Welcome to the Central Pacific Financial Corp. third quarter 2008 conference call. During today’s presentation all parties will be in listen-only mode. (Operator Instructions) I'd now like to turn the call over to Mr. David Morimoto, Senior Vice President, Investor Relations. Please go ahead, sir.

Good morning everyone from Hawaii. With us today are Ron Migita, President and Chief Executive Officer; Dean Hirata, Vice President and Chief Financial Officer; Glen Fujimoto, Vice Chairman Hawaii Market and Curtis Chinn, Executive Vice President and Chief Risk Officer. Today's call will refer to a PowerPoint presentation that can be found on our Investor Relations web site. Ron and Dean will begin by reviewing our third quarter results and then we will open the call up for questions. During the course of today's call, management may make forward-looking statements with respect to the financial conditions, results of operations and the business of Central Pacific Financial Corp. These forward-looking statements involve risks that may cause actual results to differ materially from those projected. For a complete discussion of the risks related to these forward-looking statements, please see our earnings release issued this morning and our other recent documents filed with the SEC. Now I would like to turn the call over to Ron Migita.

Thank you all for joining us today to review Central Pacific Financial Corporation’s financial performance for the quarter ended September 30, 2008. I will be addressing the highlights of our company and the marketplace including updating you on the progress we have made in our California loan portfolio. Our Chief Financial Officer, Dean Hirata, will follow with a detailed financial report of our third quarter results. After we have completed our remarks we will be happy to take your questions. Central Pacific Bank is a company with strong roots in Hawaii. I have been on the job for about three months now and it is indeed an honor and a privilege to serve as CEO of Central Pacific Financial Corporation and Central Pacific Bank. I enjoy spending time with many of our customers to see how we can address their needs and concerns. I have also been impressed by the dedication of our employees. As you all know these continue to be challenging times for our bank and the entire financial industry. Central Pacific Financial Corporation like many financial institutions across the country continue to be faced with formidable problems stemming from problems in the national housing market and the ripple effect of the sub-prime lending crisis. We are pleased to announce that Central Pacific Financial Corporation has returned to profitability in the third quarter of 2008 with net income of $3 million or $0.11 per diluted share. This compares to a net loss of $146.3 million or $5.10 per diluted share in the second quarter of 2008. The earnings include credit costs of $23 million for the third quarter 2008 compared to credit costs of $116.1 million and a non-cash goodwill impairment charge of $94.3 million in the second quarter of 2008. The company did not report a goodwill…

Turning to slide three let me just again summarize the third quarter results. First, we have returned to profitability with quarterly net income of $3 million or $0.11 per diluted share. We have maintained our well-capitalized regulatory designation as of September 30, 2008 with tier one risk based capital, total risk base capital and leverage capital ratios of 10.13%, 11.39% and 8.66% respectively. All three of these ratios were an improvement from June 30, 2008. We showed a decline in our total credit costs from $116.1 million in the second quarter to $23 million in the third quarter of 2008. The increase in allowance for loan and lease losses as a percentage of total loans and leases from 2.11% at June 30 to 2.46% at September 30, 2008. Finally we have improved the company’s credit risk profile by reducing our exposure to the California residential construction market through the previously announced sale of assets in July of this year with a combined carrying amount of $44.2 million. Turning to slide four, as you can see our net interest margin was 4.07% in the current quarter as compared to 3.97% in the second quarter and as you can see from the periods presented we do compare favorably compared to our national peers. Our expectation is that we will compare favorably in the third [sic] quarter. Turning now to the balance sheet on slide five and starting with our loan portfolio, again this slide provides a break down of our total loan portfolio by loan category at September 30 compared to balances as of June 30. Later in the presentation I will provide additional detail on each of these specific categories. This slide also shows past due amounts by category comparing June 30 with September 30. In total our loan portfolio increased…

Thank you for participating in our call today. In conclusion I would like to underscore several key points here. I am confident that our team at Central Pacific Bank can successfully overcome these current economic challenges and continue to serve our customers and our shareholders. While Hawaii’s economy has begun to slow, Central Pacific Financial Corporation’s core operations in Hawaii remain solid with strong operating fundamentals. We remain encouraged by the long-term outlook for our core Hawaii franchise. We continue to take proactive steps to actively reduce our credit exposure in California’s real estate market. We are also well prepared for these challenging times facing financial institutions like ours all across the country. Now at this particular time we would like to entertain questions from the audience.

