Bank of Hawaii (NYSE:BOH) executives highlighted fourth-quarter 2025 earnings growth, continued net interest margin (NIM) expansion, and what management described as “pristine” credit quality during the company’s quarterly conference call. The bank also provided commentary on deposit trends, loan growth expectations, expense outlook, and capital return plans.
Fourth-quarter results and margin improvement
Chairman and CEO Peter Ho said the company delivered “another set of strong results” in the fourth quarter, reporting fully diluted earnings per share of $1.39, which he said was 63% higher than a year earlier and 16% higher than the prior quarter. Ho also pointed to improved profitability metrics, including a 15% return on common equity.
In the Q&A, management clarified that the “near 290” view refers to an end-of-period level. CFO Brad Satenberg added that the bank finished the year at a 2.67% margin in December, about 6 basis points above the fourth-quarter ending level.
Deposit trends, funding costs, and repricing dynamics
Management said loans and deposits grew modestly during the quarter, with notable strength in non-interest-bearing demand deposits. Ho said non-interest-bearing demand deposits increased 6.6% on a linked-quarter basis. On funding costs, Ho noted interest-bearing deposit costs improved by 20 basis points, while total cost of funds improved by 16 basis points.
Executives attributed the margin improvement to several factors, including deposit repricing and fixed-rate asset repricing. Ho said the bank “remixed” $659 million in fixed-rate loans and investments, moving from a roll-off rate of 4% to a roll-on rate of 5.8%.
Satenberg said net income for the quarter was $60.9 million, and that the quarter-over-quarter improvement was primarily driven by expansion in net interest income and NIM. He cited three drivers:
- Successful deposit repricing
- A $200 million securities repositioning executed in early October
- A $100 million positive deposit mix shift in the quarter (which he said was the first positive mix shift effect since the second quarter of 2022)
While the yield on interest-earning assets declined by one basis point due to floating-rate assets repricing lower after rate cuts, Satenberg said the impact was “almost entirely offset” by fixed asset repricing. He added that the cost of interest-bearing liabilities improved by 19 basis points, driven by the cost of deposits declining to 1.43%. He noted the company ended the quarter with a deposit “spot rate” of 1.3%, below the quarterly average, and said he expected another improvement in deposit costs in the first quarter.
On certificates of deposit, Satenberg said the average cost of CDs declined 22 basis points to 3.18%, with 52% of CDs maturing over the next three months at an average rate of 3.1%. Management expects many to renew into new CDs at rates ranging from 2.25% to 3%.
Loan growth outlook and market positioning
In response to analyst questions, executives said they felt better about loan pipelines, but indicated growth may depend on contributions from both consumer and commercial segments. President and Chief Banking Officer Jim Polk said the company would likely remain in “low single digits” until both sides contribute more consistently, while Ho noted 2025 was essentially flat year-over-year on an end-of-period basis and suggested 2026 could look more like a “mid-single-digit” growth year, at least based on early visibility.
Polk said the commercial pipeline “built nicely” through the fourth quarter, with activity in large commercial real estate as well as in middle market businesses. On residential mortgages, he said fourth-quarter performance benefited from increased purchase activity and “a couple of projects” closing during the period, with the pipeline remaining “pretty good” entering the first quarter.
Ho also emphasized the company’s long-term market share performance in Hawaii, stating Bank of Hawaii remains the “clear deposit market share leader” and that market share growth continued in 2025, increasing another 40 basis points.
Credit quality metrics and allowance update
Chief Risk Officer Brad Shairson said the loan book remains concentrated in core markets the bank knows well, with approximately 93% of loans in Hawaii, 4% in the Western Pacific, and 3% on the mainland, primarily to support existing clients. He noted long client tenure, with about 60% of commercial and consumer clients having been with the bank for more than 10 years.
Shairson provided details on portfolio composition and underwriting metrics, including a consumer portfolio representing 57% of loans (about $8 billion) with 86% in residential mortgage and home equity loans. Within that residential segment, he cited a weighted average loan-to-value ratio of 48% and weighted average FICO score of 799. Commercial loans totaled $6.1 billion, with 73% secured by real estate and a weighted average LTV of 54%.
On asset quality, Shairson said net charge-offs were $4.1 million, or 12 basis points annualized. Non-performing assets declined to 10 basis points, while delinquencies rose to 36 basis points and criticized loans increased to 2.12% of total loans. He noted the allowance for credit losses ended the quarter at $146.8 million, down $2 million from the linked quarter, with the ACL ratio at 1.04%.
In the Q&A, Shairson said a roughly $1 million charge-off related to a previously identified non-performing asset contributed to a modest uptick in net charge-offs, calling it an “idiosyncratic resolution” rather than a sign of broader stress. He also said the most recent UHERO economic forecast for Hawaii reflected an improved outlook for 2026, which supported the reduction in ACL coverage. Management also disclosed $63.4 million of special mention loans at quarter-end and total classified loans of $298.5 million.
Noninterest items, expenses, and capital return
Noninterest income was $44.3 million for the quarter, compared with $46.0 million in the linked quarter. Satenberg discussed several items affecting comparability, including an $18.1 million gain on the sale of the merchant services portfolio, largely offset by a $16.8 million loss related to investment portfolio repositioning. He also cited a $770,000 charge tied to a Visa conversion ratio change. Excluding “normalizing” items, he said noninterest income was essentially flat and guided to first-quarter normalized noninterest income of $42 million to $43 million.
Noninterest expense was $109.5 million, down from $112.4 million in the prior quarter. The quarter included a $1.4 million reduction in the FDIC special assessment and a non-recurring $1.1 million donation to the Bank of Hawaii Foundation. Satenberg said normalized expenses were higher than expected due to additional incentives. For 2026, he forecast expense growth of 3% to 3.5% over 2025 normalized expenses and guided to first-quarter normalized noninterest expense of about $113 million.
On capital actions, Satenberg said Tier 1 capital and total risk-based capital improved to 14.5% and 15.5%, respectively. The company paid $28 million in common dividends and $5.3 million in preferred dividends during the quarter and resumed share repurchases, buying about $5 million of common shares at an average price of $65. He said $121 million remained under the current repurchase plan. In the Q&A, Ho said management expects to increase repurchases, indicating an anticipated range of $15 million to $20 million per quarter as long as growth remains “tepid.”
About Bank of Hawaii (NYSE:BOH)
Bank of Hawaii (NYSE: BOH) is a regional commercial bank headquartered in Honolulu, Hawaii, with roots tracing back to its founding in 1897 by Charles Montague Cooke and Peter Cushman Jones. As one of the oldest financial institutions in the U.S. West Coast region, the bank has built a reputation for stability and community focus. It operates as the principal subsidiary of Bank of Hawaii Corporation, a publicly traded company on the New York Stock Exchange.
The bank offers a comprehensive suite of personal and business banking products and services.
