stock Option Plan. In April 1997, the Company’s shareholders approved the 1997 Plan, which provided 2,000,000 shares of the Company’s common stock for grants to employees as qualified incentive stock options and to directors as nonqualified stock options.

In September 2004, we adopted and the Company’s shareholders approved the 2004 Stock Compensation Plan (“2004 Plan”) making available 1,989,224 shares for grants to employees and directors. Upon adoption of the 2004 Plan, all unissued shares from the 1997 Plan were frozen and no new options will be granted under the 1997 Plan. Optionees may exercise outstanding options granted pursuant to the 1997 Plan until the expiration of the respective options in accordance with the original terms of the 1997 Plan. To satisfy share issuances pursuant to the share-based compensation programs, we issue new shares from the 2004 Plan.Activity

The following is a summary of stock option activity for the Company’s stock option plans for the ~~three~~six months ended ~~March 31,~~June 30, 2008:

Weighted Average
Shares Exercise Price

Outstanding at January 1, 2008 872,912 $ 27.90
Changes during the period:
Granted 93,000 18.88
Forfeited (17,163 ) 36.43
Outstanding at March 31, 2008 948,749 26.86

			Weighted Average
	Shares		Exercise Price

Outstanding at January 1, 2008	872,912		$	27.90
Changes during the period:
Granted	95,000			18.75
Exercised	(1,000	)		9.24
Expired	(2,213	)		26.66
Forfeited	(36,249	)		35.37
Outstanding at June 30, 2008	928,450			26.70

We estimate the fair value of stock options granted using the Black-Scholes option pricing formula and a single option award approach. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The fair value of the Company’s stock options granted to employees for the three and six months ended ~~March 31,~~June 30, 2008 and 2007 was estimated using the following weighted-average assumptions:

	Three Months Ended						Three Months Ended						Six Months Ended
	March 31,						June 30,						June 30,
	2008			2007			2008			2007			2008			2007

Expected volatility		32.0	%		33.3	%		32.5	%		-	%		32.0	%		33.3	%
Risk free interest rate		2.8	%		4.5	%		4.9	%		-	%		2.8	%		4.5	%
Expected dividends		5.3	%		2.8	%		8.0	%		-	%		5.4	%		2.8	%
Expected life (in years)		6.5			7.5			6.5			-			6.5			7.5
Weighted average fair value	$	3.50		$	11.40		$	1.89		$	-		$	3.47		$	11.40

There were no stock options granted during the three months ended June 30, 2007.

Restricted Stock Awards

~~Under~~The table below presents the ~~1997 and 2004 Plans, we~~activity of restricted stock awards for the six months ended June 30, 2008:

			Weighted Average
			Grant Date
	Shares		Fair Value

Nonvested at January 1, 2008	44,620		$	34.87
Changes during the period:
Forfeited	(2,500	)		36.95
Nonvested at June 30, 2008	42,120			34.74

We awarded restricted stock awards to our non-officer directors and certain senior management personnel. The awards typically vest over a three or five year period. Compensation expense is measured as the market price of the stock awards on the grant date, and is recognized over the specified vesting periods.

~~The table below presents the activity of restricted stock awards for the three months ended March 31, 2008:~~

Weighted Average
Grant Date
Shares Fair Value

Nonvested at January 1, 2008 44,620 $ 34.87
Changes during the period:
Forfeited (2,500 ) 36.95
Nonvested at March 31, 2008 42,120 34.74

Performance Shares and Stock Appreciation Rights

In 2005 and 2008, we established a Long Term Incentive ~~Plan (“~~Plans (the “2005 LTIP” and “2008 LTIP”) that covers certain executive and senior management personnel. ~~The~~Awards granted under the 2005 LTIP isare comprised of three components: performance shares, stock appreciation rights (“SARs”) and cash ~~awards.~~

~~Performance shares are~~awards, while awards granted under the 2008 LTIP consists of performance shares and SARs. All performance shares and SARs awarded under both the 2005 LTIP and 2008 LTIP are granted from the Company’s 2004 ~~Plan and~~Stock Compensation Plan.

Performance shares granted under the 2005 LTIP vest based on achieving both performance and service conditions. Performance conditions require achievement of stated goals including earnings per share, credit quality and efficiency ratio targets. The service condition ~~requires~~required employees to be employed continuously with the Company through March 15, 2008. The fair value of the grant to be recognized over this service period is determined based on the market value of the stock on the grant date, multiplied by the probability of the granted shares being earned. This requires us to assess the expectation over the performance period of the performance targets being achieved as well as to estimate expected pre-vested cancellations.

Performance shares granted under the 2008 LTIP vest based on achieving both market and service conditions. Market conditions require attainment of specified market-based conditions tied to the market value of our common stock. The service condition requires employees to be employed continuously with the Company through March 12, 2011. The fair value of the grant, which is based on the market value of the stock on the grant date, will be recognized as compensation over this service period and must be recognized as expense over the service period regardless of whether the market conditions are met, so long as the grantee meets the service condition.

The table below presents activity of performance shares for both the ~~three~~2005 LTIP and 2008 LTIP during the six months ended ~~March 31,~~June 30, 2008:

			Weighted Average				Weighted Average
			Grant Date				Grant Date
	Shares		Fair Value		Shares		Fair Value

Nonvested at January 1, 2008	45,957		$	34.74	45,957		$	34.74
Changes during the period:
Granted	97,907			18.88	97,907			18.88
Vested	(45,957	)		34.74	(44,670	)		34.77
Nonvested at March 31, 2008	97,907			18.88
Forfeited					(1,287	)		33.86
Nonvested at June 30, 2008					97,907			18.88

~~Stock appreciation rights (“SARs”) are~~

SARs granted under the ~~2004 Plan. These SARs~~2005 LTIP require the employee to achieve the same performance conditions as the performance shares described for above for the 2005 LTIP, as well as to satisfy service conditions that approximate three years from the date of grant. Similar to the performance shares under the 2005 LTIP addressed above, the amount of compensation cost to be recognized is the fair value of the SAR grant adjusted based on expectations of achieving the performance requirements and also the expected pre-vested cancellations. Compensation costs arising from the SARs will be recognized ratably over the requisite service period.

SARs granted under the 2008 LTIP require the achievement of the same market and service conditions described above for the 2008 LTIP. Similar to the performance shares awarded under the 2008 LTIP, the fair value of the SARs granted will be recognized as compensation over the service period and must be recognized as expense over the service period regardless of whether the market conditions are met, so long as the grantee meets the service condition.

Upon exercise of SARs under the ~~SAR,~~2005 LTIP and 2008 LTIP, for each SAR exercised, the grantee shall be entitled to receive value equal to the difference between the market value of a share on the date of exercise minus the market value of a share on the date of grant. We shall pay the value owing to the grantee upon exercise in whole shares. No cash will be awarded upon exercise, and no fractional shares will be issued or delivered.

As the Company’s SARs plan is a stock-settled SAR, this plan is an equity-classified award under SFAS 123R. As such, the financial and income tax accounting for this type of award is identical to that of a nonqualified stock option plan. Therefore, the grant date fair value for all SARs issued under the SARs plan is determined at the grant date using the same method as would be used for determining the fair value of a grant of a nonqualified stock option, which has historically been the Black-Scholes formula. Similar to the performance shares addressed above, the amount of compensation cost to be recognized is the fair value of the SAR grant adjusted based on expectations of achieving the performance requirements and also the expected pre-vested cancellations. Compensation costs arising from the SARs will be recognized ratably over the requisite service period.

The fair value of SARs granted to employees were estimated using the Black-Scholes option pricing formula with the following weighted-average assumptions:

	Three Months Ended						Six Months Ended
	March 31,						June 30,
	2008			2007			2008			2007

Expected volatility		32.0	%		31.7	%		32.0	%		31.7	%
Risk free interest rate		2.8	%		4.5	%		2.8	%		4.5	%
Expected dividends		5.3	%		2.8	%		5.3	%		2.8	%
Expected life (in years)		6.5			6.5			6.5			6.5
Weighted average fair value	$	3.50		$	10.49		$	3.50		$	10.49

There were no grants of SARs for the three months ended June 30, 2008 and 2007.

The table below presents activity of SARs under both the 2005 LTIP and 2008 LTIP for the ~~three~~six months ended ~~March 31,~~June 30, 2008:

				Weighted Average				Weighted Average
	Shares			Exercise Price		Shares		Exercise Price

Outstanding at January 1, 2008		56,549		$	35.00	56,549		$	35.00
Changes during the period:
Granted		210,963			18.88	210,963			18.88
Vested		(22,535	)		34.48	(21,368	)		34.41
Forfeited		(2,426	)		35.20	(5,893	)		35.33
Outstanding at March 31, 2008		242,551			21.03
Outstanding at June 30, 2008						240,251			20.89

9.10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Components of accumulated other comprehensive ~~income (loss),~~loss, net of taxes, were as follows:

March 31, December 31,
2008 2007
(Dollars in thousands)

Unrealized holding gains (losses) on available-for-sale investment securities $ 6,183 $ (401 )
Unrealized holding gains on derivatives 4,564 -
Pension adjustments (9,784 ) (9,973 )
Tax effect (386 ) 4,160
Accumulated other comprehensive income (loss), net of tax $ 577 $ (6,214 )

	June 30,			December 31,
(Dollars in thousands)	2008			2007

Unrealized holding losses on available-for-sale investment securities	$	(5,744	)	$	(401	)
Unrealized holding losses on derivatives		(8,428	)		-
Pension adjustments		(9,596	)		(9,973	)
Tax effect		9,526			4,160
Accumulated other comprehensive loss, net of tax	$	(14,242	)	$	(6,214	)

The unrealized holding losses on available-for-sale investment securities at June 30, 2008 and December 31, 2007 represent net unrealized losses on U.S. Government sponsored entities debt and mortgage-backed securities, privately issued mortgage-backed securities and state and political subdivision municipal securities with total fair values of $423.0 million and $399.8 million, respectively. The declines in market value were primarily attributable to changes in interest rates and not credit quality. Because we have the ability and intent to hold all of our available-for-sale securities until a recovery of fair value, which may be at maturity, we do not consider these investments to be other-than-temporarily impaired.

Components of comprehensive income (loss) for the periods indicated were as follows:

Three Months Ended
March 31,
2008 2007
(Dollars in thousands)

Net income $ 1,658 $ 20,135
Unrealized gain on investment securities, net of taxes 3,945 1,805
Unrealized gain on derivatives, net of taxes 2,735 -
Pension adjustments, net of taxes 111 -
Comprehensive income $ 8,449 $ 21,940

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2008			2007			2008			2007

Net income (loss)	$	(146,258	)	$	21,016		$	(144,600	)	$	41,151
Unrealized loss on investment securities, net of taxes		(7,147	)		(4,883	)		(3,202	)		(3,078	)
Unrealized loss on derivatives, net of taxes		(7,785	)		-			(5,050	)		-
Pension adjustments, net of taxes		113			328			224			328
Comprehensive income (loss)	$	(161,077	)	$	16,461		$	(152,628	)	$	38,401

~~10.~~

11. PENSION PLANS

Central Pacific Bank, our bank subsidiary, has a defined benefit retirement plan (the “Pension Plan”) which covers certain eligible employees. The plan was curtailed effective December 31, 2002, and accordingly, plan benefits were fixed as of that date. The following table sets forth the components of net periodic benefit cost for the Pension Plan:

	Three Months Ended						Three Months Ended						Six Months Ended
	March 31,						June 30,						June 30,
	2008			2007
	(Dollars in thousands)
(Dollars in thousands)							2008			2007			2008			2007

Interest cost	$	451		$	446		$	451		$	446		$	902		$	892
Expected return on assets		(574	)		(560	)		(574	)		(560	)		(1,148	)		(1,120	)
Amortization of unrecognized loss		186			264			186			264			372			528
Net periodic cost	$	63		$	150		$	63		$	150		$	126		$	300

Central Pacific Bank also established Supplemental Executive Retirement Plans (“SERPs”), which provide certain officers of Central Pacific Bank with supplemental retirement benefits. The following table sets forth the components of net periodic benefit cost for the SERPs:

	Three Months Ended					Three Months Ended					Six Months Ended
	March 31,					June 30,					June 30,
	2008			2007
	(Dollars in thousands)
(Dollars in thousands)						2008			2007		2008			2007

Service cost	$	75		$	140	$	75		$	140	$	150		$	280
Interest cost		138			136		138			136		276			272
Amortization of unrecognized transition obligation		5			5		5			5		10			10
Amortization of prior service cost		5			1		5			5		10			10
Amortization of unrecognized (gain) loss		(8	)		5		(8	)		1		(16	)		2
Net periodic cost	$	215		$	287	$	215		$	287	$	430		$	574

~~11.~~12. EARNINGS PER SHARE

The following table presents the information used to compute basic and diluted earnings per share for the periods indicated:

	Three Months Ended				Three Months Ended					Six Months Ended
	March 31,				June 30,					June 30,
(In thousands, except per share data)	2008		2007		2008			2007		2008			2007

Net income	$	1,658	$	20,135	$	(146,258	)	$	21,016	$	(144,600	)	$	41,151

Weighted average shares outstanding - basic		28,686		30,699		28,652			30,555		28,670			30,627
Dilutive effect of employee stock options and awards		115		289		-			243		-			267
Weighted average shares outstanding - diluted		28,801		30,988		28,652			30,798		28,670			30,894

Basic earnings per share	$	0.06	$	0.66	$	(5.10	)	$	0.69	$	(5.04	)	$	1.34
Diluted earnings per share	$	0.06	$	0.65	$	(5.10	)	$	0.68	$	(5.04	)	$	1.33

A total of ~~812,978 and 28,875~~1,308,728 potentially dilutive securities have been excluded from the dilutive share calculation for the three and six months ended ~~March 31,~~June 30, 2008 ~~and 2007, respectively,~~ as their effect was ~~anti-dilutive.~~antidilutive, compared to 388,937 and 317,937 for the three and six months ended June 30, 2007, respectively.

