Central Pacific Financial Corp. CPB (NYSE:CPF) reported third-quarter 2026 net income of $22.8 million, or $0.88 per diluted share, up from $20.8 million, or $0.80 per diluted share, in the prior quarter. Chairman, President and Chief Executive Officer Arnold Martines said the results were driven by higher net interest income, expense discipline and continued balance-sheet strength.
“We delivered solid third quarter results driven by higher net interest income, disciplined expense management, and continued balance sheet strength,” Martines said. He added that diluted earnings per share increased 21% from the prior-year quarter after adjusting the earlier period for one-time expenses.
Margin Expansion Supports Earnings
Executive Vice President and Chief Financial Officer Dayna Matsumoto said net interest income rose 2.6% sequentially to $64.5 million and increased 5.2% from a year earlier. Net interest margin expanded five basis points from the second quarter and 13 basis points year over year to 3.62%.
The improvement was primarily driven by higher loan and investment-security yields. The average loan yield increased five basis points to 5.01%, while the average rate paid on total deposits remained stable at 90 basis points during the quarter.
Matsumoto said the company’s balance-sheet sensitivity is neutral to slightly asset sensitive. She said federal rate increases would be modestly favorable after the company reduced fixed-rate asset exposure, though deposit pricing would offset some benefits. CPB expects fourth-quarter net interest margin in the mid-3.60% range.
Other operating income totaled $12.4 million, down from $14.6 million in the prior quarter, largely due to a $2.4 million decline in bank-owned life insurance income associated with equity-market volatility. Matsumoto said fourth-quarter other operating income could be about $13 million, though results could continue to be affected by BOLI-related market volatility.
Other operating expense declined to $44.8 million from $46.2 million in the second quarter, reflecting lower deferred compensation expenses tied to market volatility. The efficiency ratio improved to 58.3% from 59.6%.
Loan Mix Shifts Toward Higher-Yielding Categories
Vice Chair Ralph Mesick said total loans ended the quarter at $5.31 billion, up about $5 million from the prior quarter but down roughly $54 million from a year earlier. Average loans were essentially unchanged at $5.3 billion.
While overall loan balances were relatively stable, the company continued to adjust its portfolio mix toward variable-rate commercial mortgage and construction loans, replacing lower-yielding fixed-rate residential mortgage, consumer and home-equity loans.
- Funded production, excluding revolving activity, totaled about $229 million, compared with $204 million of runoff.
- New production carried a weighted-average rate of 6.26%, compared with 5.72% on runoff balances.
- About half of third-quarter production came from Hawaii and half from the mainland.
- Mainland loans represented 18% of total balances at quarter-end.
Mainland balances increased by about $50 million during the quarter, while Hawaii balances declined by about $45 million. Mesick said the company is using mainland lending to selectively deploy excess funding, diversify the portfolio and improve risk-adjusted returns. In Hawaii, the bank remains focused on relationship-based lending intended to generate operating accounts, treasury-management business and personal-banking opportunities.
The company had approximately $224 million in loan volume across 71 opportunities scheduled for fourth-quarter closings. Mesick emphasized that the pipeline is not a forecast and that timing and pull-through could vary, although more than one-third of the pipeline’s dollar volume had been booked during October.
Deposit Mix and Capital Actions
Vice Chair and Chief Operating Officer David Morimoto said total deposits were $6.66 billion at quarter-end, down $31.9 million, or 0.5%, from the prior quarter and up $86.2 million, or 1.3%, from a year earlier. The sequential decline reflected a $49.2 million reduction in higher-cost time deposits, partly offset by growth in interest-bearing demand deposits and savings and money-market balances.
On an average-balance basis, noninterest-bearing deposits increased $10.9 million and savings and money-market balances rose $39.2 million. Morimoto said the company’s deposit base remains diversified, supported by long-tenured customer relationships, low reliance on public time deposits and no brokered deposits.
Matsumoto said the September spot rate on total deposits was 91 basis points. The company expects a total deposit beta of around 24%, or approximately 33% on total interest-bearing deposits, in a rising-rate environment. About $410 million of certificates of deposit, or roughly 40% of the portfolio, are expected to mature in the fourth quarter at a weighted-average rate of about 2.7%; new blended CD rates are estimated near 3.0%.
The company’s loan-to-deposit ratio was about 80%, at the low end of its 80% to 85% target range. Matsumoto said that position provides flexibility to grow the balance sheet profitably.
During the quarter, CPB repurchased approximately 294,000 shares for $11.2 million, or about $38 per share. About $22 million remained available under the repurchase authorization. The board also increased the fourth-quarter cash dividend 3.3% to $0.31 per share.
Credit Quality Remains Strong
Executive Vice President and Chief Credit Officer Anna Hu said asset quality remained strong. Nonperforming assets declined to $14 million, or 19 basis points of total assets, while net charge-offs were unchanged at $2.7 million, or 20 basis points of average loans.
The criticized loan ratio improved to 181 basis points of total loans from 234 basis points in the prior quarter. Hu said 91% of criticized loans were secured by real estate with strong loan-to-value ratios. The allowance for credit losses was $59.8 million, or 1.13% of total loans, while the provision for credit losses totaled $1.9 million.
Hu said the company is paying closer attention to the consumer market amid higher-for-longer interest rates and broader macroeconomic conditions. Martines said Hawaii’s economic backdrop remained resilient, citing a 2.8% September unemployment rate and growth in visitor arrivals, spending and construction employment through the first eight months of the year.
About CPB (NYSE:CPF)
Central Pacific Financial Corp. is the bank holding company for Central Pacific Bank, a community-focused financial institution headquartered in Honolulu, Hawaii. Central Pacific Bank serves consumers, businesses, nonprofit organizations and government entities, with a focus on customers throughout the Hawaiian Islands.
The bank provides a range of financial products and services, including checking and savings accounts, certificates of deposit, consumer lending, residential mortgages, commercial and small-business loans, commercial real estate financing, and treasury management services.
