Central Pacific Financial shares surge on earnings beat, dividend hike
Hawaii lender beats expectations by $0.12 per share, announces $55M buyback program
Central Pacific Financial reported stronger-than-expected fourth-quarter results on Wednesday, boosted by expanding net interest margins and improving operational efficiency, as the Hawaii-based lender rewarded shareholders with a dividend increase and a substantial share repurchase authorization.
The company earned $22.9 million, or $0.85 per diluted share, in the final quarter of 2025, surpassing Wall Street estimates by $0.12. Analysts had anticipated earnings of $0.73 per share. For the full year, the bank generated $77.5 million in net income, or $2.86 per share.
Central Pacific's core banking metrics showed significant improvement. Net interest margin, a key measure of lending profitability, rose 7 basis points sequentially to 3.56% in the fourth quarter, outpacing larger regional peers. The efficiency ratio, which tracks operating expenses as a percentage of revenue, improved to 59.88% from 62.84% in the prior quarter, indicating better cost management. Return on average equity reached 15.41% for the quarter.
"We achieved strong fourth-quarter and full-year 2025 results, driven by strong balance sheet management and progress on our strategic and business priorities," said Arnold Martines, chairman, president and chief executive officer.
The board of directors demonstrated confidence in the company's financial position by authorizing a new share repurchase program of $55 million for 2026. Additionally, the quarterly cash dividend was increased 3.6% to $0.29 per share, up from $0.28 in the previous quarter. The dividend is payable March 16 to shareholders of record as of February 27.
In 2025, Central Pacific returned $52.7 million to shareholders through a combination of dividends and buybacks. The company repurchased 529,613 shares for $16.3 million during the fourth quarter and 788,261 shares for $23.3 million over the full year.
Credit quality remained solid despite slight deterioration. Nonperforming assets totaled $14.4 million, or 0.19% of total assets, at December 31, 2025, up from $11.0 million (0.15%) a year earlier. Net charge-offs were $2.5 million in the fourth quarter, representing an annualized 0.18% of average loans. The allowance for credit losses stood at 1.13% of total loans.
Total loans decreased $78.1 million, or 1.5%, from the prior quarter to $5.29 billion at year-end. The decline reflects selective lending in a challenging rate environment, though Central Pacific's focus on small business lending helped it maintain market position. The bank originated more Small Business Administration loans in Hawaii in fiscal 2024 than all other major banks combined, according to company disclosures.
Central Pacific operates in a competitive Hawaiian banking market dominated by Bank of Hawaii, which also reported strong fourth-quarter results with a 63% year-over-year earnings increase. However, Central Pacific's higher net interest margin of 3.56% compares favorably to Bank of Hawaii's 2.61%, suggesting attractive pricing power in specific market segments.
The Hawaii economy presents unique dynamics for financial institutions. The state experienced economic growth of approximately 1.7% in 2025, according to Hawaii Department of Business, Economic Development and Tourism projections. The market is characterized by intensifying deposit competition for rate-sensitive accounts, particularly as accountholders seek better yields.
Analysts have set an average price target of $35.50 for Central Pacific shares, representing about 12% upside from recent levels. The consensus rating is "Hold," with forecasts ranging from $34.00 to $37.00. Central Pacific Bank was recently recognized by Newsweek as one of America's Best Regional Banks for 2026, marking its fifth consecutive year on the list.
Shares of Central Pacific Financial were trading higher in pre-market activity following the earnings announcement, building on the stock's 52-week range of $22.52 to $33.34. The company currently trades at 13.0 times trailing earnings with a price-to-book ratio of 1.44.
Looking ahead, management emphasized continued focus on supporting customers and communities while creating long-term shareholder value. The new share repurchase authorization provides flexibility to capitalize on market opportunities and enhance returns to investors.