~~12.~~

13. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Effective January 1, 2008, we partially adopted the provisions of SFAS 157. The statement defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements for fair value measurements.

Under SFAS 157, we group our financial assets and liabilities at fair value into three levels based on the markets in which the financial assets and liabilities are traded and the reliability of the assumptions used to determine fair value as follows:

·	Level 1 – Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities traded in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

·	Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of discounted cash flow models and similar techniques that requires the use of significant judgment or estimation.

Under SFAS 157, we base our fair values on the price that we would expect to receive if an asset were sold or pay to transfer a liability in an orderly transaction between market participants at the measurement date. As required under SFAS 157, we maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements.

We use fair value measurements to record adjustments to certain financial assets and liabilities and to determine fair value disclosures. Available for sale securities and derivatives are recorded at fair value on a recurring basis. From time to time, we may be required to record other financial assets at fair value on a nonrecurring basis such as loans held for sale, impaired loans and mortgage servicing rights. These nonrecurring fair value adjustments typically involve application of the lower of cost or fair value accounting or write-downs of individual assets.

The following table below presents the balances of assets and liabilities measured at fair value on a recurring basis:

	March 31, 2008								June 30, 2008
(Dollars in thousands)									Level 1		Level 2			Level 3		Total
	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)

Trading securities									$	-	$	5,077		$	-	$	5,077
Available for sale securities	$	935	$	837,045	$	14,675	$	852,655		955		794,461			14,549		809,965
Derivatives		-		5,297		-		5,297
Net Derivatives										-		(8,048	)		-		(8,048	)
Total	$	935	$	842,342	$	14,675	$	857,952	$	955	$	791,490		$	14,549	$	806,994

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:

	March 31, 2008			June 30, 2008
	Available For Sale Securities
	(Dollars in thousands)
(Dollars in thousands)				Available For Sale Securities

Balance at January 1, 2008	$	14,821		$	14,821
Principal payments received on mortgage revenue bonds		(146	)		(272	)
Balance at March 31, 2008		14,675
Balance at June 30, 2008					14,549

For assets measured at fair value on a nonrecurring basis that were recorded at fair value on our balance sheet at ~~March 31,~~June 30, 2008, the following table provides the level of valuation assumptions used to determine the respective fair values:

	June 30, 2008
(Dollars in thousands)	Level 1		Level 2		Level 3		Total

Loans held for sale (1)	$	-	$	72,394	$	-	$	72,394
Impaired loans (1)		-		94,161		-		94,161

(1) Represents carrying value and related write-downs of loans for which adjustments are based
on agreed upon purchase prices for the loans or the appraised value of the collateral.

March 31, 2008
Level 1 Level 2 Level 3 Total
(Dollars in thousands)

Loans held for sale (1) $ - $ 47,929 $ - $ 47,929
Impaired loans (1) - 65,630 - 65,630

(1) Represents carrying value and related write-downs of loans for which adjustments are based
on agreed upon purchase prices for the loans or the appraised value of the collateral.

~~13.~~14. SEGMENT INFORMATION

We have three reportable segments: Commercial Real Estate, Hawaii Market and Treasury. The segments reported are consistent with internal functional reporting lines. They are managed separately because each unit has different target markets, technological requirements, marketing strategies and specialized skills. The Commercial Real Estate segment includes construction and real estate development lending in Hawaii, California and Washington. The Hawaii Market segment includes retail branch offices, commercial lending, residential mortgage lending and servicing, indirect auto lending, trust services and retail brokerage services. A full range of deposit and loan products and various other banking services are offered. The Treasury segment is responsible for managing the Company's investment securities portfolio and wholesale funding activities.

The All Others category includes activities such as electronic banking, data processing and management of bank owned properties.

The accounting policies of the segments are consistent with the Company's accounting policies that are described in Note 1 to the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission. The majority of the Company's net income is derived from net interest income. Accordingly, management focuses primarily on net interest income, rather than gross interest income and expense amounts, in evaluating segment profitability.

Intersegment net interest income (expense) was allocated to each segment based upon a funds transfer pricing process that assigns costs of funds to assets and earnings credits to liabilities based on market interest rates that reflect interest rate sensitivity and maturity characteristics. All administrative and overhead expenses are allocated to the segments at cost. Cash, investment securities, loans and their related balances are allocated to the segment responsible for acquisition and maintenance of those assets. Segment assets also include all premises and equipment used directly in segment operations.

Segment profits and assets are provided in the following table for the periods indicated.

Commercial Hawaii
Real Estate Market Treasury All Others Total
(Dollars in thousands)
Three months ended March 31, 2008:
   Net interest income $ 37,045 $ 17,111 $ (3,299 ) $ - $ 50,857
   Intersegment net interest income (expense) (24,463 ) 18,398 2,126 3,939 -
   Provision for loan losses (33,300 ) (972 ) - - (34,272 )
   Other operating income 58 10,958 2,979 284 14,279
   Other operating expense (5,274 ) (17,499 ) (609 ) (8,078 ) (31,460 )
   Administrative and overhead expense allocation 2,683 (9,528 ) (91 ) 6,936 -
   Income taxes 8,138 (5,174 ) 9 (719 ) 2,254
      Net income (loss) $ (15,113 ) $ 13,294 $ 1,115 $ 2,362 $ 1,658

Three months ended March 31, 2007:
   Net interest income $ 44,183 $ 12,237 $ (2,733 ) $ - $ 53,687
   Intersegment net interest income (expense) (26,714 ) 19,538 416 6,760 -
   Provision for loan losses - (2,600 ) - - (2,600 )
   Other operating income 14 9,083 1,896 159 11,152
   Other operating expense (1,862 ) (17,487 ) (649 ) (10,478 ) (30,476 )
   Administrative and overhead expense allocation (1,785 ) (7,060 ) (84 ) 8,929 -
   Income taxes (5,065 ) (5,019 ) 422 (1,966 ) (11,628 )
      Net income (loss) $ 8,771 $ 8,692 $ (732 ) $ 3,404 $ 20,135

At March 31, 2008:
    Investment securities $ - $ - $ 879,570 $ - $ 879,570
    Loans and leases (including loans held for sale) 2,275,510 1,998,829 - - 4,274,339
    Other 52,239 209,288 255,433 129,168 646,128
       Total assets $ 2,327,749 $ 2,208,117 $ 1,135,003 $ 129,168 $ 5,800,037

At December 31, 2007:
    Investment securities $ - $ - $ 881,254 $ - $ 881,254
    Loans and leases (including loans held for sale) 2,228,739 1,950,538 - - 4,179,277
    Other 31,891 208,135 244,453 135,376 619,855
       Total assets $ 2,260,630 $ 2,158,673 $ 1,125,707 $ 135,376 $ 5,680,386

	Commercial			Hawaii
	Real Estate			Market			Treasury			All Others			Total
	(Dollars in thousands)
Three months ended June 30, 2008:
Net interest income	$	32,025		$	19,969		$	(610	)	$	-		$	51,384
Intersegment net interest income (expense)		(20,838	)		14,584			2,398			3,856			-
Provision for loan losses		(85,600	)		(2,200	)		-			-			(87,800	)
Other operating income		119			10,585			1,235			(8	)		11,931
Goodwill impairment		(94,279	)		-			-			-			(94,279	)
Other operating expense (excluding goodwill impairment)		(31,122	)		(20,162	)		(665	)		(14,055	)		(66,004	)
Administrative and overhead expense allocation		(2,831	)		(10,598	)		(103	)		13,532			-
Income taxes		42,187			(2,522	)		(784	)		(371	)		38,510
Net income (loss)	$	(160,339	)	$	9,656		$	1,471		$	2,954		$	(146,258	)

Three months ended June 30, 2007:
Net interest income	$	43,883		$	12,690		$	(3,690	)	$	-		$	52,883
Intersegment net interest income (expense)		(27,656	)		19,505			1,717			6,434			-
Provision for loan losses		(60	)		(940	)		-			-			(1,000	)
Other operating income		67			9,282			2,309			(120	)		11,538
Other operating expense		(1,729	)		(16,453	)		(565	)		(12,584	)		(31,331	)
Administrative and overhead expense allocation		(1,806	)		(9,252	)		(444	)		11,502			-
Income taxes		(4,382	)		(5,118	)		232			(1,806	)		(11,074	)
Net income (loss)	$	8,317		$	9,714		$	(441	)	$	3,426		$	21,016

Six months ended June 30, 2008:
Net interest income	$	69,070		$	37,080		$	(3,909	)	$	-		$	102,241
Intersegment net interest income (expense)		(45,301	)		32,982			4,524			7,795			-
Provision for loan losses		(118,900	)		(3,172	)		-			-			(122,072	)
Other operating income		177			21,543			4,214			276			26,210
Goodwill impairment		(94,279	)		-			-			-			(94,279	)
Other operating expense (excluding goodwill impairment)		(36,396	)		(37,661	)		(1,274	)		(22,133	)		(97,464	)
Administrative and overhead expense allocation		(148	)		(20,126	)		(194	)		20,468			-
Income taxes		50,325			(7,696	)		(775	)		(1,090	)		40,764
Net income (loss)	$	(175,452	)	$	22,950		$	2,586		$	5,316		$	(144,600	)

Six months ended June 30, 2007:
Net interest income	$	88,066		$	24,927		$	(6,423	)	$	-		$	106,570
Intersegment net interest income (expense)		(54,370	)		39,043			2,133			13,194			-
Provision for loan losses		(60	)		(3,540	)		-			-			(3,600	)
Other operating income		81			18,365			4,205			39			22,690
Other operating expense		(3,591	)		(33,940	)		(1,214	)		(23,062	)		(61,807	)
Administrative and overhead expense allocation		(3,591	)		(16,312	)		(528	)		20,431			-
Income taxes		(9,447	)		(10,137	)		654			(3,772	)		(22,702	)
Net income (loss)	$	17,088		$	18,406		$	(1,173	)	$	6,830		$	41,151

At June 30, 2008:
Investment securities	$	-		$	-		$	841,065		$	-		$	841,065
Loans and leases (including loans held for sale)		2,180,792			2,005,699			-			-			4,186,491
Other		(54,255	)		210,714			280,618			185,716			622,793
Total assets	$	2,126,537		$	2,216,413		$	1,121,683		$	185,716		$	5,650,349

At December 31, 2007:
Investment securities	$	-		$	-		$	881,254		$	-		$	881,254
Loans and leases (including loans held for sale)		2,228,739			1,950,538			-			-			4,179,277
Other		31,891			208,135			244,453			135,376			619,855
Total assets	$	2,260,630		$	2,158,673		$	1,125,707		$	135,376		$	5,680,386

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a Hawaii corporation and a bank holding company. Our principal business is to serve as a holding company for our bank subsidiary, Central Pacific Bank. We refer to Central Pacific Bank herein as “our Bank” or “the Bank,” and when we say “the Company,” “we,” “us” or “our,” we mean the holding company on a consolidated basis with the Bank and our other consolidated subsidiaries.

Central Pacific Bank is a full-service community bank with 39 branches and more than 95 ATMs located throughout the State of Hawaii. The Bank offers a broad range of products and services including accepting time and demand deposits and originating loans, including commercial loans, construction loans, commercial and residential mortgage loans, and consumer loans. The Bank also has four loan production offices serving customers in California.

On July 31, 2008, we announced that our Board of Directors elected Mr. Ronald K. Migita to succeed Mr. Clint Arnoldus as President and Chief Executive Officer of the Company and the Bank, effective August 1, 2008. Mr. Migita has been Chairman of the Board of Directors of the Company and the Bank since September 2004 and will continue to serve in those roles. Prior to joining the Company, Mr. Migita served as the President and Chief Executive Officer of CB Bancshares, Inc. whose principal subsidiary was City Bank, which merged with Central Pacific Financial in 2004. Mr. Migita’s four decades of banking experience includes an extensive background in corporate and retail banking.

Critical Accounting Policies

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires that management make certain judgments and use certain estimates and assumptions that affect amounts reported and disclosures made. Accounting estimates are deemed critical when a different estimate could have reasonably been used or where changes in the estimate are reasonably likely to occur from period to period and would materially impact our consolidated financial statements as of or for the periods presented. Management has discussed the development and selection of the critical accounting estimates noted below with the Audit Committee of the Board of Directors, and the Audit Committee has reviewed the accompanying disclosures.

