Central Pacific Financial Corp. CPB (NYSE:CPF) reported second-quarter 2026 net income of $20.8 million, or $0.80 per diluted share, as the Hawaii-based bank benefited from higher earning-asset balances and yields, stable funding costs and a modest expansion in net interest margin.
Diluted earnings per share increased 19% from the year-earlier quarter. Return on average assets was 1.12%, while return on average equity was 13.94%, according to Executive Vice President and Chief Financial Officer Dayna Matsumoto.
Margin Expansion and Full-Year Outlook
Net interest income totaled $62.8 million during the second quarter, while net interest margin increased four basis points from the prior quarter to 3.57%. Matsumoto attributed the result to growth in average loans and securities, higher earning-asset yields and stable funding costs.
The company expects net interest margin to remain relatively steady or rise slightly in the second half of 2026. While the benefit from repricing existing assets remains favorable, Matsumoto said that benefit has moderated. CPB expects deposit costs to remain fairly steady if the Federal Reserve keeps rates unchanged.
Management reaffirmed guidance for full-year net interest income growth of 4% to 6% over the prior year. Matsumoto said the balance sheet is relatively neutral to slightly asset sensitive and is positioned to benefit from a potential Federal Reserve rate increase, although management does not expect such an increase to have a significant impact this year.
During the question-and-answer session, Matsumoto said loan pricing remains competitive in Hawaii, with some spread compression, while deposit pricing has remained rational. She said the company expects its margin to remain in the “high 350s” as it balances profitability with growth opportunities.
Loans, Deposits and Capital Returns
Total loans ended the quarter relatively unchanged at $5.3 billion, although average loan balances rose $33 million from the first quarter. Vice Chair and Chief Operating Officer David Morimoto said second-quarter loan growth was affected by several closings shifting into the third quarter and expected commercial real estate loan payoffs.
Average loan yield increased to 4.96% from 4.93% in the prior quarter, primarily reflecting higher yields on new loan production relative to runoff loans. Morimoto said the bank originated nearly $70 million of new construction loans during the quarter, mainly multifamily construction loans on the mainland, with floating rates at Secured Overnight Financing Rate plus spreads in the low 200-basis-point range.
Management expects stronger loan growth in the second half than in the first half, supported by commercial construction funding activity, a commercial lending pipeline and initiatives intended to slow runoff in its Hawaii retail portfolio. CPB continues to expect both loan and deposit growth in the low-single-digit range for the full year.
Total deposits were largely unchanged at $6.7 billion, with core deposits representing more than 90% of the total. Morimoto said noninterest-bearing and relationship-based accounts continued to grow. Total deposit costs held steady at 90 basis points, and the company reported deposit growth of nearly $90 million year to date.
Morimoto said deposit competition in Hawaii has remained consistent and more rational than on the mainland, where banks face a larger number of competitors. Matsumoto said the company’s 79% loan-to-deposit ratio at June 30 was at the low end of its typical 80% to 85% target range, leaving room to support expected lending growth.
CPB paid a $0.29-per-share second-quarter dividend, and its board declared a $0.30-per-share third-quarter dividend, representing a 3.4% increase. The company also repurchased about 322,000 shares for $11.3 million during the quarter, leaving $33.2 million available under its repurchase authorization at quarter-end.
Matsumoto said management generally expects capital returns through dividends and repurchases to continue at a similar pace, though repurchase levels will remain dependent on loan growth, market conditions, risk and valuation.
Credit Trends and Expenses
Vice Chair Ralph Mesick said asset quality remained strong. Nonperforming assets totaled $16.5 million, or 22 basis points of total assets, and net charge-offs were 20 basis points of average loans. Past-due trends were stable, and management said it was not seeing broad-based weakness across the loan portfolio.
Criticized loans increased to 234 basis points of total loans, driven primarily by a small number of Hawaii-based credits. Mesick said the credits are well collateralized and actively managed. He discussed the largest downgraded credit, a $20 million Hawaii real estate loan involving an ownership dispute and financial difficulties for the principal guarantor. The loan had debt-service coverage of about 1.27 times and a loan-to-value ratio of 57%, and Mesick said management does not see loss content in the loan.
Provision expense was $4.4 million, including $3.3 million added to the allowance for credit losses and $1.1 million added to the reserve for unfunded commitments. Management said the increase primarily reflected more conservative economic assumptions and commitment growth rather than portfolio deterioration. The allowance rose to $60.6 million, or 1.14% of loans, from 1.13% in the first quarter.
Other operating income increased $3 million sequentially to $14.6 million, largely due to bank-owned life insurance income tied to market performance. Other operating expense rose $2.5 million to $46.2 million, primarily because of higher deferred compensation expense also associated with market performance.
The company maintained its forecast for 2.5% to 3.5% full-year growth in other operating expenses, though Matsumoto said its latest forecast was near the lower end of that range. She said second-half expenses will include costs associated with a customer relationship management system, a new branch system and data platforms. Management expects deferred compensation expense to normalize in the second half.
Martines said Hawaii’s economy remains resilient, citing steady visitor activity, increases in visitors from the U.S. East Coast and Japan, 2.5% unemployment, increased construction employment and rising government contract awards. He added that the company continues to monitor geopolitical conflict, oil prices and inflation, but has not observed significant impacts on customers.
About CPB (NYSE:CPF)
Charoen Pokphand Foods Public Company Limited (NYSE: CPF) is a Thailand‐based integrated agro‐industrial and food conglomerate. Headquartered in Bangkok, the company is a subsidiary of the Charoen Pokphand Group and has grown into one of the world’s leading producers of livestock feed, meat and seafood products. CPF’s businesses span animal feed milling, animal breeding and hatchery operations, meat and seafood processing, and the distribution of fresh, frozen and value‐added food products.
CPF’s product portfolio includes poultry, swine and aquaculture feed; fresh and frozen chicken and pork; shrimp and other seafood; as well as ready‐to‐eat and ready‐to‐cook food items.
