During the first quarter, Central Pacific stepped up again to support our small business community by originating over 3,600 PPP loans, totaling over $290 million.
Our financial results for the first quarter were very strong with a highest quarterly pre-tax income since 2007.
Based on our strong results and financial position, our Board of Directors increased our quarterly cash dividend to $0.24 per share.
Our unemployment rate declined to 9% in March, and while so elevated, is significantly down from its peak of 22% in April last year.
Visitor arrivals have recently been averaging nearly 20,000 per day or about two third of pre-pandemic levels.
Real estate in Hawaii continues to be extremely strong with the medium price for a single-family home in Oahu hitting our record high of $950,000 in March.
Our vaccination progress is also quite good with over 30% of our residents fully vaccinated, currently putting us the eighth high state in the nation.
In the first quarter, our total loan portfolio increased by $174 million, primarily due to the new round of PPP loan originations.
In Q1, we processed over 3,600 PPP loans totaling over $290 million, which represented over 50% of the loans we funded in 2020.
Concurrently, our team continue to assist our existing PPP borrowers to apply for forgiveness from the SBA, resulting in approximately $100 million in paydowns in Q1.
To date, inclusive of forgiveness applications processed in 2020 and through March 31st, we have processed over 3,600 forgiveness applications, resulting in $234 million in PPP loan paydowns.
To date, we have expanded banking relationships with approximately 20% of the new to CPBs small business customers.
Total deposits during the first quarter increased by $410 million or about 8% sequential quarter, which was supported by PPP loan fundings and other government stimulus.
Additionally, our cost of total deposits declined by 3 basis points from the prior quarter and is now down just to 6 basis points.
At March 31st, the loan portfolio totaled $5.1 billion with 53% consumer and 47% commercial.
Approximately 78% of the total loan portfolio, excluding PPP balances is real estate secured.
At quarter end, the total balance of loans on payment deferrals declined significantly by $80.7 million sequential quarter to $39.5 million or 0.9% of the total loan portfolio, excluding PPP balances.
Total loans on payment deferrals further declined to $32.5 million as of April 21st.
During the quarter, criticized loans declined by $10.5 million sequential quarter to $181.7 million or 4% of the total loan portfolio, excluding PPP balances.
Special mentioned loans declined by $14.7 million to $127.8 million or 2.8% of the total loan portfolio, excluding PPP balances, and classified loans increased by $4.2 million to $53.9 million or 1.2% of the total loan portfolio, excluding PPP balances.
We continue to monitor our borrowers in the high-risk industries of food service and accommodation or $44 million is rated special mentioned, an $8 million is rated classified.
Approximately 27% of total special mentioned balances and 8% of total classified balances also received PPP loan.
Additional details on our high-risk industry loans and loans rated special mention and classified can be found on Slides 11, 13 and 14.
Net income for the first quarter was $18 million or $0.64 per diluted share.
Return on average assets in the first quarter was 1.07% and return on average equity was 13.07%.
Net interest income for the first quarter was $49.8 million, which decreased from the prior quarter, primarily due to less recognition of PPP fee income due to lower forgiveness.
Net interest income included $5.2 million in PPP net interest income and net loan fees compared to $6.3 million in the prior quarter.
At March 31, unearned net PPP fees for rounds one and two was $5.8 million and net fees for round three was $14.5 billion.
The net interest margin decreased to 3.19% in the first quarter compared to 3.32% in the prior quarter.
The net interest margin normalized for PPP was 3.12% in the first quarter compared to 3.17% in the prior quarter.
First quarter other operating income totaled $10.7 million compared to 14.1 million in the prior quarter.
The increase was primarily due to lower mortgage banking income of $2.5 million and lower income from bank-owned life insurance of $0.4 million.
Other operating expense for the first quarter was $37.8 million, which was a decrease of $6.8 million from carried through the prior quarter.
The prior quarter included one-time expenses totaling $5.9 million.
Additionally, in the current quarter, $0.8 million in PPP loan origination cost were deferred from salaries and benefits.
The efficiency ratio decreased to 62.5% in the first quarter compared to 68.2% in the prior quarter, primarily due to the one-time expenses in the prior quarter.
Net charge-offs in the first quarter totaled $0.7 million compared to net charge-offs of $1.8 million in the prior quarter.
At March 31st, our allowance for credit losses was $81.6 million or 1.80% of outstanding loans excluding the PPP loans.
This compares to 1.83% as of the prior quarter end.
In the first quarter, we reported a $0.8 million credit to the provision for credit losses due to improvements in the economic forecast utilized in our CECL methodology.
The effective tax rate was 23.2% in the first quarter, a slight decline from the prior quarter as we recognized the benefit for capital loss carry-backs.
Going forward, we expect the effective tax rate to be in the 24% to 26% range.
Finally, as Paul noted earlier, our Board of Directors declared a quarterly cash dividend of $0.24 per share, which was an increase from the $0.23 in the prior quarter.

Summary:
Net income for the first quarter was $18 million or $0.64 per diluted share.
Net interest income for the first quarter was $49.8 million, which decreased from the prior quarter, primarily due to less recognition of PPP fee income due to lower forgiveness.