Allowance for Loan and Lease Losses

We maintain an allowance for loan and lease losses (the “Allowance”) at an amount we expect to be sufficient to absorb probable losses inherent in our loan and lease portfolio based on a projection of probable net loan charge-offs. For loans classified as impaired, which includes nonaccrual loans, an estimated impairment loss is calculated. To estimate loan charge-offs on other loans, we evaluate the level and trend of nonperforming and potential problem loans and historical loss experience. We also consider other relevant economic conditions and borrower-specific risk characteristics, including current repayment patterns of our borrowers, the fair value of collateral securing specific loans, changes in our lending and underwriting standards and general economic factors, nationally and in the markets we serve, including the real estate market generally and the residential construction market. Estimated loss rates are determined by loan category and risk profile, and an overall required Allowance is calculated. Based on our estimate of the level of Allowance required, a provision for loan and lease losses (the “Provision”) is recorded to maintain the Allowance at an appropriate level. WeDuring the current quarter, we increased ~~the~~certain loan loss factors assigned to ~~outstanding balances with direct exposure to~~portions of our portfolio in light of the ~~California residential market~~current economic environment and ~~accordingly, increased our Provision for those loan and lease losses~~overall uncertainty in the ~~first~~credit markets. If these loan loss factors had not been increased in the second quarter of 2008, ~~to account for our increased exposure in~~ the ~~California residential construction market.~~Provision of $87.8 million would have been lower by $15.5 million.

Since we cannot predict with certainty the amount of loan and lease charge-offs that will be incurred, and because the eventual level of loan and lease charge-offs are impacted by numerous conditions beyond our control, a range of loss estimates could reasonably have been used to determine the Allowance and Provision. In addition, various regulatory agencies, as an integral part of their examination processes, periodically review our Allowance. Such agencies may require that we recognize additions to the Allowance based on their judgments about information available to them at the time of their examination. Accordingly, actual results could differ from those estimates.

Loans Held for Sale

Loans held for sale consists of residential mortgage loans, as well as mainland commercial mortgage and construction loans. Residential mortgage loans classified as held for sale are carried at the lower of cost or fair value on an aggregate basis while mainland commercial mortgage and construction loans are recorded at the lower of cost or fair value on an individual basis.

Loans originated with the intent to be held in our portfolio are subsequently transferred to held for sale when a decision is made to sell these loans. At the time of a loan’s transfer to the held for sale account, the loan is recorded at the lower of cost or fair value. Any reduction in the loan’s value is reflected as a write-down of the recorded investment resulting in a new cost basis, with a corresponding reduction in the Allowance.

In subsequent periods, if the fair value of a loan classified as held for sale is less than its cost basis, a valuation adjustment is recognized in our consolidated statement of operations in other operating expense and the carrying value of the loan is adjusted accordingly. The valuation adjustment may be recovered in the event that the fair value increases, which is also recognized in the condensed consolidated financial statements in other operating expense.

The fair value of loans classified as held for sale are generally based upon quoted prices for similar assets in active markets, acceptance of firm offer letters with an agreed upon purchase prices, discounted cash flow models that takes into account market observable assumptions, or independent appraisals of the underlying collateral securing the loans.

Goodwill and Other Intangible Assets

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “~~Goodwill~~“Goodwill and Other Intangible ~~Assets~~”Assets” (“SFAS 142”), we review the carrying amount of goodwill for impairment on an annual basis. Additionally, we perform an impairment assessment of goodwill and other intangible assets whenever events or changes in circumstances indicate that the carrying value of goodwill and other intangible assets may not be recoverable. Significant changes in circumstances can be both internal to our strategic and financial direction, as well as changes to the competitive and economic landscape.

Our impairment assessment of goodwill and other intangible assets involves the estimation of future cash flows and the fair value of reporting units to which goodwill is allocated. Estimating future cash flows and determining fair values of the reporting units is only an estimate and often involves the use of significant assumptions. These estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and also the magnitude of the impairment charge.

During the ~~first~~second quarter of 2008, we determined that an impairment test was required under SFAS 142 ~~due~~as the negative effects of the continued deterioration in the California residential construction market contributed to a decrease in our market ~~capitalization continuing to be substantially less than our equity book value.~~capitalization. As a result of our impairment test, we ~~determined~~concluded that the remaining goodwill associated with our Commercial Real Estate reporting segment, which includes the California residential construction loan portfolio, was ~~not~~ impaired asand we recorded a non-cash charge of ~~March 31,~~$94.3 million in the second quarter of 2008.

Following this impairment charge, our remaining goodwill balance was $150.5 million at June 30, 2008, all of which was attributable to our Hawaii Market reporting segment.

Deferred Tax Assets and Tax Contingencies

We account for income taxes in accordance with SFAS 109, “~~Accounting~~“Accounting for Income ~~Taxes~~”Taxes” and FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”).

Deferred tax assets and liabilities are recognized for the estimated future tax effects attributable to temporary differences and carryforwards. A valuation allowance may be required if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining whether a valuation allowance is necessary, we consider the level of taxable income in prior years, to the extent that carrybacks are permitted under current tax laws, as well as estimates of future taxable income and tax planning strategies that could be implemented to accelerate taxable income if necessary. If our estimates of future taxable income were materially overstated, or if our assumptions regarding the tax consequences of tax planning strategies were inaccurate, some or all of our deferred tax assets may not be realized, which would result in a charge to earnings.

We have established income tax contingencies reserves for potential tax liabilities related to uncertain tax positions. Tax benefits are recognized when we determine that it is more likely than not that such benefits will be realized. Where uncertainty exists due to the complexity of income tax statutes, and where the potential tax amounts are significant, we generally seek independent tax opinions to support our positions. If our evaluation of the likelihood of the realization of benefits is inaccurate, we could incur additional income tax and interest expense that would adversely impact earnings, or we could receive tax benefits greater than anticipated which would positively impact earnings.

Defined Benefit Retirement Plan

Defined benefit plan obligations and related assets of our defined benefit retirement plan are presented in Note 14 to the Consolidated Financial Statements for the year ended December 31, 2007 included in the Company’s Annual Report on Form 10-K. In 2002, the defined benefit retirement plan was curtailed and all plan benefits were fixed as of that date. Plan assets, which consist primarily of marketable equity and debt securities, are typically valued using market quotations. Plan obligations and the annual pension expense are determined by independent actuaries through the use of a number of assumptions. Key assumptions in measuring the plan obligations include the discount rate and the expected long-term rate of return on plan assets. In determining the discount rate, we utilize a yield that reflects the top 50% of the universe of bonds, ranked in the order of the highest yield. Asset returns are based upon the anticipated average rate of earnings expected on the invested funds of the plans. At December 31, 2007, we used a weighted-average discount rate of 6.5% and an expected long-term rate of return on plan assets of 8.0%, which affected the amount of pension liability recorded as of year-end 2007 and the amount of pension expense to be recorded in 2008. For both the discount rate and the asset return rate, a range of estimates could reasonably have been used which would affect the amount of pension expense and pension liability recorded. A 0.25% change in the discount rate assumption would impact 2008 pension expense by $0.1 million and year-end 2007 pension liability by $0.7 million, while a 0.25% change in the asset return rate would impact 2008 pension expense by $0.1 million.

Financial Summary

Continued weakness in the California residential construction market and related declines in collateral values have significantly impacted our operating results during the first half of 2008. Net ~~income~~loss for the ~~first~~second quarter of 2008 was ~~$1.7~~$146.3 million, or ~~$0.06~~$5.10 per diluted share, ~~down 91.8% from $20.1~~compared to net income of $21.0 million, or ~~$0.65~~$0.68 per diluted share, for the ~~first~~second quarter of ~~2007. The decrease in~~2007, while net ~~income~~loss for the first six months of 2008 was $144.6 million, or $5.04 per diluted share, compared to net income of $41.2 million, or $1.33 per diluted share in the comparable prior year period. Our results for the current quarter and first six months of 2008 were reflective of the challenging economic environment that we, along with many other financial institutions across the country, continue to experience.

The net loss recognized in the second quarter of 2008 ~~was primarily due~~included credit costs of $116.1 million and a non-cash goodwill impairment charge of $94.3 million associated with the write down of the remaining balance of goodwill related to our Commercial Real Estate reporting segment, as the ~~recognition of $34.3 million in~~deteriorating California residential construction market continues to impact our business. Credit costs during the current quarter included the provision for loan and lease losses of $87.8 million, write-downs of loans classified as ~~market conditions~~held for sale of $22.4 million, write-downs of foreclosed property of $4.0 million and an increase to the reserve for unfunded loan commitments of $1.9 million. The non-cash goodwill impairment charge had no impact on our cash flows, tangible equity or regulatory capital and was due to the continued deterioration in the California residential construction market ~~continued~~and the resultant decline in our market capitalization and asset values with exposure to ~~deteriorate~~this sector. Following the impairment charge, we do not have any goodwill associated with our mainland lending operations and ~~collateral values have decreased. The effects of~~ the ~~increase in the provision were partially offset by a decrease in income tax expense resulting from the decrease in pre-tax income for the current period.~~
remaining goodwill on our books at June 30, 2008 is attributable to our Hawaii operations.

The following table presents annualized returns on average assets, average shareholders' equity, average tangible equity and basic and diluted earnings per share for the periods indicated. Average tangible equity is calculated as average shareholders’ equity less average intangible assets which includes goodwill and core deposit premium. Average intangible assets were ~~$273.2~~$271.5 million and ~~$328.8~~$272.3 million for the three and six months ended ~~March 31,~~June 30, 2008, respectively, and $324.0 million and $326.4 million for the three and six months ended June 30, 2007, respectively.

Three Months Ended
March 31,
2008 2007

Return on average assets 0.12 % 1.48 %
Return on average shareholders' equity 0.96 % 10.73 %
Return on average tangible equity 1.59 % 19.11 %
Basic earnings per share $ 0.06 $ 0.66
Diluted earnings per share $ 0.06 $ 0.65

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007

Return (loss) on average assets		(9.96	) %		1.52	%		(4.98	) %		1.50	%
Return (loss) on average shareholders' equity		(86.27	) %		10.99	%		(42.27	) %		10.87	%
Return (loss) on average tangible equity		(143.86	) %		19.03	%		(70.22	) %		19.04	%
Basic earnings (loss) per share	$	(5.10	)	$	0.69		$	(5.04	)	$	1.34
Diluted earnings (loss) per share	$	(5.10	)	$	0.68		$	(5.04	)	$	1.33

Material Trends

Hawaii’s economy is expected to ~~maintain moderate growth~~remain flat in 2008 as the continued effects of several airline failures; the surge in fuel prices and the loss of a cruise ship have taken an effect on Hawaii’s tourism industry. Hawaii economists now predict small net declines in both real income and jobs this year, and higher inflation. Hawaii economists also predict that a significant recovery of the Hawaii economy will not begin until 2010, making for a relatively shallow but at a slower rate than experienced over the last several years, according to the latest Department of Business and Economic Development and Tourism forecast. Personal income is forecasted to increase 5.7% for 2008, while total wage and salary jobs are forecasted to increase 1.4% in 2008. Real gross state product is expected to increase by 2.5% in 2008 and 2009, as compared to the 2.7% increase in 2007.lengthy Hawai'i economic contraction.

Based upon the latest data and near term outlook, visitor industry growth has been revised downward from the prior forecast. Total arrivals are expected to decrease ~~1.4%~~3.0% in 2008, which is in contrast to a 1.0% projected increase in the previous November 2007 forecast. In 2008, visitor days are expected to decline ~~1.5%~~2.4% from fiscal 2007 and average daily spending is expected to increase ~~1.5%~~0.5% over the previous year.

Hawaii real personal income is expected to increase ~~1.6%~~0.8% in 2008, following a ~~1.3%~~1.5% increase in 2007. The state’s unemployment rate, which was tied for the ~~fourth~~sixth lowest jobless rate in the nation, was ~~3.1%~~3.8% in ~~March~~June 2008 compared to 3.2% at December 31, 2007. The job growth ~~forecast~~forecasted for 2008 ~~remained unchanged at 1.4%~~was 0.4%.

The rate of home resales in the Hawaii housing market is expected to slow down through ~~2009, which is similar to the slowdown evident in the national housing market.~~2009. In ~~March~~June 2008, the number of single-family home resales on Oahu decreased by ~~14.5%~~25.7% while the median sales price decreased by ~~2.4%~~2.5% from a year ago. Despite the anticipated slowdown in home resales, the Hawaii housing market is expected to experience lower levels of price declines compared to the national housing market.

California’s economy ~~is expected~~continues to ~~remain relatively flat in 2008 as expected growth in technology, tourism, international trade~~face pressure caused by falling home prices, tight credit conditions, dysfunctional financial markets and ~~agriculture is estimated to offset declines in the housing~~soaring food and ~~finance related industries.~~energy prices. Job growth in 2008 is expected to ~~be in excess of 0.5% of~~decrease by 0.2% from 2007 levels, while, California real personal income is expected to increase ~~4.7%~~4.5% in 2008, compared to ~~6.2%~~5.9% in 2007 and 6.5% in 2006. California’s unemployment rate has increased to ~~6.2%~~6.9% in ~~March~~June 2008 from ~~6.1%~~5.9% in December 2007, further suggesting a weakening in the economy.

