SecProbe.io

CORRESP
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    letter.htm

              Central Pacific
      Plaza

              PO Box 3590

              Honolulu  Hawaii
      96811-3590

              Telephone
      808-544-0500

              Fax Line
      808-531-2875

      October
29, 2008

        Mr. Kevin
W. Vaughn

        Branch
Chief

        Securities
and Exchange Commission

        Division
of Corporation Finance

        Washington,
DC 20549

                  Re:
      Central Pacific Financial Corp.

                  Form
      10-K for Fiscal Year Ended December 31,
2007

                  Form
      10-Q for the Periods Ended March 31 and June 30,
  2008

                  File
      No. 001-31567

        Dear Mr.
Vaughn:

This letter constitutes the response of Central
Pacific Financial Corp., a Hawaii corporation
(the “Company”), to the comment letter of the Securities and Exchange Commission
(the “Commission”) dated October
16, 2008. If after reviewing this
letter, the Commission has further concerns or comments, we would be pleased to
provide any necessary additional information.

        In our letter, we
refer to the Staff of the Commission as the “Staff” and to the Form 10-K
for the fiscal year ended December 31,
2007 and
December 31, 2008 as the “2007 Form
10-K” and “2008 Form 10-K,”
respectively. We refer to the Form 10-Q for
the fiscal quarter ended March 31 and June
30, 2008 as the “Q1 2008 Form
10-Q” and “Q2 2008 Form 10-Q,”
respectively.

        Comment numbering used for each response set forth below
corresponds to the comment numbering used in the Staff’s
letter.

        Form 10-K for the Year Ended
December 31, 2007

        Our Services, Page
4

                  1.

                  We
      note your response to comment 1 to our letter dated August 7,
      2008.  Given that a significant amount of your loan portfolio is
      subject to interest reserves (approximately 21% at December 31, 2007 and
      16% at June 30, 2008), please consider providing the following additional
      information in future filings, much of which is included in your response,
      or tell us why you do not believe similar disclosures are not necessary or
      material:

                  ·

                  Discussion
      of the loan types where interest reserves are required and the purpose of
      the interest reserves;

                  ·

                  Disclosure
      of the principal amount of loans subject to interest reserves and
      remaining interest reserves;

                  ·

                  Discussion
      of your underwriting process for loans with interest reserves, and any
      specific differences in how you underwrite loans with interest reserves
      and loans that do not have interest
reserves;

                  ·

                  Discussion
      of your monitoring procedures for these loans, with specific focus on how
      you evaluate the loan for impairment given that it may appear the loan is
      current since the borrower is using the interest reserves to make monthly
      payments on the loan;

                  ·

                  Discussion
      of whether there have been any trends in extensions, renewals and/or
      restructuring of the loans subject to interest
  reserves;

                  ·

                  Clearly
      disclose how restructurings or the extension of additional reserves are
      reflected in your past due metrics, and quantify the amount of additional
      reserves extended based on such restructurings;
  and

                  ·

                  Discussion
      of the reasons for the significant decrease in loans with reserves as well
      as in the outstanding reserve balances from December 31, 2007 to June 30,
      2008, and identify any trends
reflected.

        Response:

        The
Company notes the Staff’s comment.  In future annual filings, the
Company intends to include a discussion similar to its previous response to the
staff.  At a minimum, the Company’s annual filings will include a
discussion of (1) loan types where interest reserves are required; (2) the
purpose of the interest reserves; (3) principal amount of loans subject to
interest reserves and remaining interest reserves; (4) its underwriting process
for loans with interest reserves; (5) its monitoring procedures for loans
subject to interest reserves; (6) trends in extensions, renewals and/or
restructuring of the loans subject to interest reserves; and (7) reasons for any
significant decreases in loans with reserves as well as in the outstanding
reserve balances. The Company also intends to disclose how restructurings, or
the extension of additional reserves, are reflected in its past due metrics and
will quantify the amount of additional reserves extended based on such
restructurings.

