Good morning and good afternoon, ladies and gentlemen.

Thank you for standing by and welcome to the Central Pacific Financial Corp Third Quarter 2026 Earnings Call. During today's presentation, all parties will be in a listen only mode. Following the presentation, the conference will be open for questions. This call is being recorded and will be available for replay shortly after its completion on the company's website at www.cpb.bank. I'd like to turn the call over to Mr. Jayrald Rabago, Senior Strategic Financial Officer. Please go ahead.

Thank you, Erica. And thank you all for joining us today to review Central Pacific Financial Corp's financial results for the third quarter of 2026. Joining me this morning are Arnold Martinez, Chairman, President, and Chief Executive Officer. David Morimoto, Vice Chair and Chief Operating Officer. Ralph Mesick, Vice Chair. Executive Vice President and Chief Financial Officer, and Anna Hu, Executive Vice President and Chief Credit Officer. Before we begin, I would like to remind everyone that our earnings release and supplemental slides are available on our investor relations website at ir.cpb.bank. During today's call, management may make forward-looking statements. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. For a complete discussion of these risks, please refer to slide two of our presentation. With that, I will turn the call over to our chairman, president, and CEO, Arnold Martines.

Thank you, Jayrald, and aloha to everyone joining us today. We delivered solid third quarter results driven by higher net interest income Our net interest margin expanded, supported by higher earning asset yields and stable deposit costs. Diluted earnings per share rose 21% compared with last year's third quarter results, which were adjusted to exclude one-time expenses. Our performance reflects the results and provides a sound foundation as we move into the fourth quarter. Our strategy remains focused on delivering sustainable returns as a high performing bank while supporting our customers, communities and shareholders. We continue to invest in talent, automation and data capabilities to support future operating efficiencies. At the same time, continued productivity gains are helping us generate positive operating leverage. Turning to the broader environment, Hawaii's economy remains resilient despite slower growth in the recent months due to storm-related travel disruptions. Through the first eight months of 2026, visitor arrivals increased 1.8% and spending rose 4.1% compared with the prior year. Hawaii's unemployment rate remained low at 2.8% in September, compared with 4.2% nationally. Statewide non-farm employment increased by 1,300 jobs year over year, including 700 jobs added in the construction industry, which continues to be a bright spot in the Hawaii economy. We continue to monitor external risks, including the geopolitical conflict and effects on oil prices, inflation and visitors to our state, as well as impacts from the elevated storm activity Hawaii is experiencing this year. We are committed to supporting our community as restoration and cleanup efforts continue. Overall, impacts were fortunately isolated and we don't see any material impacts on our business or our customers. With that, I will turn the call over to Dayna.

Thank you, Arnold. We are pleased to report another solid quarter of earnings, reflecting the continued execution and diligence of our teams. For the third quarter, net income was $22.8 million, or 88 cents per diluted share, compared with $20.8 million, or 80 cents per diluted share in the prior quarter. Return on average assets was 1.22% and return on average equity was 15.28%. Our profitability metrics continue to trend favorably in line with our focus on high performance. Net interest income totaled $64.5 million for the quarter, up $1.6 million or 2.6% from the prior quarter and up $3.2 million or 5.2% from the year ago quarter. Net interest margin increased five basis points from the prior quarter and 13 basis points from the year-ago quarter to 3.62%. A sequential quarter increase in net interest income and margin was primarily driven by higher yields on loans and investment securities. Average loan yield increased five basis points to 5.01%, while the average rate paid on total deposits remained stable at 90 basis points. We continue to benefit from earning asset repricing and disciplined funding management. Our balance sheet sensitivity position is neutral to slightly asset sensitive. Therefore, we are well positioned in the current rate environment. Fed rate hikes are modestly favorable as we've reduced our fixed rate asset exposures and we expect deposit pricing and betas to remain manageable. For the fourth quarter, we expect NIM to be in the mid 360% range. Total other operating income was $12.4 million for the quarter compared with $14.6 million in the prior quarter. The sequential decrease was primarily due to a $2.4 million decline in our bank-owned life insurance income related to continued equity market volatility. Total other operating expense was $44.8 million for the quarter compared with $46.2 million in the prior quarter. The sequential quarter decrease was primarily attributable to a $1.2 million reduction in salaries and employee benefits and a $1.0 million reduction in other expenses, both related to lower deferred compensation expenses driven by market volatility and offset by lower BOLDI income. The efficiency ratio improved to 58.3% from 59.6% in the prior quarter, and continues to drive towards high performance with our ongoing focus on positive operating leverage. During the quarter, we repurchased approximately 294,000 shares for $11.2 million at an average price of about $38 per share. At quarter end, $22 million remained available under our share repurchase authorization. Given our strong earnings, the board increased the fourth quarter cash dividend by 3.3% to 31 cents per share. We continue to maintain a healthy capital position and remain committed to optimizing capital to enhance long-term shareholder value.