The residential real estate market in California ~~has shown continued signs of weakness as tighter underwriting standards~~continues to be affected by the current downturn and ~~the~~ ongoing effects of the credit ~~crisis have dampened sales activity.~~crisis. In ~~March~~June 2008, the number of single-family home resales in California ~~decreased 24.5% and~~increased 17.5%, while the median sales price decreased ~~29.0%~~37.7% from a year ago. ~~Despite recent declines~~The increase in sales activity and the significant decline in the median price over the past year are largely due to a dramatic shift in the sales ~~price, affordability remains low~~mix since the onset of the credit crisis and the ~~inventory~~increase in the share of ~~unsold homes continues~~distressed sales in 2008. This trend of slightly higher sales activity with declining median prices are expected to ~~grow. Accordingly, further declines in single-family home resales are expected~~continue for the remainder of ~~2008.~~2008 as increases in distressed sales activities are anticipated.

As we have seen in the past ~~three fiscal quarters~~year with the deteriorating market conditions of the California residential construction market, our results of operations in future periods may be significantly impacted by the economies in Hawaii, California or other markets we serve. Loan demand, deposit growth, provision for loan losses, asset quality, noninterest income and noninterest expense may be affected by changes in economic conditions. If the California and Hawaii residential ~~construction market does~~real estate markets do not improve or ~~continues~~continue to deteriorate, the California commercial real estate market begins to deteriorate, or if the economic environments in Hawaii, California or other markets we serve suffer an adverse change ~~such as a material decline in the real estate market, further declines in single-family home resales,~~ or a material external shock, our results of operations may be negatively impacted.

Results of Operations

Net Interest Income

Net interest income, when expressed as a percentage of average interest earning assets, is referred to as “net interest margin.” Interest income, which includes loan fees and resultant yield information, are expressed on a taxable equivalent basis using an assumed income tax rate of 35%. A comparison of net interest income on a taxable equivalent basis (“net interest income”) for the three and six months ended ~~March 31,~~June 30, 2008 and 2007 is set forth below.

	Three Months Ended						Three Months Ended						Three Months Ended						Three Months Ended
	March 31, 2008						March 31, 2007						June 30, 2008						June 30, 2007
	Average		Average		Amount		Average		Average		Amount		Average		Average		Amount		Average		Average		Amount
(Dollars in thousands)	Balance		Yield/Rate		of Interest		Balance		Yield/Rate		of Interest		Balance		Yield/Rate		of Interest		Balance		Yield/Rate		of Interest

Assets
Interest earning assets:
Interest-bearing deposits in other banks	$	495	3.17	%	$	4	$	2,776	5.11	%	$	35	$	700	1.71	%	$	3	$	3,011	5.16	%	$	39
Federal funds sold & securities purchased
under agreements to resell		2,641	3.20			21		778	5.20			10		4,385	2.04			22		8,276	5.27			109
Taxable investment securities (1)		739,033	5.03			9,295		743,018	4.71			8,745		710,653	5.25			9,319		732,966	4.87			8,926
Tax-exempt investment securities (1)		152,316	5.61			2,137		154,509	5.43			2,097		150,796	5.78			2,179		154,715	5.43			2,100
Loans and leases, net of unearned income (2)		4,247,369	6.65			70,294		3,899,826	7.90			76,166		4,346,980	6.07			65,677		3,984,070	7.76			77,070
Federal Home Loan Bank stock		48,797	1.00			122		48,797	0.80			98		48,797	1.40			171		48,797	0.20			24
Total interest earning assets		5,190,651	6.33			81,873		4,849,704	7.26			87,151		5,262,311	5.90			77,371		4,931,835	7.17			88,268
Nonearning assets		557,802						588,269						613,736						585,625
Total assets	$	5,748,453					$	5,437,973					$	5,876,047					$	5,517,460

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits	$	451,058	0.12	%	$	137	$	433,167	0.13	%	$	138	$	472,037	0.15	%	$	179	$	441,674	0.13	%	$	141
Savings and money market deposits		1,141,285	1.33			3,785		1,236,806	2.06			6,285		1,111,289	1.08			2,980		1,202,652	2.06			6,167
Time deposits under $100,000		532,517	3.38			4,481		627,268	3.74			5,784		590,750	2.81			4,126		639,022	3.89			6,203
Time deposits $100,000 and over		1,105,154	3.73			10,248		900,843	4.52			10,050		1,054,284	2.89			7,580		978,496	4.60			11,220
Short-term borrowings		229,455	3.37			1,923		37,021	5.55			505		369,489	2.57			2,357		21,973	5.50			303
Long-term debt		920,006	4.24			9,694		768,312	5.26			9,968		897,740	3.58			8,002		807,389	5.27			10,616
Total interest-bearing liabilities		4,379,475	2.78			30,268		4,003,417	3.32			32,730		4,495,589	2.26			25,224		4,091,206	3.40			34,650
Noninterest-bearing deposits		599,047						589,009						607,581						579,429
Other liabilities		79,756						95,269						94,765						82,264
Shareholders' equity		690,175						750,278						678,112						764,561
Total liabilities and shareholders' equity	$	5,748,453					$	5,437,973					$	5,876,047					$	5,517,460

Net interest income					$	51,605					$	54,421					$	52,147					$	53,618

Net interest margin			3.99	%					4.52	%					3.97	%					4.36	%

(1) At amortized cost.
(2) Includes nonaccrual loans.

	Six Months Ended						Six Months Ended
	June 30, 2008						June 30, 2007
	Average		Average		Amount		Average		Average		Amount
(Dollars in thousands)	Balance		Yield/Rate		of Interest		Balance		Yield/Rate		of Interest

Assets
Interest earning assets:
Interest-bearing deposits in other banks	$	597	2.32	%	$	7	$	2,894	5.14	%	$	74
Federal funds sold & securities purchased
under agreements to resell		3,513	2.48			43		4,547	5.26			119
Taxable investment securities (1)		724,843	5.14			18,614		737,964	4.79			17,671
Tax-exempt investment securities (1)		151,556	5.70			4,316		154,613	5.43			4,197
Loans and leases, net of unearned income (2)		4,297,175	6.36			135,971		3,942,181	7.83			153,236
Federal Home Loan Bank stock		48,797	1.20			293		48,797	0.50			122
Total interest earning assets		5,226,481	6.12			159,244		4,890,996	7.22			175,419
Nonearning assets		585,769						586,940
Total assets	$	5,812,250					$	5,477,936

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits	$	461,548	0.14	%	$	316	$	437,444	0.13	%	$	279
Savings and money market deposits		1,126,287	1.21			6,765		1,219,634	2.06			12,452
Time deposits under $100,000		561,634	3.08			8,607		633,178	3.82			11,986
Time deposits $100,000 and over		1,079,719	3.32			17,828		939,884	4.56			21,271
Short-term borrowings		299,471	2.87			4,280		29,456	5.53			808
Long-term debt		908,873	3.92			17,696		787,958	5.27			20,584
Total interest-bearing liabilities		4,437,532	2.51			55,492		4,047,554	3.36			67,380
Noninterest-bearing deposits		603,313						584,192
Other liabilities		87,261						88,731
Shareholders' equity		684,144						757,459
Total liabilities and shareholders' equity	$	5,812,250					$	5,477,936

Net interest income					$	103,752					$	108,039

Net interest margin			3.98	%					4.44	%

(1) At amortized cost.
(2) Includes nonaccrual loans.

Net interest income of ~~$51.6~~$52.1 million for the ~~first~~second quarter of 2008, decreased by ~~$2.8~~$1.5 million, or ~~5.2%~~2.7%, from the ~~first~~second quarter of ~~2007.~~2007, while net interest income for the first half of 2008 decreased by $4.3 million, or 4.0%, to $103.8 million from the comparable prior year period. The decrease in net interest income for the second quarter and first ~~quarter~~half of 2008 was primarily the result of a decrease in average loan yields as certain variable rate loans repriced downward ~~over the past twelve months~~ in connection with the Federal Reserve’s actions to decrease interest ~~rates.~~rates, as well as an increase in our non-performing assets. Net interest income was positively impacted by a decrease in interest expense as average rates on interest-bearing liabilities have decreased ~~over the past twelve months,~~ also ~~reflective~~as a result of the Federal Reserve’s ~~recent actions to decrease~~actions.

Interest Income

Taxable-equivalent interest ~~rates.~~income of $77.4 million for the second quarter of 2008, decreased by $10.9 million, or 12.3%, from the second quarter of 2007, while taxable-equivalent interest income of $159.2 million for the first six months of 2008, decreased by $16.2 million, or 9.2%, from the comparable prior year period.

~~Interest Income~~

~~Taxable-equivalent interest income of $81.9 million for the first quarter of 2008 decreased by $5.3 million, or 6.1%, from the first quarter of 2007.~~ The current quarter decrease in taxable-equivalent interest income was attributable to the reversal of ~~$1.5~~$2.1 million of interest income on certain nonaccrual loans in the ~~first~~second quarter of 2008, as well as a decrease in average loan yields, which declined to ~~6.65%~~6.07% for the ~~first~~second quarter of 2008 from ~~7.90%~~7.76% in the comparable prior year period. The decrease in the average loan ~~yield~~yields (including the ~~effects~~effect of the reversal of interest mentioned above) contributed to approximately ~~$12.2~~$16.8 million of the current quarter decrease in taxable-equivalent interest income. Partially offsetting the decrease in interest income was the ~~$347.5~~$362.9 million, or ~~8.9%~~9.1%, increase in average loans and leases (net of write-downs, charge offs and transfers to held for sale) in the ~~first~~second quarter of 2008 over the comparable prior year period. This increase in loan volume resulted in a ~~$6.9~~$7.0 million increase in taxable-equivalent interest income for the ~~first~~second quarter of 2008 when compared to the comparable prior year period. The increase in average loans and leases for the current quarter was primarily driven by an increase in residential mortgage originations as ~~competition in this market has diminished with the departure of several national~~Central Pacific HomeLoans, our residential mortgage ~~lenders~~subsidiary, was able to capitalize on the establishment of strategic alliances with real estate brokers and developers to provide additional origination opportunities.

The year-to-date decrease in taxable-equivalent interest income was attributable to the reversal of $3.6 million of interest income on certain nonaccrual loans during the first half of 2008 and also the decrease in average loan yields. The decrease in the average loan yields (including the effects of the reversal of interest mentioned above) contributed to approximately $29.0 million of the year-to-date decrease in taxable-equivalent interest income from the ~~Hawaii market.~~comparable prior year period, while the volume increase in average loan balances resulted in an increase in taxable-equivalent interest income of $13.9 million over the comparable prior year period.

Interest Expense

Taxable-equivalent interest expense of ~~$30.3~~$25.2 million for the ~~first~~second quarter of 2008, decreased by ~~$2.5~~$9.4 million, or ~~7.5%~~27.2%, from the comparable quarter one year ~~ago.~~ago, while taxable-equivalent interest expense of $55.5 million for the first six months of 2008, decreased by $11.9 million, or 17.6%, from the comparable prior year period. The ~~change~~decrease in interest expense for the second quarter and first half of 2008 was primarily attributable to the decrease in average rates paid on average interest-bearing ~~liabilities, particularly~~liabilities.

The weighted average rates paid on ~~savings and money market~~interest bearing deposits ~~which~~ decreased by 73107 basis points (“bp”)~~; time deposits $100,000 and over, which decreased by 79 bp and long-term debt, which decreased by 102 bp. The decreases in average rates~~ during the current quarter when compared to the second quarter of 2007. This decrease contributed to ~~$2.3 million, $1.8 million and $2.0~~approximately $8.7 million of the ~~decrease~~reduction in taxable-equivalent interest expense ~~respectively. Partially offsetting~~during the current quarter when compared to the second quarter of 2007. The 169 bp decrease in average rates paid on long-term debt resulted in a reduction in taxable-equivalent interest expense ~~were increases~~of approximately $3.4 million for the same period. Offsetting these decreases was the increase in average ~~balances~~short-term borrowings, which rose by $347.5 million during the current quarter from the second quarter of 2007. This increase resulted in a rise in taxable-equivalent interest expense of $4.8 million when compared to the second quarter of 2007. Short-term borrowings at June 30, 2008, consisted primarily of Federal Home Loan Bank advances of $256.0 million which carried a weighted average interest rate of 2.9%. During the six months ended June 30, 2008, the maximum amount of Federal Home Loan Bank advances was $470.0 million in April 2008.

For the first half of 2008, the 78 bp decrease in the weighted average rates paid on ~~time~~all interest bearing deposits ~~$100,000 and over, which increased by $204.3~~contributed to $12.7 million ~~or 22.7%,~~of the year-to-date reduction in taxable-equivalent interest expense from the comparable prior year period, ~~and~~while the 135 bp decrease in average rates paid on long term debt contributed to $5.3 million of the year-to-date reduction. Increases in average short-term borrowings ~~which increased by $192.4~~of $270.0 million ~~or 519.8%, from~~and average long-term debt of $120.9 million during the ~~comparable prior year period. These volume increases~~first half of 2008, resulted in ~~higher~~an increase in taxable-equivalent interest expense of ~~$2.3~~$7.5 million and ~~$2.7~~$3.2 million, respectively, for the first ~~quarter~~half of ~~2008. The increase in average balances~~2008 when compared to the first half of time deposits $100,000 and over was reflective of the continued shift in our deposit base from lower rate checking and savings accounts to higher rate time deposit accounts. The increase in short term borrowings was attributable to loan growth outpacing deposit growth.2007.

