Second-placed Pan, in his fifth event as a member of the PGA Tour, fired a six-under 64 at the Seaside Course after hitting 17 greens in regulation.
Four players, including 2003 Players Championship winner Chad Campbell, were tied on 11-under.
Former British Open champion Stewart Cink, who carded a career-low 62 on Thursday, posted a one-under 71 at the Plantation Course for a nine-under total.
"It's been a really fun two days," said Hughes after taking advantage of the conditions that allowed players to take aim at the flags. "I'm looking forward to the challenge this weekend."
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Using his "squeeze cut" off the tee, a modest left-to-right ball flight, the 25-year-old hit 12 of 14 fairways after not missing a single fairway in the opening round.
"The idea is to eliminate the left side of the golf course and be able to swing freely, knowing the ball is not going to go left. It's been a good shot to lean on."
Pan, who earned his tour card by finishing 11th in 2016 Web.com Tour earnings, struggled in his first four outings.
"It took me a while to feel comfortable out here but it's good to be back and play my game," said Pan who was the world number one amateur while at the University of Washington.
His game is getting in shape at the perfect time, ahead of his next challenge at the World Cup in Australia.
"I can't wait," said Pan, 25. "I played the Olympics this summer and it's always my dream to represent my country."
Eighty players made the cut, set at five-under, at the final tournament of the autumn portion of the schedule.
(Writing by Larry Fine in New York; Editing by Tony Jimenez)