(Operator Instructions) The first question comes from Brett Rabatin – FTN Midwest Research. Brett Rabatin – FTN Midwest Research: I wanted to start off talking about the commercial construction portfolio and ask how much of that portfolio was spec versus you had someone pre-bill kind of situation?

In Hawaii in the commercial construction portfolio our underwriting requires pre-leasing so from that perspective it really isn’t a pure spec type of transaction. On the mainland it was more spec, probably 50% of that portfolio required some level of pre-leasing when it was originated. Probably about 50% was spec. Brett Rabatin – FTN Midwest Research: If I understand it correctly it sounded like of those eight loans six of them were office space related. Was that the case?

Are you talking about the eight loans in Sacramento? Brett Rabatin – FTN Midwest Research: I’m not sure if I quite understood. There was reference to and you mentioned it in the call as well, there is eight California commercial real estate loans with three borrowers totaling $29 million which appears to be where you had your weakness in the “mainland commercial construction portfolio.” So I wanted to make sure I understood those are all commercial construction loans not also commercial real estate?

You were talking about the eight loans that were added to non-performing status in the quarter. Those were commercial construction and development. Two of them were actual construction. Six were actually in development so they were more on the spec side. Most of those loans were also in Sacramento so geographically that is where we have experienced more of our issues. Brett Rabatin – FTN Midwest Research: I also wanted to ask about the auto portfolio. I’m curious, how much of that is fore plan and what are you seeing in terms of the performance of that portfolio? I think it is about $140 million.

That is all in our indirect portfolio so that is paper we bought from dealers and that has been performing very well. Our delinquency rate has been 92 basis points at the end of the quarter and it has been running at about the 1% range pretty much all year. About a year and a half ago we made a decision given that is a relatively small portfolio for us to concentrate all of our new production on A&B tiers so it tends to be pretty high quality paper. We give up some yield but we have good quality.

I also want to clarify, you said fore plan, we only have one line of credit that is considered a fore plan and it is to the tune of about $10 million and as Curtis had said earlier all of our positions remain very conservative. Particularly, as you know as car sales are declining across the United States. Brett Rabatin – FTN Midwest Research: I wanted to make sure I understood if I’m reading this correctly and I appreciate all the color in the PowerPoint presentation, there basically are no non-performing commercial real estate loans and you really haven’t seen much in the way of risk migration in that portfolio? Can you give us any additional clarity on that?

That is correct. That commercial real estate portfolio are the income property and multi-family portfolios and we really haven’t seen at this juncture the stress we have seen in other segments on the mainland. Brett Rabatin – FTN Midwest Research: So the retail restaurant is about $245 million and the office $139 million. No major stress there. You indicate grade five loans or reappraised. Do you have an estimate how much you have in grade five loans for the mainland CRE portfolio?

I’m going to estimate that number off the top of my head but it is going to be around $50 million range. The recent appraisals have been holding their value better. We have seen in publications everybody has said that thus far those valuations have held up a bit better. Brett Rabatin – FTN Midwest Research: Lastly, I wanted to ask about TARP and what your correspondence has been like with the regulators and what you are anticipating right now?

Again, as we talked about we continue to be well capitalized as of September 30 in terms of our capital ratios and again we are committed to ensure our capital position remains strong. We have applied for the capital through the Treasury’s capital purchase program. Again, we have been in close contact with the regulators on our application.