        If any of
the above disclosure items materially change during the fiscal year, the Company
will also update its disclosures in subsequent interim filings.

        Financial Statements,
beginning on page 48

        Note 1.  Summary
of Significant Accounting Policies, page 56

        Reclassifications and
Corrections, page 56

                  2.

                  We
      note your response to comment 5 to our letter dated August 7,
      2008.  In order for us to more fully evaluate your response and
      your conclusion about the materiality of the errors related to income
      taxes, please respond to the
following:

                  ·

                  Tell
      us in more detail the nature of the tax errors, quantifying each type
      separately;

                  ·

                  Tell
      us how the errors were discovered and when you finalized the amount of the
      errors;

                  ·

                  Quantify
      the amount of the errors originating each
  period;

                  ·

                  Tell
      us how the error corrections are reflected in the rate reconciliation in
      Note 17;

                  ·

                  Clarify
      how you reached a conclusion that the effect on prior quarterly results
      was not material.  In this regard, your response indicates that
      based on the guidance provided in APB 28, you concluded that the
      correction of the prior period tax errors in the quarterly periods in
      fiscal 2007 was not material, but you do not address the prior interim
      periods in which the error
originated;

            2

                  ·

                  Tell
      us whether the conclusion about materiality was discussed with KPMG’s
      National Office; and

                  ·

                  Please
      consider providing additional clarifying disclosure about these
      out-of-period errors in future filings.  Therefore, in response
      to this comment, please also provide disclosure that you would propose to
      include in future filings relating to these out-of-period
      errors.  The disclosure should specifically focus on your
      conclusion that the effect of recording the correction of the errors
      out-of-period was not material to 2007 results and should provide an
      additional description of the nature of the
  errors.

        Response:

        Nature and Amount of
Errors

        The nature of the tax errors can be placed into the
following two categories:

        Tax Provision Corrections –
Adjustments to the Company’s income tax provision prepared in accordance with
SFAS No. 109, Accounting for
Income Taxes.  Notable corrections in this category included
adjustments to the Company’s deferred tax assets and liabilities to properly
account for revisions to the Company’s temporary differences between book and
tax income ($0.6 million expense in 2006 and $2.2 million benefit in 2005) and
adjustments to properly account for the deduction of dividends paid to the
Company’s employee stock ownership plan ($0.4 million benefit in 2006 and
2005).

        Tax Return Corrections –
Adjustments due to the Company amending previously filed income tax returns.
Notable corrections in this category included adjustments to properly account
for bad debt recoveries ($0.5 million income tax benefit in 2003) and
adjustments to properly recognize the utilization of certain tax credits as
income in its federal and state tax returns ($0.7 million income tax expense in
2005).

        The following table quantifies each type of
correction, illustrates the prior periods in which each type of correction
relates, and compares the correction amount to each period’s reported net income
(dollar amounts in thousands):

                  Fiscal
      Years

                  2006

                  2005

                  2003

                  Total

                  Tax
      Provision Corrections

                $
                (693
                )

                $
                2,887

                $
                -

                $
                2,194

                  Tax
      Return Corrections

                -

                (648
                )

                458

                (190
                )

                $
                (693
                )

                $
                2,239

                $
                458

                $
                2,004

                  Net
      income as reported

                $
                79,180

                $
                72,459

                $
                33,940

                  Error
      as a % of reported net income

                -0.9
                %

                3.1
                %

                1.3
                %

          The
corrections referenced above were discovered by the Company during a thorough
review of its previously filed income tax returns and tax provisions. The
Company’s review coincided with the hiring of a new Tax Director in July 2007
and included detailed examinations of all income tax returns and tax provisions
dating back to fiscal 2000. The review was completed and all amounts were
finalized during the fourth quarter of 2007.