Net Interest Margin

Our net interest margin was ~~3.99%~~3.97% for the ~~first~~second quarter of 2008 compared to ~~4.52%~~4.36% for the second quarter of 2007, while our net interest margin for the first ~~quarter~~six months of ~~2007.~~fiscal 2008 was 3.98% compared to 4.44% for the comparable prior year period. The compression in our net interest margin ~~is primarily~~was attributable to the aforementioned decrease in net interest income. In addition, average yields earned on interest earning assets have declined faster than the average rates paid on interest-bearing liabilities, as the rate of downward repricing of interest-bearing liabilities has been tempered by the continued strong competition for deposits in the Hawaii market.

Nonperforming Assets, Accruing Loans Delinquent for 90 Days or More, Restructured Loans Still Accruing Interest

The following table sets forth nonperforming assets, accruing loans delinquent for 90 days or more and restructured loans still accruing interest at the dates indicated.

	March 31,			December 31,			June 30,			December 31,
	2008			2007			2008			2007
	(Dollars in thousands)						(Dollars in thousands)
Nonperforming Assets:
Nonperforming Assets
Nonaccrual loans (including loans held for sale):
Commercial, financial and agricultural	$	251		$	231		$	1,831		$	231
Real estate:
Construction		116,342			61,017			130,773			61,017
Mortgage-residential		162			-			5,674			-
Mortgage-commercial		-			293			4,130			293
Total non accrual loans		116,755			61,541			142,408			61,541
Other real estate		2,000			-			3,501			-
Total nonperforming assets		118,755			61,541			145,909			61,541

Accruing loans delinquent for 90 days or more:
Commercial, financial and agricultural		69			18			-			18
Real estate:
Mortgage-residential		57			-			227			586
Mortgage-commercial		-			586
Consumer		355			273			281			299
Leases		51			26
Total accruing loans delinquent for 90 days or more		532			903			508			903

Restructured loans still accruing interest:
Total restructured loans still accruing interest		-			-			-			-

Total nonperforming assets, accruing loans delinquent for 90
days or more and restructured loans still accruing interest	$	119,287		$	62,444		$	146,417		$	62,444

Total nonperforming assets as a percentage of loans and other real estate		2.81	%		1.48	%
Total nonperforming assets as a percentage of loans and leases,
loans held for sale and other real estate								3.48	%		1.47	%

Total nonperforming assets and accruing loans delinquent for 90
days or more as a percentage of loans and other real estate		2.82	%		1.51	%
Total nonperforming assets and accruing loans delinquent for 90 days or more
as a percentage of loans and leases, loans held for sale and other real estate								3.49	%		1.49	%

Total nonperforming assets, accruing loans delinquent for 90 days or more and
restructured loans still accruing interest as a percentage of loans and other real estate		2.82	%		1.51	%
Total nonperforming assets, accruing loans delinquent for 90 days or
more and restructured loans still accruing interest as a percentage of
loans and leases, loans held for sale and other real estate								3.49	%		1.49	%

Nonperforming assets, which includes nonaccrual loans and leases, nonperforming loans classified as held for sale and foreclosed real estate, ~~and other nonperforming investments~~ totaled ~~$118.8~~$145.9 million at ~~March 31,~~June 30, 2008, compared to $61.5 million at fiscal 2007 year-end. Nonperforming assets at ~~March 31,~~June 30, 2008 were comprised of nonaccrual loans of ~~$68.9~~$80.8 million, nonperforming loans classified as held for sale ~~that were nonperforming~~ of ~~$47.9~~$61.6 million and other real estate of ~~$2.0~~$3.5 million. The increase in nonperforming assets during the first ~~quarter~~half of 2008 was again primarily attributable to the ~~inclusion of 13~~troubled California residential construction market, as 17 California residential construction loans totaling ~~$76.5~~$78.8 million were placed on nonaccrual status during the first half of 2008, of which, $61.5 million were classified as ~~market conditions~~held for sale at June 30, 2008. Additionally, five California commercial real estate loans totaling $16.9 million, one Washington commercial construction loan totaling $0.9 million and $27.3 million in loans to two Hawaii commercial real estate borrowers were also placed on nonaccrual status during the first half of 2008.

Offsetting the increase in nonperforming assets were partial charge-offs of seven California residential construction ~~market continued to deteriorate, partially offset by~~loans totaling $23.1 million, the partial ~~charge-offs~~charge-off of ~~six California~~one Washington residential ~~constructions loans to five borrowers~~construction loan totaling ~~$16.4 million.~~

~~As indicated above, the Company’s credit risk position declined further during the current quarter as the deterioration in the~~$1.7 million, write-downs of $2.3 million associated with two California residential construction ~~market continued. Lower absorption rates in many~~loans classified as held for sale and write-downs of the California residential tract lending projects that we financed resulted in the continued decline of California home prices. These conditions adversely impacted a number of our California borrowers with exposure to this sector and led to further reductions in collateral values.
$3.9 million on two foreclosed properties.

An increase in impaired loans combined with the reduced collateral values described above contributed to the $34.3 million Provision during the current quarter, compared to a Provision of $2.6 million one year ago. The increased Provision was necessary to ensure that our Allowance was appropriate and reflects the current, reduced value of the collateral supporting our impaired loans with exposure to the California residential construction market.

In light of the significant negative impact our exposure to the California residential construction market had on our overall credit risk position, additional information regarding our exposure to this sector follows:

March 31, December 31,
2008 2007
(Dollars in thousands)
Total loans outstanding - California residential construction market:
Loans held for sale $ 47,929 $ 5,400
Loan portfolio 197,936 305,230
Total $ 245,865 $ 310,630

Percentage of California residential construction loan portfolio to total loans 4.7 % 7.4 %

Non performing assets - California residential construction market:
Nonaccrual loans $ 63,502 $ 52,334
Nonaccrual loans held for sale 47,929 5,400
Other real estate 2,000 -
$ 113,431 $ 57,734

Total nonperforming assets with exposure to the California residential
construction market assets as a percentage of total assets 1.96 % 1.02 %

Beginning in fourth quarter of 2007, we engaged the services of seasoned real estate professionals to assist us in assessing and managing our risk exposure to the California residential construction market. As a result of these efforts and given the uncertainties in the short-term outlook for this market, we have initiated loan sale proceedings on several California residential construction loans and are pursuing a variety of options to reduce our credit risk exposure to this market.

Allowance and Provision for Loan and Lease Losses

A discussion of our accounting policy regarding the Allowance and Provision is contained in the Critical Accounting Policies section of this report. The following table sets forth certain information with respect to the Allowance as of the dates and for the periods indicated:

Three Months Ended
March 31,
2008 2007
(Dollars in thousands)
Allowance for loan and lease losses:
   Balance at beginning of period $ 92,049 $ 52,280

   Provision for loan and lease losses 34,272 2,600

   Charge-offs:
   Commercial, financial and agricultural 199 3,424
   Real estate:
      Construction 53,722 -
      Mortgage-residential - 358
   Consumer 889 1,053
   Leases - -
      Total charge-offs 54,810 4,835

   Recoveries:
   Commercial, financial and agricultural 55 39
   Real estate:
      Mortgage-residential 52 35
      Mortgage-commercial 2 3
   Consumer 488 492
   Leases - -
      Total recoveries 597 569

   Net charge-offs 54,213 4,266

   Balance at end of period $ 72,108 $ 50,614

Annualized ratio of net charge-offs to average loans
5.11 % 0.44 %

Our Allowance at ~~March 31,~~June 30, 2008 totaled ~~$72.1~~$86.1 million, a decrease of ~~$19.9~~$6.0 million, or ~~21.7%~~6.5%, from year-end 2007. The ~~current quarter~~ decrease in our Allowance was ~~primarily attributable to $54.2~~the result of the $128.1 million in net loan charge-offs induring the first ~~quarter~~half of 2008, concentrated inprimarily on loans with direct exposure to the California residential construction ~~market. As previously mentioned,~~market, offset by the $122.1 million Provision ~~of $34.3 million~~ recognized induring the six months ended June 30, 2008. The net loan charge-offs loans for the first ~~quarter~~half of ~~2008 was attributed~~the year included charge-offs for loans transferred to ~~the decline in collateral values~~held for ~~many loans with exposure to this sector.~~

sale of $79.5 million.

The increase in total nonaccrual and impaired loans, combined with reduced collateral values and increases in our loan loss factors have contributed to the $87.8 million Provision during the ~~quarter. As we have seen~~second quarter of 2008 and the $122.1 million Provision for the first six months of 2008, compared to a Provision of $1.0 million and $3.6 million for the comparable prior year periods, respectively. Given the uncertainty in the current economic environment, the increased Provision was necessary to ensure that our Allowance was appropriate to cover nonaccrual loans (excluding loans held for sale) of $80.8 million, and reflects the reduced value of the collateral supporting our impaired loans with ~~the downturn in~~exposure to the California residential construction market ~~continued economic deterioration~~and increased credit risk in other parts of our loan portfolio. Collateral values are determined based on appraisals received from qualified valuation professionals and are obtained periodically or when indicators that property values may be impaired are present.

California Residential Construction Market Exposure

As previously noted, our credit risk position worsened during the current quarter as issues facing California residential real estate developers, including declining home prices, lower absorption rates and increased inventory, continue to adversely impact our mainland loan portfolio resulting in significant write-downs and higher credit costs. In light of the negative impact our exposure to the California residential construction market had on our overall credit risk position, additional information regarding our exposure to this sector follows:

	June 30,			December 31,
	2008			2007
	(Dollars in thousands)
Total loans outstanding - California residential construction market:
Loans held for sale	$	53,182		$	5,400
Loan portfolio		87,187			305,230
Total	$	140,369		$	310,630

Percentage of California residential construction loan portfolio to total loans		2.1	%		7.4	%

Non performing assets - California residential construction market:
Nonaccrual loans	$	41,200		$	52,334
Nonaccrual loans held for sale		53,182			5,400
Other real estate		3,501			-
	$	97,883		$	57,734

Total nonperforming assets with exposure to the California residential
construction market assets as a percentage of total assets		1.7	%		1.0	%

Beginning in the ~~areas~~fourth quarter of 2007, we ~~serve could adversely affect~~engaged the services of seasoned real estate professionals to assist us in assessing and managing our ~~borrowers’ ability~~risk exposure to ~~repay their~~this troubled market. As a result of these efforts and given the uncertainties in the outlook for this market, we initiated loan sale proceedings on several California residential construction loans orduring the first half of 2008 and continue to pursue a variety of options to reduce our credit risk exposure to this market.

In July 2008, we completed the bulk sale of certain non-performing assets with a combined carrying value of ~~collateral securing those loans~~$44.2 million at June 30, 2008. No gain or loss was recorded on the sale in July as these assets were written down to their sales price during the second quarter of 2008. Upon completion of the sale, our remaining asset exposure to the California residential construction sector was $102.1 million and ~~consequently, the level~~our nonperforming assets related to this sector were reduced to $56.1 million, or 1.00% of ~~net loan charge-offs and the Provision.~~
total assets.

Other Operating Income

Total other operating income of ~~$14.3~~$11.9 million for the ~~first~~second quarter of 2008 increased by ~~$3.1~~$0.4 million, or ~~28.0%~~3.4%, from the comparable quarter one year ago. The change was largely due to increases in net gain on sales of residential loans of $0.8 million and other service charges and fees of $0.3 million, partially offset by a decrease in miscellaneous operating income of ~~$1.6~~$0.7 million. The increase in net gain on sales of residential loans was reflective of the continued increase in residential mortgage originations reported in the second quarter of 2008 as our residential mortgage subsidiary, Central Pacific HomeLoans, has capitalized on the establishment of strategic alliances with real estate brokers and developers to provide additional origination opportunities.

For the first six months of 2008, total other operating income of $26.2 million increased by $3.5 million, or 15.5%, over the comparable prior year period. The improvement was primarily due to increases in net gains on sales of residential loans of $1.3 million, miscellaneous operating income of $0.9 million, income from bank-owned life insurance of ~~$0.8~~$0.5 million, income from fiduciary activities of $0.4 million and ~~gains on sales of loans~~other service charges and fees of $0.4 million. The increase in miscellaneous operating income ~~resulted from~~was attributable to the mandatory partial redemption of our shares in Visa, Inc.~~, which resulted~~ during the first quarter of 2008 resulting in a gain of $0.9 million, while the increase in bank-owned life insurance was primarily the result of $0.8 million in net death benefits recognized during the ~~first quarter of 2008.~~period. The increase in ~~gains on sales of loans was~~income from fiduciary activities is reflective of the ~~increase~~continued growth in ~~loan origination activity reported in~~our trust services experienced over the first quarter of 2008. Several factors have lead to the increased loan origination activity, including our establishment of strategic alliances with real estate brokers and developers that provide additional loan origination opportunities and decreased competition aspast several ~~national lenders have recently exited the Hawaii market.~~years.