The next question comes from Joe Morford – RBC Capital Markets, Joe Morford – RBC Capital Markets: I wanted to circle back to these eight new loans California commercial real estate added to NPA this quarter. I’m just wondering if you can talk about the reason for the weakness or the move to NPA. Was it problems with the borrower or the collateral values or kind of write down as you take them and move them into NPL and then lastly what is the prospect for resolution here.

In terms of the eight, six of those are to one borrower and the issue really wasn’t with the collateral value it really was more liquidity of the borrower. The borrower basically over extended and ran out of cash and couldn’t continue debt service. So that was really the problem there. The other two one was a land development for a retail project. When we underwrote it had a certain amount of acreage, it was pre-leased. The pre-leases fell out and that caused the issue there. The other one again was a liquidity issue with the borrower. Joe Morford – RBC Capital Markets: Write-downs taken as you moved into NPL?

At this juncture we have taken no write downs on those specific loans. Joe Morford – RBC Capital Markets: Any color on the prospects for resolution here?

At this juncture it is pretty early in the game because we just moved it to NPL. We had on a number of those loans we had a couple of investors fishing and calling us with offers for note sales at discounts we were not interested in.

I will just add though like any other loan on the mainland we are putting these up for sale. If we can find a buyer that makes sense we will consider it. But again we are very cautious on the amount of discount we have to entertain there. Joe Morford – RBC Capital Markets: What other plans for sales do you currently have in California or any pools being currently marketed?

We don’t really anticipate trying to do another large wholesale like we did that was completed in July. We are opportunistically looking at opportunities. We are in discussions on a number of non-performing loans for sale. There was about 3-4 we have ongoing conversations to the extent we can get closer to our carrying value we will consider those opportunities more closely. Some of the other loans we have in NPA are sort of sell through of the collateral on an absorption basis so that is just a longer-term work through process. Joe Morford – RBC Capital Markets: Lastly, I know it is the smallest part of the portfolio, but given your comments at the outset about the growing stress on the Hawaii economy I just wonder if you could comment on the CNI portfolio there and what trends you are seeing there in terms of strain or potentially increased classified assets or what have you.

We have seen softening in the Hawaii market and that has had affected some of our CNI borrowers. We started a process about 6 months ago where we were reviewing our portfolios on a monthly basis for all of our loans. So we have been adding to reserves to that to cover that. We have seen some movement in classifieds and criticized but no major moves in terms of NPA. Many of the borrowers also saw this coming and have been adjusting their costs to maintain their cash flows. So far we haven’t had any major issues in that portfolio.

With all of that said, we are continuing to stay on top of our entire portfolio here in Hawaii.

The next question comes from Bobby Bowen – KBW. Bobby Bowen – KBW: Continuing on the Hawaii loans I was wondering if you could give some comments on the hotel loans especially if we are seeing visitor arrivals down as much as we are both on the construction and on the commercial?

We don’t really have a lot of hotel exposure. Dean referenced one $15 million loan. We have aggregate about $50 million exposure to hotels so we are not a big hotel bank and we typically do not provide financing on a single property basis. That said, as you can imagine occupancy rates are down across the board and you have probably read that in the paper or seen that in the press releases. In terms of our performance of our loans to those hotel operators, their occupancies are down but they are still performing and have adequate cash and liquidity to service their debt. Bobby Bowen – KBW: Further on the Hawaii economy, what is your outlook for GDP or obviously softening but is there a possibility we could start seeing negative marks on GDP in Hawaii?

There is no question the Hawaii market is softening. However, the downturn locally is not as severe as the overall U.S. economy. You may have read about this but in September of this year visitor headcount fell by about 19% and that has been the largest decline in about 5 years. Our unemployment rate for the month of September was at 4.5% and is up from a year ago. But again this unemployment issue was caused by several large companies that were forced to address layoffs locally. Overall we are cautiously optimistic. We think things will continue to get softer and we are just watching everything very closely.

The next question comes from Eileen [Lipsky] – Sandler O’Neill & Partners. Eileen [Lipsky] – Sandler O’Neill & Partners: You had mentioned you had applied for TARP. My first question was can you tell us what the maximum amount of capital you would receive from the program is?

