Bank of Hawaii Q3 Earnings Call Highlights

Key Points

• Bank of Hawaii reported solid third-quarter growth: Net income rose 20.5% year over year to $64.3 million, or $1.49 per diluted share, while return on average common equity reached 15.4%.
• Margin expansion continued for a tenth consecutive quarter: Net interest income increased to $156.1 million and net interest margin widened to 2.82%, supported by asset repricing and the runoff of higher-cost public deposits.
• Commercial lending and shareholder returns remained priorities: Loans grew 0.6%, led by commercial lending, while credit quality stayed favorable despite one nonperforming commercial loan. The company repurchased $20 million of stock, plans another $20 million in the fourth quarter, and declared a $0.70-per-share dividend.

Bank of Hawaii NYSE: BOH reported third-quarter 2026 net income of $64.3 million, or $1.49 per diluted share, as higher net interest income and continued asset repricing supported earnings growth. Net income rose 1.4% from the prior quarter and 20.5% from the third quarter of 2025, while diluted earnings per share increased 0.7% sequentially and 24.2% year over year.

President and CEO Jim Polk said the results reflected improvement in financial performance, the strength of the company’s franchise and disciplined balance-sheet management. Return on average common equity was 15.4% for the quarter.

Margin expansion continues

Net interest income increased $2.5 million from the previous quarter to $156.1 million, while net interest margin expanded four basis points to 2.82%. Polk said the quarter marked Bank of Hawaii’s tenth consecutive quarter of expansion in both net interest income and net interest margin.

CFO Brad Satenberg said the improvement was primarily driven by fixed-asset repricing, partly offset by an unfavorable shift in deposit mix. Excluding the effect of a commercial loan placed on nonaccrual status during September, net interest income would have risen $3 million and net interest margin would have been 2.83%, he said.

The yield on earning assets increased five basis points during the quarter. Satenberg said a September rate increase had limited impact during the third quarter but should add several basis points to fourth-quarter earning-asset yields as floating-rate assets reflect the increase for a full period.

The cost of interest-bearing liabilities was unchanged at 1.83%, and average deposit costs remained at 1.27%. The company’s end-of-quarter deposit cost was 1.29%, two basis points higher than the quarterly average.

Bank of Hawaii allowed approximately $200 million of higher-cost public deposits to run off during the quarter. Satenberg said the runoff should provide a modest benefit of roughly one basis point to deposit costs and net interest margin going forward. He added that the company may evaluate further repricing or runoff opportunities among public deposits, though it does not expect additional runoff during the fourth quarter.

Deposits decline, while commercial lending grows

Average deposits declined 0.8% during the quarter, while total deposits fell $411 million from the linked quarter. Management attributed the decrease to the deliberate reduction of higher-cost public funds and normal customer activity among commercial clients, including construction spending, working-capital needs, business-owner distributions and completed real estate projects.

Polk said customer activity and deposit pipelines remained healthy and that the company expects a return to modest deposit growth in the fourth quarter. Satenberg also said Bank of Hawaii expects deposit growth to continue into the first quarter of 2027, reducing its reliance on short-term borrowings over time.

Loans increased $85 million, or 0.6% from the prior quarter, representing 2.4% annualized growth. Commercial loans rose $73 million, or 1.2%, supported by customer activity and loan pipelines. Consumer lending grew marginally, with higher interest rates continuing to weigh on residential lending demand.

Polk said the company expects overall loan growth in the low- to mid-single-digit range, led by commercial lending. He also said Bank of Hawaii saw growth in its home equity line portfolio and expects some borrowers with lower-rate first mortgages to turn to home equity products to access the equity in their homes.

Credit metrics remain favorable despite one nonperforming loan

Chief Risk Officer Brad Shairson said asset quality remained strong. Delinquencies were 46 basis points and net charge-offs were 9 basis points during the quarter. Criticized assets declined to 2.37% from 2.81% in the prior quarter.

Nonperforming assets increased to 30 basis points from 8 basis points, driven by a single real estate-secured commercial loan. Shairson said the borrower is pursuing a sale of the property and that the company expects to exit the exposure during the fourth quarter or early next quarter. Without that relationship, nonperforming assets would have remained at 8 basis points.

Shairson said any loss from the sale is expected to be immaterial and already adequately reserved for, adding that resolution of the credit is not expected to increase future provision expense.

The allowance for credit losses on loans and leases ended the quarter at $146.2 million, or 1.02% of outstanding loans, down one basis point from the prior quarter. Bank of Hawaii recorded a $2.8 million provision for credit losses during the quarter.

The company’s loan portfolio remained concentrated in its core markets, with approximately 91% of loans based in Hawaii. Consumer loans represented 56% of total loans, while commercial loans accounted for 44%. Commercial real estate loans totaled $4.5 billion, or 31% of total loans, and Shairson said no individual commercial real estate property type exceeded 10% of total loans.

Fee income, expenses and capital actions

Non-interest income was $42.7 million, compared with $43.3 million in the previous quarter. Excluding charges related to a change in Visa Class B conversion ratios, normalized non-interest income declined $400,000, reflecting lower gains on leased asset sales and lower trust-related tax-services revenue following a seasonally stronger second quarter. Higher deposit fees partly offset those declines.

Satenberg said normalized non-interest income is expected to be about $44 million in the fourth quarter. Non-interest expense totaled $112.3 million, and management expects normalized fourth-quarter expense of approximately $112.5 million.

For the first nine months of 2026, trust and asset management fees and annuity and insurance fees totaled $45.2 million, up 11.5% from the same period in 2025. Polk said investments in Bankoh Advisors and the company’s trust and asset-management operations were contributing to improved results.

Bank of Hawaii maintained capital ratios above well-capitalized regulatory thresholds, reporting Tier 1 capital of 14.4% and total risk-based capital of 15.4%. During the quarter, the company repurchased $20 million of common stock at an average price of about $78 per share and plans to repurchase another $20 million in the fourth quarter.

The board increased the company’s repurchase authorization by $200 million after quarter-end. It also declared a common dividend of $0.70 per share, payable in the fourth quarter.

Polk said Hawaii’s economy remained stable but modest-growth oriented, citing low unemployment of 2.8%, mixed tourism results and support from military construction, public investment and military spending. He said the company’s growth strategy will focus on deepening customer relationships, expanding market penetration and improving operating efficiency rather than relying primarily on broader economic growth.

About Bank of Hawaii (NYSE:BOH)

Bank of Hawaii Corporation is the parent company of Bank of Hawaii, a regional financial institution headquartered in Honolulu. Founded in 1897, the bank provides banking and financial services to consumers, businesses, and government entities, with a primary focus on Hawaii and selected Pacific markets.

Its consumer banking business offers deposit accounts, residential and consumer lending, credit cards, online and mobile banking, and other personal financial products. Through its commercial banking operations, Bank of Hawaii provides business loans, commercial real estate financing, treasury management, payments, and deposit services to companies and institutions.

The company also provides wealth management, trust, investment management, and private banking services.

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