Other Operating Expense

Total other operating expense ~~was $31.5 million~~ for the ~~first~~second quarter of 2008 was $160.3 million, up ~~$1.0~~$129.0 million, or ~~3.2%~~411.6%, from the comparable quarter one year ago. The increase ~~in other operating expense was attributable to an increase in foreclosed asset expense of $2.6 million, which represented~~from the ~~writedown of foreclosed property to its estimated fair value, and an increase in salaries and employee benefits of $1.0 million as salaries and employee benefits for the first~~year-ago quarter of 2007 included the effects of a $1.8 million reversal of certain incentive compensation accruals. The aforementioned increases were partially offset by a decrease in miscellaneous operating expense of $3.2 million, primarily due to a $4.5 million reduction in the reserve for unfunded commitments recognized in the first quarter of 2008. The decrease in reserves for unfunded commitments was primarily attributable to the ~~termination~~non-cash goodwill impairment charge of ~~several outstanding~~$94.3 million, write-downs of certain loans held for sale totaling $22.4 million, write-downs of foreclosed property totaling $4.0 million and higher reserves for unfunded commitments ~~to certain borrowers with exposure~~totaling $1.9 million. Additionally, salaries and employee benefits increased during the current quarter primarily due to the ~~California~~payment of higher commissions as a result of the previously mentioned increase in residential ~~construction market.~~

~~Given~~mortgage originations and the recognition of certain retirement and severance compensation accruals. During the current ~~economic conditions under which~~quarter, we ~~operate, we expect~~also recognized a loss of $1.7 million related to ~~continue to tightly manage our operating expenses and anticipate expenses for~~sale of commercial real estate loans located in Washington. For the ~~remainder~~first six months of 2008, total other operating expense of $191.7 million increased by $129.9 million, or 210.2%, over the comparable prior year period. The increase was attributable to ~~remain relatively consistent with current levels.~~the events that transpired during the second quarter of 2008 as described above.

Income Taxes

In the second quarter and first ~~quarter~~six months of 2008, the Company recognized an income tax ~~benefit~~benefits of ~~$2.3~~$38.5 million and $40.8 million on a pre-tax net ~~loss~~losses of ~~$0.6 million.~~$184.8 million and $185.4 million, respectively. In the comparable prior year ~~period,~~periods, the Company recorded income tax ~~expense~~expenses of ~~$11.6~~$11.1 million and $22.7 million on pre-tax income of ~~$31.8 million.~~$32.1 million and $63.9 million, respectively. The ~~current quarter’s~~Company’s effective tax ~~benefit was~~rate for the second quarter and first six months of 2008 were impacted by the recognition of the non-cash goodwill impairment charge, which is not deductible for tax purposes, as well as the disproportionate recognition of federal and state tax credits and the generation of tax-exempt income.

The Company earns a tax benefit from tax credits and tax exempt income ~~compared~~irrespective of the level of pre-tax income. This results in a favorable impact to ~~taxable income.~~the total tax benefit and the effective tax rate especially during periods in which the Company is near break-even or experiencing a pre-tax loss. Excluding the impact of the goodwill impairment charge of $94.3 million, the effective tax rate for the second quarter and the first six months of 2008 was 42.6% and 44.8%, respectively, higher than the expected tax rate of 35.0% due to the recognition of the tax benefits from tax credits of $2.2 million and $3.6 million and tax exempt income of $2.4 million and $5.9 million for the second quarter and first six months of 2008, respectively.

Factors that may affect the effective tax rate for the remainder of 2008 include the level of tax-exempt income recognized, the amount of nondeductible expenses incurred and the amount of federal and state tax credits available to offset future taxable income.

Financial Condition

Total assets of $5.7 billion at ~~March 31,~~June 30, 2008, ~~grew to $5.8 billion, increasing by $119.7 million, or 2.1%, compared to~~remained relatively consistent with year-end 2007.

Loans and leases, net of unearned income, ~~grew to $4.2~~of $4.1 billion ~~increasing slightly~~at June 30, 2008, decreased by ~~$34.9~~$63.7 million ~~or 0.8%, over~~from year-end 2007. The ~~increase~~decrease was primarily attributable to increases in our residential and commercial real estate mortgage portfolios, partially offset by decreases in our commercial, financial and agricultural and real estate construction loan portfolios. Further reducing our loans and leases balance wascharge-offs totaling $129.1 million; the ~~current quarter~~ reclassification of ~~$42.5~~$87.7 million ~~(net of related charge-offs)~~ of California residential construction loans, ~~and $17.5~~$60.5 million of Hawaii residential mortgage loans and $14.8 million of Washington commercial real estate loans from the held to maturity loan portfolio to loans held for ~~sale.~~sale and the securitization of $25.6 million of Hawaii residential mortgages, in each case during the six months ended June 30, 2008. The reclassification of the California residential construction loans to the held for sale portfolio reflects our continued effort to ~~minimize~~reduce our exposure to this sector, while the reclassification of the Hawaii residential mortgage loans ~~was~~and Washington commercial real estate loans were done ~~to generate additional liquidity.~~for asset/liability management purposes. After considering the effects of ~~the current quarter’s loan growth and the reclassification of certain loans to held for sale,~~these reclassifications, our Hawaii ~~operations~~loan portfolio grew by approximately ~~$104.7~~$127.9 million, primarily driven by an increase in residential mortgages, while our mainland loan portfolio decreased by ~~$69.8~~$191.6 million. Our Hawaii loan portfolio, while not unaffected by current market conditions, remains stable.

Total deposits of $3.9 billion at ~~March 31,~~June 30, 2008, ~~of $3.8 billion~~ decreased by ~~$222.7~~$82.1 million, or ~~5.6%~~2.1%, from year-end 2007. Interest-bearing deposits at ~~March 31,~~June 30, 2008, decreased by ~~$189.8~~$67.0 million, or ~~5.7%~~2.0%, while noninterest-bearing deposits decreased by ~~$32.9~~$15.1 million, or ~~4.9%~~2.3%, from year-end 2007. The decrease in deposits since year-end 2007 was reflective of customers seeking higher returns from other investment vehicles as deposit rates have recently decreased ~~in the current quarter~~ and the overall softening of the economy. Despite the decrease from December 31, 2007, total deposits grew by $140.6 million, or 3.7%, from March 31, 2008. The sequential quarter increase was due to the issuance of a brokered CD totaling $100.0 million and net growth in core deposits resulting from the success of deposit campaigns.

Capital Resources

~~Shareholders'~~

Shareholders’ equity was $507.1 million at June 30, 2008, compared to $674.7 million at March 31, 2008 ~~compared to~~and $674.4 million at year-end 2007. Book value per share at June 30, 2008 was $17.66, compared to $23.50 at March 31, 2008 ~~was $23.50, compared to~~and $23.45 at year-end 2007.

On ~~January 30,~~April 23, 2008, the Company’s board of directors declared a ~~first~~second quarter cash dividend of $0.25 per share, an increase of 4.2% over the $0.24 per share dividend declared in the ~~first~~second quarter of 2007. For the first six months of 2008, dividends declared totaled $0.50 per share, also an increase of 4.2% over the $0.48 per share declared in the first six months of 2007.

In January 2008, the Company’s board of directors authorized the repurchase and retirement of up to 1,200,000 shares of the Company’s common stock (the “2008 Repurchase Plan”). ~~Repurchases under~~Under the 2008 Repurchase Plan, repurchases may be made from time to time on the open market or in privately negotiated transactions. ~~During~~There were no repurchases of common stock during the three months ended ~~March 31,~~June 30, 2008. During the six months ended June 30, 2008, we repurchased and retired a total of 100,000 shares of common stock for approximately $1.8 million under the 2008 Repurchase Plan. ~~At March 31, 2008,~~Although a total of 1,100,000 shares remained authorized for repurchase under the 2008 Repurchase Plan at June 30, 2008, the Company is not currently making any repurchases.

We have five statutory trusts: CPB Capital Trust I, CPB Capital Trust II, CPB Statutory Trust III, CPB Capital Trust IV and CPB Statutory Trust V, which issued a total of $105.0 million in trust preferred securities. ~~The~~Our obligations with respect to the issuance of the Securities constitute a full and unconditional guarantee by the Company of the Trust’s obligations with respect to the Securities. Subject to certain exceptions and limitations, we may elect from time to time to defer subordinated debenture interest payments, which could result in a deferral of distribution payments on the related Securities. Our ability to pay dividends on these statutory trusts ~~are not consolidated in the consolidated financial statements as of September 30, 2007. However,~~is subject to approval by the Federal Reserve ~~Board (the “FRB”)~~and there is no assurance that such approval can be obtained. The Federal Reserve has determined that certain cumulative preferred securities ~~such as~~having the ~~trust preferred securities issued by~~characteristics of the ~~capital and statutory trusts,~~Securities qualify as minority interest, and are included in ~~the calculation of~~ Tier 1 capital ~~up to 25% of total risk-based capital~~for bank holding companies.

In January 2004, in accordance with the ~~excess includable as Tier 2 capital.~~

~~Our objective with respect to capital resources is to maintain a level~~Financial Accounting Standards Board Interpretation No. 46(R) (as amended), our statutory trusts were deconsolidated from our financial statements. This resulted in the removal of ~~capital that will support sustained asset growth~~the trust preferred securities from the long-term debt category of our balance sheets and ~~anticipated risks. Furthermore, we seek to ensure that regulatory guidelines and industry standards for well-capitalized institutions are met or exceeded.~~the addition of our subordinated debentures.

Regulations on capital adequacy guidelines adopted by the FRB and the Federal Deposit Insurance Corporation (the “FDIC”) are as follows. An institution is required to maintain a minimum ratio of qualifying total capital to risk-adjusted assets of 8% and a minimum ratio of Tier 1 capital to risk-adjusted assets of 4%. In addition to the risk-based guidelines, federal banking regulators require banking organizations to maintain a minimum amount of Tier 1 capital to total assets, referred to as the leverage ratio. For a banking organization to be rated in the highest of the five categories used by regulators to rate banking organizations, the minimum leverage ratio of Tier 1 capital to total assets must be 3%. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.

Management and the Company’s board of directors continue to closely evaluate our capital levels. Given the uncertainty in the economy and the capital markets, we will continue to evaluate our capital levels and requirements and consider ways to increase our capital if appropriate, including further asset reductions or through the issuance of additional capital.

The following table sets forth the Company’s capital ratios and capital adequacy requirements applicable as of the dates indicated. In addition, FDIC-insured institutions such as our principal banking subsidiary, Central Pacific Bank, must maintain leverage, Tier 1 and total risk-based capital ratios of at least 5%, 6% and 10%, respectively, to be considered “well capitalized” under the prompt corrective action provisions of the FDIC Improvement Act of 1991.

Minimum Required
for Capital
Minimum Required to

Actual Adequacy Purposes be Well Capitalized
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio

Company
At March 31, 2008:
   Leverage capital $ 529,491 9.6 % $ 219,794 4.0 % $ 274,743 5.0 %
   Tier 1 risk-based capital 529,491 10.9 193,702 4.0 290,553 6.0
   Total risk-based capital 590,192 12.2 387,403 8.0 484,253 10.0

At December 31, 2007:
   Leverage capital $ 535,670 9.8 % $ 218,477 4.0 % $ 273,096 5.0 %
   Tier 1 risk-based capital 535,670 11.5 187,049 4.0 280,574 6.0
   Total risk-based capital 594,620 12.7 374,098 8.0 467,623 10.0

Central Pacific Bank
At March 31, 2008:
   Leverage capital $ 500,395 9.2 % $ 218,831 4.0 % $ 273,539 5.0 %
   Tier 1 risk-based capital 500,395 10.4 193,328 4.0 289,992 6.0
   Total risk-based capital 560,981 11.6 386,656 8.0 483,320 10.0

At December 31, 2007:
   Leverage capital $ 518,923 9.5 % $ 218,143 4.0 % $ 272,679 5.0 %
   Tier 1 risk-based capital 518,923 11.1 186,743 4.0 280,115 6.0
   Total risk-based capital 577,779 12.4 373,487 8.0 466,859 10.0

					Minimum Required for				Minimum Required to
	Actual				Capital Adequacy Purposes				be Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio

Company
At June 30, 2008:
Leverage capital	$	468,087	8.2	%	$	228,059	4.0	%	$	285,074	5.0	%
Tier 1 risk-based capital		468,087	9.8			190,504	4.0			285,756	6.0
Total risk-based capital		527,997	11.1			381,008	8.0			476,260	10.0

At December 31, 2007:
Leverage capital	$	535,670	9.8	%	$	218,477	4.0	%	$	273,096	5.0	%
Tier 1 risk-based capital		535,670	11.5			187,049	4.0			280,574	6.0
Total risk-based capital		594,620	12.7			374,098	8.0			467,623	10.0

Central Pacific Bank
At June 30, 2008:
Leverage capital	$	446,437	7.8	%	$	227,791	4.0	%	$	284,739	5.0	%
Tier 1 risk-based capital		446,437	9.4			189,988	4.0			284,982	6.0
Total risk-based capital		506,188	10.7			379,977	8.0			474,971	10.0

At December 31, 2007:
Leverage capital	$	518,923	9.5	%	$	218,143	4.0	%	$	272,679	5.0	%
Tier 1 risk-based capital		518,923	11.1			186,743	4.0			280,115	6.0
Total risk-based capital		577,779	12.4			373,487	8.0			466,859	10.0

Liquidity

Our objective in managing liquidity is to maintain a balance between sources and uses of funds in order to economically meet the cash requirements of customers for loans and deposit withdrawals and participate in lending and investment opportunities as they arise. We monitor our liquidity position in relation to trends of loan demand and deposit growth on a daily basis to assure maximum utilization, maintenance of an adequate level of readily marketable assets and access to short-term funding sources.