Again, the maximum amount is based on 3% of risk-weighted assets which would be approximately $135 million. Eileen [Lipsky] – Sandler O’Neill & Partners: Would you consider any other capital raising efforts or would that money be sufficient to carry you through this environment?

Again, as I talked about earlier we remain committed to ensuring our capital position remains strong. At this time we are working with the Treasury on our application for TARP. Eileen [Lipsky] – Sandler O’Neill & Partners: So no other methods at this moment, the TARP would be sufficient?

Again, that is what we are currently working on.

The next question comes from Brett Rabatin – FTN Midwest. Brett Rabatin – FTN Midwest : I just wanted to follow up on some deposit related stuff. I’m curious given what I hear locally about competitive deposit rates I am assuming your [prognication] for the margin in the fourth quarter is a little softer with CD pricing and I’m also curious how much do you have in foreign deposits? I’m trying to figure out how much of an impact the title escrow and foreign deposit factor impacts you.

We actually don’t have a large amount in foreign deposits but we did see some foreign deposits leave as there was concern about the overall U.S. banking industry. So a lot of that was repatriated back. There was some overall softening in the economy but with the decline and softening in the real estate market we did see some decline in the title and escrow balances this quarter. We expect that to soften for the remaining part of the year in those types of balances but we are starting to see those overall balances start to flatten out and come back a little bit. Brett Rabatin – FTN Midwest : It sounds like you are being locally a little more competitive on CD rates so I’m curious about funding. I know you are shrinking the balance sheet but how you are funding the assets going forward in terms of mix of borrowings. Can you bring that down with higher CD levels? Do you expect the margin to be a little softer in Q4?

We are focused on our loan to deposit ratio. Again we expect this ratio to decrease over time as we focus on growing our deposits. Again we did talk about some of the initiatives including some products such as our free plus checking, the exceptional account as well as the roll out of our community based banking model. With respect to the mainland again we are focused on downsizing the mainland portfolio. Combined with the slower growth here in Hawaii overall we do expect to manage our funding levels with a decline in the overall loans. As far as the margin, with the recent cuts by the Fed we expect the margin to be somewhere in the range of 3.9-4.1% going forward. Brett Rabatin – FTN Midwest : Are you in the Cedars program?

Yes.

The next question comes from Charles Phipps – Palm Desert National Bank. Charles Phipps – Palm Desert National Bank: You mentioned the deposits are up because you are servicing the small business market very well it sounds like. What products are driving that? Are you pushing your remote deposit capture? ACH? What?

Actually with our community banking initiative the large reason why we embarked on that was we felt there would be opportunity in the small business market. That continues to take root. We are seeing an increase in the number of accounts being opened as mentioned earlier by Ron. We expect that in the next few months and quarters to expand. We also launched our new free plus checking account. That also contributed to some of our growth in consumer deposits and that again is something we think is the most competitive product in the marketplace so we expect to see growth in that category in the next few months also.

The next question comes from Al [Sevastano] – Unknown Firm. Al [Sevastano] – Unknown Firm: I was just wondering if you can add a little color on the mainland commercial construction rise in delinquencies and the Hawaii residential construction rise in delinquencies.

Let me go back to that slide. The delinquency numbers that Dean referenced included the NPA. If you look at the less than 90-day delinquencies only the delinquencies in the third quarter were $23 million or 57 basis points compared to $18 million and 44 basis points in the second quarter of 2008. So the delinquencies were up quite modestly. Most of those delinquencies got cleared at the end of the quarter. So the real issue was the NPA’s.

Again, thank you everyone. Central Pacific Bank has been a Hawaii bank since 1954. Over these 54 years we have faced many challenges and prevailed. I remain confident that the bank will successfully meet the challenges currently before us and do what is best for our customers, employees, shareholders and our communities for many years to come. Thank you again for joining us this morning.

The conference has now concluded. You may disconnect.