Central Pacific Financial Corp. Q4 FY2025 earnings call

• Central Pacific Bank was named to Newsweek's list of America's Best Regional Banks for 2026, reflecting strong franchise and customer trust.
• Hawaii's economy is resilient despite macroeconomic uncertainty, with strong construction activity in public, private, and military sectors.
• Disciplined execution across core franchise led to strengthened profitability in Q4 2025, with core earnings per share up 24% from prior year.
• Focus in 2026 on core business with disciplined organic growth, diversification, and operational excellence.
• Total shareholder return over past three years was 77%, and core earnings per share increased 24%.
• Credit risk appetite emphasized portfolio design, underwriting discipline, and risk-based pricing, with strong credit performance in Q4 2025, including stable asset quality indicators and low net charge-offs.

In the fourth quarter, the total loan portfolio declined by $78 million from the prior quarter, with full-year 2025 total loans declining by $44 million, driven by decreases in residential mortgage, home equity, and consumer portfolios offset by growth in commercial mortgage and construction. Total core deposits grew by $78 million during the quarter, with interest-bearing demand, savings, and money market balances increasing, and the average rate paid on total deposits declining to 94 basis points. Fourth-quarter net interest income was $62.1 million, up 1.3% from the prior quarter, with net interest margin expanding seven basis points to 3.56%. Total other operating income was $14.2 million, up $700,000 from the previous quarter, primarily from bank-owned life insurance income. For the full year 2026, net interest income is guided to increase 4 to 6%, and first-quarter NIM is expected to expand by approximately two to five basis points.

• Conservatively guiding to full-year net loan and deposit growth in the low single-digit percentage range for 2026.
• Expect net interest income to increase approximately 4 to 6% in 2026.
• First-quarter NIM expected to expand by approximately two to five basis points.
• Board approved a new share repurchase authorization for up to $55 million in 2026.
• Board declared a first-quarter cash dividend of 29¢ per share, a 3.6% increase from the prior quarter.

• Forward-looking statements involve risks that may cause actual results to differ materially from projections. For a complete discussion, refer to slide two of the presentation.
• Macroeconomic uncertainty such as lower visitor counts and softer job growth in Hawaii pose potential risks.

Q: Could you elaborate on the delay in new loan fundings this quarter and timing for funding, and its impact on provisioning in the first half?

A: David Morimoto said some delayed closings pushed into the first half, with closings more weighted to the second quarter versus the first quarter, and a combination of funded deals and construction. Provisioning will be affected by these timing factors.

Q: On deposit costs, what was the spot rate at the end of the year and current deposit competition impact on deposit beta?

A: Dayna Matsumoto said the deposit spot rate at December 31 was 89 basis points, and with an outlook of two rate cuts in the year, the interest-bearing deposit beta is expected to remain roughly in the 25 to 30% range.

Q: Regarding loan growth, outlook for Hawaii and Mainland, and mix of growth?

A: David Morimoto stated Hawaii has a pipeline of growth opportunities in commercial areas, expecting 2026 to be a stronger growth year than 2025, with growth between Hawaii and Mainland fluctuating based on risk-return opportunities.

Q: Thoughts on loan growth trajectory, origination trends, and drivers of payoffs/paydowns?

A: David Morimoto said first quarter is seasonally slower for loan growth, originations in Q4 were in the $300 million range, and payoffs/paydowns in construction portfolio were due to its smaller size, working towards building critical mass in construction.

Q: Competitive landscape on deposit side and core deposit growth sources?

A: David Morimoto said core deposit growth is a combination of new clients and gaining share with existing clients, with focus on deepening relationships and customer prospecting for stronger core deposit growth in 2026