~~During the first quarter~~Core deposits have historically provided us with a sizeable source of ~~2008, loan balances increased slightly while our~~relatively stable and low cost of funds. In addition to core deposit ~~balances decreased from year end 2007. This shortfall was funded from~~funding, we also access a variety of other short-term and long-term funding sources, ~~including~~which include proceeds from maturities of our investment securities, as well as secondary funding sources such as the Federal Home Loan Bank of Seattle (“FHLB”). and the Federal Reserve discount window. The Bank is a member of, and maintained a $1.3 billion line of credit with the FHLB as of ~~March 31,~~June 30, 2008, of which ~~$135.2~~approximately $279.5 million was ~~outstanding.~~available for future borrowings. Other sources of funds in the past have included proceeds from common stock offerings. Management does not rely on any one source of liquidity and manages availability in response to changing balance sheet needs.

~~We believe that our current~~Our liquidity may be affected by an inability to access the capital markets or by unforeseen demands on cash. Over the past year, sources of ~~funding are adequate~~credit in the capital markets have tightened as mortgage loan delinquencies increased, demand for mortgage loans in the secondary market decreased, securities and debt ratings were downgraded and a number of institutions defaulted on their debt. The market disruptions that started in 2007 have continued in 2008 and have made it significantly more difficult for financial institutions to ~~meet~~obtain capital/funds by selling loans in the secondary market or through borrowings.

We cannot predict with any degree of certainty how long these market conditions may continue, nor can we anticipate the degree of impact such market conditions will have on loan origination volumes and gains or losses on sale results. Deterioration in the performance of other financial institutions, including write-downs of securities, debt-rating downgrades and defaults, have resulted in industry-wide reductions in liquidity and further deterioration in the financial markets may affect our liquidity ~~needs for~~position.

On July 30, 2008, our board of directors declared a third quarter cash dividend of $0.10 per common share payable on September 19, 2008 to shareholders of record as of August 15, 2008, compared to a second quarter cash dividend of $0.25 per common share paid on June 13, 2008 to shareholders of record as of May 16, 2008. The purpose of this partial dividend reduction is to preserve and build capital while facing significant industry challenges. Our board of directors believes that this decision is in the ~~near term.~~best interest of our shareholders as it better positions the bank in the current environment and is expected to lead to greater creation of long-term shareholder value. When the economic environment stabilizes, we will take a fresh look at our dividend.

Contractual Obligations

Information regarding our contractual obligations is provided in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2007. There have been no material changes in our contractual obligations since December 31, 2007.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates/prices such as interest rates, foreign currency rates, commodity prices and equity prices. Our primary market risk exposure is interest rate risk that occurs when rate-sensitive assets and rate-sensitive liabilities mature or reprice during different periods or in differing amounts. Asset/liability management attempts to coordinate our rate-sensitive assets and rate-sensitive liabilities to meet our financial objectives. The Asset/Liability Committee (“ALCO”) monitors interest rate risk through the use of interest rate sensitivity gap, net interest income and market value of portfolio equity simulation and rate shock analyses. Adverse interest rate risk exposures are managed through the shortening or lengthening of the duration of assets and liabilities.

The primary analytical tool we use to measure and manage our interest rate risk is a simulation model that projects changes in net interest income (“NII”) as market interest rates change. Our ALCO policy requires that simulated changes in NII should be within certain specified ranges, or steps must be taken to reduce interest rate risk. The results of the model indicate that the mix of rate-sensitive assets and liabilities at ~~March 31,~~June 30, 2008 would not result in a fluctuation of NII that would exceed the established policy limits.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report and pursuant to Rule 13a-15 of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), the Company's Management, including the Chief Executive Officer and Principal Financial and Accounting Officer, conducted an evaluation of the effectiveness and design of the Company's disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon that evaluation, the Company's Chief Executive Officer and Principal Financial and Accounting Officer concluded, as of the end of the period covered by this report, that the Company's disclosure controls and procedures were effective in recording, processing, summarizing and reporting information required to be disclosed by the Company, within the time periods specified in the Securities and Exchange Commission's rules and forms.

Changes in Internal Controls

As of the end of the period covered by this report, there have been no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter to which this report relates that have materially affected or is reasonably likely to materially affect, the internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved from time to time in various claims, disputes and other legal actions in the ordinary course of business. We believe that the resolution of such additional matters will not have an adverse material effect upon our financial position or results of operations when resolved.

Item 1A. Risk Factors

~~There~~The following risk factors have been ~~no material changes~~updated from ~~Risk Factors as~~the risk factors previously disclosed in our Annual Report on Form 10-K for the period ended December 31, 2007, filed with the SEC.

Our ability to maintain required capital levels and adequate sources of funding and liquidity may be negatively impacted by the current economic environment which may, among other things, impact our ability to pay dividends.

We are required to maintain certain capital levels in accordance with banking regulations. We must also maintain adequate funding sources in the normal course of business to support our bank’s operations and fund outstanding liabilities. Our ability to maintain capital levels, sources of funding and liquidity could be impacted by changes in the general markets in which we operate or the capital markets generally.

Our bank must remain well-capitalized for us to retain our status as a bank holding company. In addition, our bank may be subject to a number of enforcement restrictions by the federal regulatory authorities. These may include limitations on the ability to pay dividends, including dividends on our trust preferred securities, the issuance by the regulatory authority of a capital directive to increase capital, and the termination of deposit insurance by the FDIC. If we experience losses, bank customers may transfer money out of bank deposits. As a result, we may lose a relatively inexpensive source of funds and our funding costs may increase.

Our capital ratios have recently declined. Because our capital levels have declined, and may continue to decline, we may need to increase our capital base by further reducing our assets or by raising additional capital. Our ability to reduce our assets or raise additional capital will depend, in part, on market conditions that are outside of our control. Accordingly, we cannot be certain of our ability to increase our capital base.

Our allowance for loan and lease losses may not be sufficient to cover actual loan losses, which could adversely affect our results of operations. Additional loan losses will likely occur in the future and may occur at a rate greater than we have experienced to date.

As a lender, we are exposed to the risk that our loan customers may not repay their loans according to their terms and that the collateral or guarantees securing these loans may be insufficient to assure repayment. During the first six months of 2008, our provision for loan and lease losses amounted to $122.1 million compared to $3.6 million for the comparable prior year period, and our current allowance may not be sufficient to cover future loan losses. We may experience significant loan losses that could have a material adverse effect on our operating results. Management makes various assumptions and judgments about the collectibility of our loan portfolio, which are regularly reevaluated and are based in part on:

·	Current economic conditions and their estimated effects on specific borrowers;

·	An evaluation of the existing relationships among loans, potential loan losses and the present level of the allowance for loan and lease losses;

·	Results of examinations of our loan portfolios by regulatory agencies; and

·	Management’s internal review of the loan portfolio.

In determining the size of the allowance, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions. If our assumptions prove to be incorrect, our current allowance may not be sufficient. We have recently made significant adjustments to our allowance and additional adjustments may continue to be necessary if the local or national real estate markets continue to deteriorate. Material additions to the allowance would materially decrease our net income. In addition, federal regulators periodically evaluate the adequacy of our allowance and may require us to increase our provision for loan and lease losses or recognize further loan charge-offs based on judgments different than those of our management. Any further increase in our allowance or loan charge-offs could have a material adverse effect on our results of operations.

At December 31, 2007, we determined that the goodwill associated with our Commercial Real Estate reporting segment, which includes the California residential construction loan portfolio, was impaired, and we consequently recorded a non-cash charge of $48.0 million in the fourth quarter of 2007. At June 30, 2008, we determined that the remaining goodwill associated with our Commercial Real Estate reporting segment was impaired, and we recorded an additional non-cash charge of $94.3 million in the second quarter of 2008. Estimates of fair value are determined based on a complex model using cash flows and company comparisons. If management's estimates of future cash flows are inaccurate, the fair value determined could be inaccurate and impairment may not be recognized in a timely manner.

Item 2. Unregistered Sales of Equity and Use of Proceeds

~~The following table sets forth information with respect to repurchases by us of our common stock during the quarter ended March 31, 2008~~:

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (1)
January 1, 2008 through January 31, 2008 - $ - - 1,200,000
February 1, 2008 through February 29, 2008 - - - 1,200,000
March 1, 2008 through March 31, 2008 100,000 17.60 100,000 1,100,000

~~(1)~~

~~Item~~ ~~3. Defaults upon Senior Securities~~

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

~~None~~Our Annual Meeting of Shareholders (the “Meeting”) was held on May 27, 2008 for the purpose of considering and voting upon the following matters:

·	To elect four persons to the Board of Directors for a term of three years and to serve until their successors are elected and qualified;

·	To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2008;

·	For the Board of Directors to eliminate classification of terms of the Board of Directors;

·	To transact such other business as may properly come before the Meeting and at any and all adjournments thereof.

The following table presents the names of directors elected at the Meeting, as well as the number of votes cast for each of the directors nominated. A total of 24,380,763 shares, or 84.9% of eligible shares, were represented at the meeting.

Name	For	Withheld
Earl E. Fry	21,150,798	3,229,964
B. Jeannie Hedberg	20,975,552	3,405,210
Colbert M. Matsumoto	21,273,867	3,106,896
Crystal K. Rose	21,181,623	3,199,139

In addition to the above directors, the following directors will continue to serve on the Board of Directors until the expiration of their respective terms as indicated:

Name		Expiration of Term
Richard J. Blangiardi		2009
Clayton K. Honbo		2009
Paul J. Kosasa		2009
Mike K. Sayama		2009
Dwight L. Yoshimura		2009
Clint Arnoldus		2010
Christine H. H. Camp		2010
Dennis I. Hirota		2010
Ronald K. Migita		2010
Maurice H. Yamasato		2010

The ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2008 was approved with a total of 23,726,052 votes cast for, 203,102 votes cast against, and 451,608 abstentions or nonvotes.

The shareholder proposal requesting that the Board of Directors take the steps necessary to eliminate the classification of terms of the Board of Directors was approved with a total of 13,459,411 votes cast for, 5,599,035 votes cast against, and 452,969 abstentions or nonvotes.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit No.	Document

3.1	Restated Articles of Incorporation of the Registrant (1)

3.2	Bylaws of the Registrant, as amended ~~(2)~~*

4.1	Rights Agreement dated as of August 26, 1998 between Registrant and the Rights Agent ~~(3)~~(2)

10.1	License and Service Agreement dated July 30, 1997 by and between the Registrant and Fiserv Solutions, Inc. ~~(4)~~(3)

10.2	Split Dollar Life Insurance Plan ~~(5)(15)~~(4)(14)

10.3	Central Pacific Bank Supplemental Executive Retirement Plan ~~(6)(15)~~

~~Exhibit No.~~	~~Document~~ (5)(14)

10.4	The Registrant's 1997 Stock Option Plan, as amended ~~(6)(15)~~(5)(14)

10.5	The Registrant’s Directors’ Deferred Compensation Plan ~~(7)(15)~~(6)(14)

10.6	The Registrant’s 2004 Stock Compensation Plan ~~(8)(15)~~(7)(14)

10.7	Supplemental Retirement Agreement dated February 28, 2002 by and between Central Pacific Bank and Naoaki Shibuya ~~(9)(15)~~(8)(14)

10.8	Supplemental Retirement Agreement dated June 28, 2002 by and between Central Pacific Bank and Joichi Saito ~~(10)(15)~~(9)(14)

10.9	Employment Agreement, effective as of September 14, 2004, by and between the Registrant and Clinton L. Arnoldus ~~(11)(15)~~(10)(14)

Exhibit No.	Document

10.10	Employment Agreement, effective as of September 14, 2004, by and between the Registrant and Ronald K. Migita ~~(11)(15)~~(10)(14)

10.11	Employment Agreement, effective as of September 14, 2004, by and between the Registrant and Neal K. Kanda ~~(11)(15)~~(10)(14)

10.12	Employment Agreement, effective as of September 14, 2004, by and between the Registrant and Blenn A. Fujimoto ~~(11)(15)~~(10)(14)

10.13	Employment Agreement, effective as of September 14, 2004, by and between the Registrant and Denis K. Isono ~~(11)(15)~~(10)(14)

10.14	Employment Agreement, effective as of September 14, 2004, by and between the Registrant and Dean K. Hirata ~~(12)(15)~~(11)(14)

10.15	Form of Restricted Stock Award Agreement ~~(8)(15)~~(7)(14)

10.16	Supplemental Executive Retirement Agreement for Blenn A. Fujimoto, effective July 1, 2005 ~~(13)(15)~~(12)(14)


10.17	Supplemental Executive Retirement Agreement for Dean K. Hirata, effective July 1, 2005 ~~(13)(15)~~(12)(14)

10.18	Retirement Agreement of Neal K. Kanda dated February 22, 2006 (13)(14) ~~(15)~~

10.19	The Registrant’s Long-Term Executive Incentive Plan (14)(15) ~~(16)~~

10.20	The Registrant’s 2004 Annual Executive Incentive Plan ~~(15) (18)~~(14)(17)

10.21	The Registrant’s Direct Purchase and Dividend Reinvestment Plan (incorporated herein by reference to the Registrant’s Registration Statement on Form S-3 (See File No. 333-138517)

10.22	Cease and Desist Order between Central Pacific Bank, Federal Deposit Insurance Corporation and Hawaii Division of Financial Institutions, dated November 29, 2006 ~~(19)~~(18)

10.23	Termination of Cease and Desist Order between Central Pacific Bank, Federal Deposit Insurance Corporation and Hawaii Division of Financial Institutions, dated December 4, 2007 ~~(20)~~(19)

10.24	Retirement Agreement of Clint Arnoldus dated March 10, 2008 ~~(15) (21)~~(14)(20)

14.1	The Registrant’s Code of Conduct and Ethics ~~(17)~~ (16)

14.2	The Registrant’s Code of Conduct and Ethics for Senior Financial Officers ~~(18)~~

~~Exhibit No.~~	~~Document~~ (17)

31.1	Rule 13a-14(a) Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 *

31.2	Rule 13a-14(a) Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 *

32.1	Section 1350 Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 **

32.2	Section 1350 Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 **

* Filed herewith.