I will now turn the call over to Ralph. Thank you, Dayna. We continue to focus our lending activities on strengthening the earnings profile of the bank while maintaining pricing and credit discipline. We target good quality credit and emphasize sponsorship structure and returns over volume. Total loans ended the quarter at $5.31 billion, up approximately $5 million from the prior quarter, and down approximately $54 million from a year ago. Average loans were essentially unchanged at $5.3 billion. While overall balances were relatively stable, portfolio mix continued to evolve, improving our interest rate position of our balance sheet. As we've seen in previous quarters, Growth in variable rate commercial mortgage and construction lending is replacing lower yielding fixed rate residential mortgage, consumer and home equity loans. Funded production excluding revolving activity totaled approximately $229 million against $204 million of runoff. New production carried a weighted average rate of 6.26% compared with 5.72% on runoff balances. resulting in positive spread replacement. From a geographic perspective, third quarter production was about 50% from Hawaii and 50% from the mainland. At quarter end, mainland loans represented 18% of total balances. Mainland balances increased by approximately $50 million during the quarter, while Hawaii balances declined by approximately $45 million. In Hawaii, our emphasis remains on relationship-based lending that supports building deeper customer relationships. These types of relationships generate operating accounts and treasury management services, as well as personal banking opportunities. On the mainland, we continue to selectively deploy excess funding, which will enhance portfolio diversification and increase risk adjusted returns. Looking ahead, we are encouraged by pipeline activity. We have approximately $224 million in loan volume, across 71 opportunities in the processing stages scheduled for fourth quarter closings. I would emphasize that this represents scheduled pipeline activity rather than a forecast. The actual pull through and timing of closings may differ but we've booked more than a third of that production in dollars during the month of October. Finally, we're well aware of the uncertainty and headwinds impacting the local and national economy but continue to be biased toward business development and growth. will be intentional and disciplined in this pursuit, allocating capital to opportunities that strengthen the earnings part of the bank and the resilience of our balance sheet. And with that, I'll turn the call over to David.

Thank you, Ralph. Total deposits ended the quarter at $6.66 billion, down $31.9 million, or 0.5% from the prior quarter, and up $86.2 million, or 1.3%, from the prior year. The quarterly decline was due to a $49.2 million reduction in higher cost time deposits. This was partially offset by growth of $15.7 million in interest-bearing demand deposits and $21.6 million in savings and money market balances. On an average balance basis, non-interest-bearing deposits increased and many more. Our deposit franchise continues to reflect the strength of our consumer, business and international relationships. Deposits remain well diversified and granular, supported by long-tenured customers, low reliance on public time deposits, and no broker deposits. We also continue to invest in the customer experience and operating efficiency across our digital branch data and operations platforms. Recent work on our customer relationship management and data platform initiatives are strengthening service, insight, and scalability. Our focus remains on new customer acquisition, increasing primary relationships, and connecting our full range of capabilities to serve customers more fully. With that, I'll turn the call over to Adam.

Thank you, David. Asset quality remains strong at quarter end. Non-performing assets declined to $40 million or 20 basis points of average loans. Criticized loan ratio improved to 181 basis points of total loans from 234 basis points in the prior quarter. 91% of criticized loans are real estate secured with strong loan-to-value ratios. Allowance for credit losses was $59.8 million or 1.13% of total loans relatively stable from 1.14% in the prior quarter. The provision for credit losses totaled $1.9 million for the quarter. Overall, our credit quality remains strong with our lending and credit risk strategy focused on diversification, consistent underwriting standards, strong collateral, and unstable segments and industries that we have solid expertise in. I will now turn the call back to Arnold for closing comments.

