Central Pacific Expands Margin as Deposit Costs Recede
Net interest margin rose 4 bps sequentially to 3.57% as the Hawaii-based lender saw a decline in average rates paid on interest-bearing deposits.
Central Pacific Financial (CPF), the Hawaii-based commercial bank, saw its net interest margin expand 4 bps sequentially to 3.57%. The move, which represented a 13 bps increase year-over-year, was driven by higher average balances and yields on loans and investment securities, alongside a decline in average rates paid on interest-bearing deposits.
Net interest income rose 2.4% sequentially to $62.8 million. On a year-over-year basis, the figure increased by $3.0 million, or 5.1%, compared to the same quarter last year.
Balance sheet growth remained flat during the period. Total loans were $5.31 billion as of June 30, 2026, compared to $5.32 billion at March 31, 2026, and $5.29 billion at June 30, 2025. Total deposits stood at $6.70 billion, a figure relatively unchanged from the prior quarter but up 2.3% from $6.54 billion a year earlier.
Non-interest revenue benefited from equity market volatility. Other operating income rose to $14.6 million from $11.6 million in the prior quarter, primarily due to a $2.6 million increase in income from bank-owned life insurance. This offset a rise in other operating expenses, which climbed to $46.2 million from $43.7 million sequentially, driven by $2.3 million in higher salaries and employee benefits related to incentive accruals and deferred compensation. The efficiency ratio improved slightly to 59.62%.
Credit costs trended higher as the bank adjusted for macroeconomic outlooks. The provision for credit losses rose to $4.4 million from $2.4 million in the prior quarter due to changes in the economic forecast and higher unfunded loan commitments. Annualized net charge-offs as a percentage of average loans increased to 0.20% from 0.18% sequentially, though the rate remained below the 0.35% reported in the same quarter last year.
Capital return increased through both dividends and buybacks. The Board of Directors raised the quarterly cash dividend by 3.4% to $0.30 per share. Additionally, the company repurchased 321,858 shares of common stock for a total cost of $11.3 million during the second quarter.