** Furnished herewith.

(1)	Filed as Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, filed with the Securities and Exchange Commission on August 9, 2005.

(2)	~~Filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 31, 2006.~~

~~(3)~~

Filed as Exhibit 4.1 to the Registrant's Registration Statement on Form 8-A, filed with the Securities and Exchange Commission on September 16, 1998.

~~(4)~~(3)

Filed as Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, filed with the Securities and Exchange Commission on March 30, 1999.

~~(5)~~(4)

Filed as Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, filed with the Securities and Exchange Commission on March 27, 1992.

~~(6)~~(5)

Filed as Exhibits 10.8 and 10.9 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, filed with the Securities and Exchange Commission on March 28, 1997.

~~(7)~~(6)

Filed as Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on March 30, 2001.

~~(8)~~(7)

Filed as Exhibits 10.8 and 10.20 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission on March 16, 2005.

~~(9)~~(8)

Filed as Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, filed with the Securities and Exchange Commission on May 10, 2002.

~~(10)~~(9)

Filed as Exhibit 10.13 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, filed with the Securities and Exchange Commission on March 14, 2003.

~~(11)~~(10)

Filed as Exhibits 10.3, 10.4, 10.5, 10.7 and 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed with the Securities and Exchange Commission on November 9, 2004.

~~(12)~~(11)

Filed as Exhibit 10.9 to Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed with the Securities and Exchange Commission on December 13, 2004.

~~(13)~~(12)

Filed as Exhibits 99.1 and 99.2 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2006.

~~(14)~~(13)

Filed as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 24, 2006.

~~(15)~~(14)

Denotes management contract or compensation plan or arrangement.

~~(16)~~(15)

Filed as Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, filed with the Securities and Exchange Commission on March 15, 2006.

~~(17)~~(16)

Filed as Exhibit 14.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, filed with the Securities and Exchange Commission on March 15, 2006.

~~(18)~~(17)

Filed as Exhibit 14.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, filed with the Securities and Exchange Commission on March 15, 2006.

~~(19)~~(18)

Filed as Exhibit 99.2 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 1, 2006.

~~(20)~~(19)

Filed as Exhibit 99 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 10, 2007.

~~(21)~~(20)

Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 10, 2008.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CENTRAL PACIFIC FINANCIAL CORP.
	(Registrant)


Date: ~~May 9,~~August 11, 2008	/s/ ~~Clint Arnoldus~~Ronald K. Migita
	~~Clint Arnoldus~~Ronald K. Migita
	President and Chief Executive Officer


Date: ~~May 9,~~August 11, 2008	/s/ Dean K. Hirata
	Dean K. Hirata
	Vice Chairman and
	Chief Financial Officer

Central Pacific Financial Corp.

Exhibit No.	Description

3.2	Bylaws of the Registrant, as amended

31.1	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of the Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of the Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES	CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES					CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS	CONSOLIDATED BALANCE SHEETS					CONSOLIDATED BALANCE SHEETS
(Unaudited)	(Unaudited)					(Unaudited)

	March 31,		December 31,				June 30,			December 31,
(Dollars in thousands)	2008		2007				2008			2007

Assets
Cash and due from banks	$	84,462	$	79,088			$	97,657		$	79,088
Interest-bearing deposits in other banks		106		241				545			241
Federal funds sold		-		2,800				14,900			2,800
Investment securities:
Held to maturity, at amortized cost (fair value of $27,098 at
March 31, 2008 and $46,077 at December 31, 2007)		26,915		46,124
Available for sale, at fair value		852,655		835,130
Trading								5,077			-
Available for sale								809,965			835,130
Held to maturity (fair value of $25,976 at June 30, 2008 and $46,077 at December 31, 2007)								26,023			46,124
Total investment securities		879,570		881,254				841,065			881,254

Loans held for sale		97,743		37,572				108,535			37,572

Loans and leases		4,176,596		4,141,705				4,077,956			4,141,705
Less allowance for loan and lease losses		72,108		92,049				86,050			92,049
Net loans and leases		4,104,488		4,049,656				3,991,906			4,049,656

Premises and equipment, net		83,504		82,841				82,724			82,841
Accrued interest receivable		25,541		26,041				22,687			26,041
Investment in unconsolidated subsidiaries		16,471		17,404				16,697			17,404
Other real estate		2,000		-				3,501			-
Goodwill		244,702		244,702				150,514			244,702
Core deposit premium		28,082		28,750				27,413			28,750
Mortgage servicing rights		11,536		11,222				13,622			11,222
Bank-owned life insurance		132,477		131,454				133,317			131,454
Federal Home Loan Bank stock		48,797		48,797				48,797			48,797
Income tax receivable								49,539			1,488
Other assets		40,558		38,564				46,930			37,076
Total assets	$	5,800,037	$	5,680,386			$	5,650,349		$	5,680,386

Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing demand	$	632,157	$	665,034			$	649,950		$	665,034
Interest-bearing demand		457,742		461,175				471,294			461,175
Savings and money market		1,112,312		1,178,855				1,151,821			1,178,855
Time		1,577,810		1,697,655				1,647,565			1,697,655
Total deposits		3,780,021		4,002,719				3,920,630			4,002,719

Short-term borrowings		368,375		16,000				275,186			16,000
Long-term debt		915,514		916,019				885,019			916,019
Minority interest		13,098		13,104				10,061			13,104
Other liabilities		48,366		58,141				52,350			58,141
Total liabilities		5,125,374		5,005,983				5,143,246			5,005,983

Shareholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares, none issued		-		-				-			-
Common stock, no par value, authorized 100,000,000 shares, issued
and outstanding 28,707,985 shares at March 31, 2008 and
28,756,647 shares at December 31, 2007		402,844		403,304
Common stock, no par value, authorized 100,000,000 shares, issued and outstanding
28,716,667 shares at June 30, 2008 and 28,756,647 shares at December 31, 2007								402,985			403,304
Surplus		54,487		54,669				55,039			54,669
Retained earnings		216,755		222,644				63,321			222,644
Accumulated other comprehensive income (loss)		577		(6,214	)
Accumulated other comprehensive loss								(14,242	)		(6,214	)
Total shareholders' equity		674,663		674,403				507,103			674,403
Total liabilities and shareholders' equity	$	5,800,037	$	5,680,386			$	5,650,349		$	5,680,386

See accompanying notes to consolidated financial statements.	See accompanying notes to consolidated financial statements.					See accompanying notes to consolidated financial statements.


Part I.	Financial Information

Item I.	Financial Statements (Unaudited)

	Consolidated Balance Sheets June 30, 2008 and December 31, 2007

	Consolidated ~~Balance Sheets~~Statements of Operations ~~March 31,~~Three and six months ended June 30, 2008 and ~~December 31,~~ 2007

	Consolidated Statements of ~~Income~~Cash Flows ~~Three~~Six months ended ~~March 31,~~June 30, 2008 and 2007

	Notes to Consolidated Financial Statements ~~of Cash Flows~~ ~~Three months ended March 31, 2008 and 2007~~

	~~Notes to Consolidated Financial Statements~~

Item 2.	~~Management's~~Management’s Discussion and Analysis of Results of Operations and Financial Condition

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

Part II.	Other Information

Item 1.	Legal Proceedings

Item 1A.	Risk Factors

Item 2.	Unregistered Sales of Equity and Use of Proceeds

Item 3.	Defaults Upon Senior Securities

Item 4.	Submission of Matters to a Vote of Security Holders

Item 5.	Other Information

Item 6.	Exhibits

Signatures

Exhibit Index

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	Three Months Ended
	March 31,
(Amounts in thousands, except per share data)	2008			2007

Interest income:
Interest and fees on loans and leases	$	70,294		$	76,166
Interest and dividends on investment securities:
Taxable interest		9,271			8,712
Tax-exempt interest		1,389			1,363
Dividends		24			33
Interest on deposits in other banks		4			35
Interest on Federal funds sold and securities purchased under agreements to resell		21			10
Dividends on Federal Home Loan Bank stock		122			98
Total interest income		81,125			86,417

Interest expense:
Interest on deposits:
Demand		137			138
Savings and money market		3,785			6,284
Time		14,729			15,835
Interest on short-term borrowings		1,923			505
Interest on long-term debt		9,694			9,968
Total interest expense		30,268			32,730

Net interest income		50,857			53,687
Provision for loan and lease losses		34,272			2,600
Net interest income after provision for loan and lease losses		16,585			51,087

Other operating income:
Service charges on deposit accounts		3,543			3,444
Other service charges and fees		3,415			3,357
Income from fiduciary activities		1,005			761
Equity in earnings of unconsolidated subsidiaries		283			257
Fees on foreign exchange		194			221
Loan placement fees		153			259
Gains on sales of loans		1,798			1,367
Income from bank-owned life insurance		1,870			1,031
Other		2,018			455
Total other operating income		14,279			11,152

Other operating expense:
Salaries and employee benefits		17,364			16,406
Net occupancy		2,853			2,504
Equipment		1,395			1,230
Amortization of core deposit premium		668			685
Amortization of mortgage servicing rights		501			510
Communication expense		1,085			1,148
Legal and professional services		2,413			2,327
Computer software expense		863			799
Advertising expense		682			623
Foreclosed asset expense		2,590			-
Other		1,046			4,244
Total other operating expense		31,460			30,476

Income (loss) before income taxes		(596	)		31,763
Income taxes		(2,254	)		11,628
Net income	$	1,658		$	20,135

Per share data:
Basic earnings per share	$	0.06		$	0.66
Diluted earnings per share		0.06			0.65
Cash dividends declared		0.25			0.24

Shares used in computation:
Basic shares		28,686			30,699
Diluted shares		28,801			30,988

See accompanying notes to consolidated financial statements.

					Minimum Required
					for Capital				Minimum Required to
	Actual				Adequacy Purposes				be Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio

Company
At March 31, 2008:
Leverage capital	$	529,491	9.6	%	$	219,794	4.0	%	$	274,743	5.0	%
Tier 1 risk-based capital		529,491	10.9			193,702	4.0			290,553	6.0
Total risk-based capital		590,192	12.2			387,403	8.0			484,253	10.0

At December 31, 2007:
Leverage capital	$	535,670	9.8	%	$	218,477	4.0	%	$	273,096	5.0	%
Tier 1 risk-based capital		535,670	11.5			187,049	4.0			280,574	6.0
Total risk-based capital		594,620	12.7			374,098	8.0			467,623	10.0

Central Pacific Bank
At March 31, 2008:
Leverage capital	$	500,395	9.2	%	$	218,831	4.0	%	$	273,539	5.0	%
Tier 1 risk-based capital		500,395	10.4			193,328	4.0			289,992	6.0
Total risk-based capital		560,981	11.6			386,656	8.0			483,320	10.0

At December 31, 2007:
Leverage capital	$	518,923	9.5	%	$	218,143	4.0	%	$	272,679	5.0	%
Tier 1 risk-based capital		518,923	11.1			186,743	4.0			280,115	6.0
Total risk-based capital		577,779	12.4			373,487	8.0			466,859	10.0

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (1)
January 1, 2008 through January 31, 2008	-	$	-	-	1,200,000
February 1, 2008 through February 29, 2008	-		-	-	1,200,000
March 1, 2008 through March 31, 2008	100,000		17.60	100,000	1,100,000