Thank you, Anna. To summarize, we are pleased with our third quarter earnings performance, which continued to trend favorably and reflect the strong execution of our team. These results position us to serve our customers well, support prudent growth, and navigate the ongoing market uncertainties with discipline. I want to thank our employees, Thank you also to our customers, shareholders and our broader community for your ongoing support. We are now happy to answer your questions.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, Press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of David Feaster with Raymond James. Your line is open. Please go ahead.

Hey, good morning, everybody. Hi, David. I wanted to start on the growth side. It sounds like demand's holding up well, pipelines are doing all right, and it sounds like you're still pulling things through. I'm just curious, how is demand from your perspective? As you talk to your clients about higher rates, have you seen any shifted demand? Are you concerned at all about anything starting to fall out of the pipeline and then Just touch on the pay down activity. It sounds like that's really been the biggest inhibitor to faster growth, but just wanted to get your sense on that side.

Yeah, David, this is Ralph. I would say in terms of the forecast, the best forecast we have right now is what we have in the pipeline. I think the pipeline looks fairly healthy. As you probably are aware, we do underwrite loans to the higher rate environment. We also look at that relative to our asset monitoring of our portfolio. I would say in terms of activity, mainland lending is really supplementing, not replacing the Hawaii franchise. We generated, I think about 380 million in production in Hawaii this year against about say 310 in the mainland. And then the runoff is greater in Hawaii because it's basically a larger portfolio.

Okay. And when I look at it, a lot of the runoff is in kind of the resi mortgage and home equity lines. Could you touch on the mortgage market and the housing market from your perspective? How much of that is intentional and strategic, just kind of optimizing the loan book and rotating towards more CRE and commercial? And just, again, kind of how you're seeing pricing trending today.

Hey David, it's David. You know, on the first mortgage side, residential mortgage, obviously that faces a lot of headwinds just because of the rate environment. So no different than the rest of the industry. And with the recent rise in longer term rates, it's going to continue to face headwinds. You know, I think it's running at about a third of what it normally would have been running on as far as production. and we expect that to continue. The home equity is a potential opportunity. It is a product that we are taking a harder look at and seeing if there's opportunity to at least diminish the runoff, if not have some net growth in that portfolio. A lot of people have first mortgages at very low interest rates. They're not looking to refi that. So the way that they can access their equity is through the home equity product.

I would add, David, that we're really trying to improve the economics of our own portfolio, not really just pursuing balance sheet growth. So what you're going to see, I think, and what you've seen our priorities are better And then I'd say continued sort of, I'd say, disciplined credit selection.

Okay. Okay. And maybe on the other side of the balance sheet, right? I mean, touching on funding, it's pretty impressive what you're all able to do. I mean, you know, reducing CDs, able to replace that with some core deposits, keep deposit costs flat. Could you just touch on... How do you think about core deposit growth as we look forward? How pricing is trending and just kind of the competitive landscape for funding on the islands?

David, it's David again. First off, I want to thank the teams. The teams have been doing an exceptional job with continuing to build core deposits. will be able to manage deposit costs over time. I think as we look forward, we are expecting strengthening loan growth, net loan growth. And as a result, that likely will cause total deposit costs to, this might be a trough going forward. If we start to see loan growth, we'll look to start growing our deposits that may result in slight increases in total deposit costs. Having said all of that, that is what we're looking to do and that will be a creative growth. So I would think that's how we're looking at the deposit side. We've been very deliberate about our managing of our deposit base because of the lack not that, but the minimal amount of loan growth. But going forward, we think that's gonna change.

Okay, terrific, thanks everybody.

The next question comes from the line of Matthew Clark with Piper Sandler. Your line is open, please go ahead.

Good morning everyone.

Morning Matthew.