              3

          The
following table details the impact of the corrections on the Company’s 2007 rate
reconciliation disclosed in its 2007 Form 10-K (in thousands):

                      Amounts
      Prior to Corrections

                      Effect
      of Corrections

                      Amounts
      As Reported

                      Computed
      "expected" tax expense

                    $
                    9,851

                    $
                    -

                    $
                    9,851

                      Increase
      (decrease) in taxes resulting from:

                        Goodwill
      impairment

                    16,800

                    -

                    16,800

                        Tax-exempt
      interest

                    (2,276
                    )

                    -

                    (2,276
                    )

                        Other
      tax-exempt income

                    (2,018
                    )

                    -

                    (2,018
                    )

                        State
      income taxes, net of Federal income tax benefit

                    643

                    649

                    1,292

                        Low-income
      housing and energy tax credits

                    (1,377
                    )

                    -

                    (1,377
                    )

                        Other

                    2,720

                    (2,653
                    )

                    67

                      Total

                    $
                    24,343

                    $
                    (2,004
                    )

                    $
                    22,339

            Materiality

            The
guidance provided under paragraph 29 of APB 28, Interim Financial
Reporting,
states “In determining materiality for the purpose of reporting the correction
of an error, amounts should be related to the estimated income for the full
fiscal year and also to the effect on the trend of earnings.”

            As noted
in the Company’s previous response, had the Company corrected the prior period
tax errors in the appropriate fiscal years, the corrections would have
represented less than 3.5% of reported net income for the respective periods.
Furthermore, the impact of all tax corrections and passed adjustments would not
result in any prior quarterly period going from a net loss position to a net
income position or vice versa in fiscal 2006, 2005 or 2003. Accordingly, the
effects of the corrections and passed adjustments would not have any effect on
the Company’s trend of quarterly earnings for fiscal 2006, 2005 or
2003.

            In
addition to evaluating the impact of the corrections in accordance APB 28,
management also considered the qualitative factors prescribed under SAB
99, Materiality.
Based on these factors, management concluded that the impact of all tax
corrections and passed adjustments for each of the quarterly periods in fiscal
2006, 2005 and 2003 are immaterial on a quantitative and qualitative basis such
that the judgment of a reasonable person would not be changed or influenced by
the correction of these errors.

            The
Company discussed its materiality conclusions with KPMG LLP’s National
Office, which deemed the Company’s treatment to be reasonable.

            Future
Disclosures

            The
Company notes the Staff’s comment with regards to providing additional
clarifying disclosure about its out-of-period errors in future filings and
proposes to include the following disclosure in its 2008 Form 10-K:

            “In the
fourth quarter of 2007, we performed a thorough review and reconciliation of our
income tax accounts and identified certain errors related to corrections of
prior period income tax provisions and income tax returns. Certain of these
errors resulted in an overstatement of income tax expense reported in prior
periods which were corrected in the fourth quarter of 2007. We believe that the
correction of these out-of-period amounts in 2007 was not material to our 2007
operating results.”

                4

              Goodwill and Other
Intangible Assets, page 59

                        3.

                        We
      note your response to prior comment 6 in our letter dated August 7,
      2008.  In order for us to more fully understand your analysis of
      goodwill for impairment and your analysis of other intangible assets,
      please address the following:

                      ·

                      Please
      tell us how your consideration of the actual core deposit premium run-off
      percentage to the percentage of cumulative amortization recognized on the
      core deposit premium to identify impairment complies with paragraph 7 of
      SFAS 144, which requires the comparison of the carrying value of the asset
      to its fair value.  Describe in more detail how you determine
      fair value at each impairment test date and tell us the fair value and
      carrying value of these assets at December 30, 2007 and June 30,
      2008.

                      ·

                      We
      note that after the elimination of all goodwill associated with the
      commercial real estate reporting unit that your book value significantly
      exceeds your market capitalization.  Please tell us in more
      detail how you determined the fair value of the reporting units at
      December 30, 2007 and June 30, 2008.  Include a discussion of
      the material assumptions you relied on in estimating future cash flows in
      your response.  Also, discuss the extent to which you reconcile
      the discounted cash flows for each reporting unit to your total enterprise
      value a