CENTRAL PACIFIC FINANCIAL CORP Q4 FY2024 earnings call

• Arnold noted strong NIM expansion, core deposit growth, strong liquidity, asset quality, and capital positions. Loan opportunities picked up, and an investment portfolio repositioning completed in Q4 will lead to income accretion in 2025+. - Hawaiian market update: Economy expanding modestly, construction strong (total construction value 2024 >$13B, payroll jobs 43,000 in Oct 2024), tourism up in Nov 2024 (arrivals +5.3%, spending +2%), Maui rebuilding, low unemployment, and strong real estate. - David discussed Q4 earnings, loan portfolio trends, deposit growth, net interest income and NIM expansion, other operating income impact, intangible asset impairment, dividend increase, and share repurchase authorization. - Ralph talked about asset quality: Net charge-offs $3.8 million, nonperforming assets $11 million, allowance for credit loss $59.2 million, strong capital positions, and Central Pacific Bank becoming a Fed member bank.

In the fourth quarter, net income was $11.3 million or $0.42 per diluted share. Excluding the investment securities loss, adjusted fourth quarter net income was $19 million or $0.70 per diluted share. For the full year 2024, net income was $53.4 million or $1.97 per diluted share, and adjusted full year net income was $63.4 million or $2.34 per diluted share. The loan portfolio decline slowed in Q4 with a sequential quarter decrease of $9.8 million or 0.2%, and the team is positioned for net loan growth in 2025. The total deposit portfolio grew by $61 million, including core deposit growth of $74.2 million and demand deposits increasing by $50.9 million in Q4. Net interest income for Q4 was $55.8 million, up $1.9 million from the prior quarter, with a net interest margin of 3.17%, up 10 basis points. Other operating income for the quarter was $2.6 million, impacted by a $9.9 million investment repositioning loss. Adjusted other operating income excluding the loss was $12.5 million. Other operating expense was $44.2 million, including a $1.4 million impairment charge on intangible assets. The Board declared a quarterly cash dividend of $0.27 per share and approved a new share repurchase authorization for up to $30 million in 2025.

• Expect net loan growth in 2025. - Investment portfolio repositioning projected to increase prospective annualized net interest income by $2.7 million and net interest margin by 4 basis points. - Dividend increased to $0.27 per share, and a new share repurchase authorization for up to $30 million in 2025. - Expect positive operating leverage in 2025 with revenues growing faster than expenses. - Cautiously optimistic about the net interest margin exceeding previous ranges.

• Risks related to forward-looking statements as mentioned in the presentation slide 2. - Potential impact of LA wildfires on Hawaii tourism arrivals. - Idiosyncratic events affecting C&I loans.

Q: Expand on loan growth opportunities A: Arnold said the team has been proactive, added lending team members, and sees growth in commercial and commercial real estate segments.

Q: Deposit performance and competitive landscape A: David mentioned core deposit growth, seasonal DDA deposits in Q4, and the team's market position in growing deposits.

Q: Expenses and operating leverage A: David said operating expense range is 42.5-43.5, and expects revenues to grow faster than expenses in 2025.

Q: Margin above 3.30 A: David was cautiously optimistic, noting positive trends in NIM and other metrics.

Q: Loan yield and rate cuts A: David said the team maintained pricing discipline, with new volume loan yield at 7.40 in Q4.

Q: Deposit funding cost and Fed cuts A: David said a balanced approach, with continued opportunities on both funding and asset sides.

Q: Credit color and consumer book A: Ralph mentioned idiosyncratic C&I issues, improving consumer charge-offs, and NPAs secured by residences.

Q: Capital priorities A: David talked about the dividend increase, share repurchases, organic growth, and potential M&A, evaluating capital flexibility ongoing.