Just along those lines, maybe Dayna, if you had the spot rate on deposits at the end of September and just thinking through the beta, assuming we get maybe a rate hike in December and March, I think on the way down you were about 35% for interest bearing. Do you think you can do something similar or do you think you can do a little better than that on the way up?

Sure. Hi, Matthew. Thanks for the question. On the spot rate for the month of September, our total deposit cost was 91 basis points. So starting to tick up slightly there. As far as the betas, we believe we can manage the deposit repricing beta in a favorable range, similar to what we've experienced in the last couple of cycles. So I'm expecting a total deposit beta of around 24% or about 33% on September. total interest-bearing deposits. Our depositors are relationship-based, sticky, and generally less rate-sensitive overall. So I feel good that we can manage the beta in a reasonable range.

Great. And then just on the CDE side, down this quarter, it sounded like some of it was higher cost. Can you just update us on the amount of CDEs you have maturing here in the fourth quarter and the roll-off and roll-on rates that you anticipate?

In the fourth quarter, we have about $410 million of CD maturities. That's about 40% of our portfolio. That's running off at a weighted average rate of about 2.7%. And I believe our new CD rates on a blended basis, I estimate it to be approximately 3.0%. So a nominal rise in our CD costs going forward, but we can manage through that.

Got it. Okay. That's helpful. Thank you. And then on the fee and expense run rates, I apologize if I missed it in your prepared comments if you spoke to kind of a run rate going forward, but just trying to think of a normalized fee income and not just expense run rate for the fourth quarter when you just kind of distill the bully noise.

Sure, Matthew. On the fee income side, you know, when we carve out that bully noise, like you said, our non-interest income continues to do well on the wealth side. Our teams have been successful. They're growing the business. Mortgage banking, though, will be under pressure in this current higher for longer rate environment. So considering these factors, I'm expecting that our total other operating income to be generally flattish year over year. but it will depend on further market volatility impacting our BOLI. And then just for the fourth quarter, if you're looking at that specifically, probably in about the $13 million range. And then on expenses, Matthew, we continue to manage our expense base well. And like I said, our objective is to consistently deliver positive operating leverage. The guidance for the full year, I updated it to expect an increase of about two to two and a half percent this year, which is on the low end of the range that I had previously guided to. In the fourth quarter, we do typically see some seasonal step up in expenses related to incentives and some other year end activities. And then, as you know, our deferred compensation expense continues to be volatile, but we assume that it will normalize in the fourth quarter.

Okay. That's great. Thank you very much.

Thanks, Matthew.

Our next question comes from the line of Andrew Leash with Stone X Financial. Your line is open. Please go ahead. Hello, Andrew. Your line is open. Please go ahead. Your next question comes from the line of Kelly Mota with KBW. Your line is open. Please go ahead.

Hey, good morning. Thanks for the question. Most of mine, it was a nice clean quarter. I feel like most of mine have been taken at this point. I guess as you look ahead, it seems like, you know, growth has been a little bit more muted with more coming from the mainland. I'm wondering if you can supplement kind of what you're seeing in natural Hawaii for maybe more mainland growth coming on. I'm just wondering if how you guys are viewing that portion of the business. Thanks.

Hi, Kelly. I think I got your question. You're a little soft, but I think Right now, we're running about 50-50 between Hawaii and the mainland. And I think just through this first month of the quarter, that's kind of the mix right now. So again, if we continue to run off some of the fixed rate long duration assets, we're probably going to see fairly muted growth.

Got it. That's helpful. And maybe just a housekeeping item for Dayna. Dayna, do you have your expected tax rate? It came in a little higher than where I was for the quarter.

Sure, Kelly. On the tax rate, so the increase this quarter was due to less tax-exempt bully income as well as higher pre-tax book income. Going forward, I would expect our normalized ETR to be around 22 to 24%. The BOLI income has been volatile, so that could impact it. And then I'll lastly note that we are evaluating some potential additional tax credits, which would be favorable to our tax rate. But right now, I'm not building it into the guidance.

Got it. That's helpful. That's all for me. I'll step back.

Thank you, Kelly.

Your next question comes from the line of Andrew Leash with Stone X Financial. Your line is open. Please go ahead.

Hi, sorry. I hope I'm coming through now. My phone wasn't muted. I don't know what was up there. Can you hear me at all?

Yeah, we're good, Andrew.

Okay, sorry about that. No, my question's really just on the margin guide. I mean, I hear the, I see the repricing engine that's still flowing through. I hear the asset sensitivity or the modest as its sensitivity. So why wouldn't the guide be closer to the high 360s rather than the mid-360s?

Hi, Andrew. It's Dayna. So on the go-forward margin, you're correct about the factors that will be favorable to the margin going forward. We will continue to have the positive asset back book cash flow repricing benefits on both the loans and the securities. And then our Our balance sheet sensitivity, as I noted earlier, is neutral to slightly asset sensitive. So there could be a slight net positive for us there. But I will note, loan yields are going up, but on the deposit side, those rates will also be going up, offsetting some of those benefits. So those are the factors that are kind of influencing our margin outlook. As we head into next year, I think there is more potential upside on the margin to the extent we are able to drive more loan growth and assuming that pricing remains rational. But we're not providing guidance for 2027 at this point.

Got it. All right. Thanks for taking the question. Thank you, Andrew.

Your next question comes from the line of Liam Cuhill with Havdi Group. Your line is open. Please go ahead.

Hey, good morning, everyone. Thanks for taking my questions. Welcome, Liam. Thank you. So to touch on deposits one more time, great to see the replacement of some higher cost funding in the quarter for and some lower costs or deposits. But I was wondering, is there a loan to deposit ratio you're targeting as we're thinking about potential loan growth in the future and funding that with deposits?

Hi Liam, it's Dayna. On the loan to deposit ratio, we're currently at about 80%. Our target range, I would say, is about 80 to 85%. So we're on the lower end of that. I think that gives us a lot of flexibility to grow the balance sheet. And we plan to do that in a profitable way.

Thank you. That's very helpful. Let's jump to credit quickly. Are there any verticals where you're watching dynamics more closely? I mean, it looks like credit improved pretty nicely in the quarter, but just curious if you have any thoughts there.

I think, hi Leon, this is Anna. Where we're primarily focused on is just paying attention a little bit more to the consumer market, just given the macroeconomic market conditions, the higher interest rates for longer. Yeah, it's mostly the consumer side.

That makes sense. Thank you. And final question for me, more of a housekeeping item. Moving forward, do you expect their repurchases likely continue in your current levels?

Hi, Liam. I can take that one. This is Dayna. So we do have the repurchase program with some authorization left, as I noted. This does give us flexibility, which we like. It's a low risk source of value. But as I said in prior quarters, the level of repurchases in any given quarter, it will continue to be dynamic. and informed by several factors, including loan growth opportunities, the operating environment, other risk considerations, our valuation, as well as we are watching our AOCI and TCE ratio. But with all of that said, as of now, I generally expect we will continue share repurchases at a roughly similar pace in the fourth quarter as we did in the third quarter.

Great. Well, thank you for taking my questions. I'll step back.

Your next question comes from the line of Matthew Clark with Piper Sandler. Your line is open. Please go ahead.

Thank you. Sorry. Since we're digging to the margin a little bit more there in the Q&A, Dayna, can you just remind us of the securities cash flows that are coming off the portfolio roll off and I've expected roll on rates and then same thing on the loan side. I think the payoffs and new production, roughly, I think a 50 basis point, you know, pick up there, but just also wanted to think through the back book repricing on the loan side.

Sure, Matthew. On the securities portfolio, the cash flows on a quarterly basis, it's about $30 million a quarter. and we've been getting about, I'd say 225 to 250 basis points yield pickup on our new securities purchases. On the loan portfolio, it's about 200 million in total quarterly runoff. And as you mentioned, it is being replaced at weighted average yields that are around 50 to 60 basis points higher.

Perfect, thank you.

Sure.

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. There are no further questions at this time. I will now turn the call back to Mr. Jayrald Rabago for closing remarks.

Thank you everyone for joining us today and for your continued interest in Central Pacific Financial Corp. We look forward to speaking with you again next quarter.