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    BOH
    Earnings call· Jun 2026(Q2 FY26)

    BANK OF HAWAII Q2 FY26 earnings call BOH

    Jul 27, 2026 Source

    Executive summary

    Bank of Hawaii Q2 FY26 — Solid Quarter with NIM Expansion and Loan Growth

    Bank of Hawaii delivered a solid second quarter, driven by continued net interest margin expansion and modest loan growth, despite a seasonal decline in deposits. The company remains confident in its earnings trajectory, supported by fixed-rate asset repricing and a well-positioned balance sheet for the current interest rate environment, while actively managing deposit costs and strategic public funds runoff.

    Highlights

    5

    • Diluted EPS of $1.47, up 13% from prior quarter.

    • Net income of $63.8 million, up 11% from prior quarter.

    • Net interest margin expanded by 4 basis points to 2.78%, marking the ninth consecutive quarter of expansion.

    • Total loans increased $94 million, representing annualized growth of approximately 2.6%.

    • Wealth Management division showed strength, with noninterest income up $2.2 million (adjusted).

    Concerns

    3

    • Average deposits declined modestly from the prior quarter due to seasonality and public funds runoff.

    • Competitive environment for deposits remains elevated, limiting opportunities for deposit cost improvement in the near term.

    • Criticized asset ratio increased to 2.81% from 2.12%, driven by a single borrower relationship.

    Guidance & targets

    10
    CategoryTargetConfidence
    Net interest margin (NIM)
    approaching 2.9%
    high materiality
    High
    Full-year loan growth
    lower mid-single-digit range
    medium materiality
    Medium
    Cost of deposits
    1.25% to 1.3%
    medium materiality
    Medium
    Public deposits
    decline
    medium materiality
    High
    Yield on earning assets
    continue to improve at a similar pace
    medium materiality
    Medium
    Normalized noninterest income
    approximately $43 million
    medium materiality
    High
    Normalized noninterest expense
    approximately $112.5 million
    medium materiality
    High
    Share repurchase
    $20 million
    medium materiality
    High
    Net interest margin (NIM) expansion
    5 basis points per quarter
    medium materiality
    Medium
    Average earning assets
    $100 million to $200 million
    medium materiality
    Medium

    Operational metrics

    49
    Diluted earnings per share
    $1.47up 13% QoQ
    Q2 FY26

    From prior quarter.

    Net income
    $63.8Mup 11% QoQ
    Q2 FY26

    From prior quarter.

    Return on average common equity
    15.5improved QoQ
    Q2 FY26
    Net interest income
    $153.6Mup $2.6M QoQ
    Q2 FY26

    Compared to the first quarter.

    Average cost of deposits
    127essentially stable QoQ
    Q2 FY26
    Noninterest-bearing deposits as % of total deposits
    27consistent QoQ
    Q2 FY26

    At quarter end.

    Total loans growth (annualized)
    2.6up $94M QoQ
    Q2 FY26

    Total loans increased $94 million during the quarter.

    Client relationship tenure
    60
    Q2 FY26

    Approximately 60% of both commercial and consumer clients have been with the bank for more than 10 years.

    Loan portfolio geographic concentration
    94
    Q2 FY26

    Mainland exposure primarily supports existing clients operating locally and on the Mainland.

    Consumer loans as % of total loans
    56
    Q2 FY26
    Commercial loans as % of total loans
    44
    Q2 FY26
    Consumer loan portfolio mix (residential mortgage & home equity)
    86
    Q2 FY26

    Within the consumer portfolio.

    Consumer loan portfolio mix (auto & personal lending)
    14
    Q2 FY26

    Remaining 14% of consumer loans.

    Auto loan FICO score
    729
    Q2 FY26
    Personal loan FICO score
    761
    Q2 FY26

    ASR error, '7.61' likely intended as '761' for FICO score.

    Commercial loans secured by real estate
    72
    Q2 FY26
    Commercial Real Estate (CRE) loans
    $4.3B
    Q2 FY26

    Largest component of the commercial book.

    CRE loans with LTV > 80%
    3less than
    Q2 FY26

    Less than 3% of CRE loans have greater than an 80% LTV.

    Commercial & Industrial (C&I) loans
    $1.7B
    Q2 FY26
    Net charge-offs
    $3.4Mup QoQ
    Q2 FY26

    Up from 3 bps last quarter due to a large recovery.

    Nonperforming assets ratio
    8declined 1 bp QoQ
    Q2 FY26
    Delinquency levels
    41increased 1 bp QoQ
    Q2 FY26
    Criticized asset ratio
    2.81up from 2.12% QoQ
    Q2 FY26

    Increase driven by a single borrower relationship, not broader weakness.

    Criticized assets secured by real estate
    93
    Q2 FY26
    Aggregate deposit mix shift (past 12 months)
    $17Mvs $516M a year ago
    LTM Q2 FY26

    Compared to the same period a year ago, showing moderation.

    Yield on earning assets improvement
    5improved QoQ
    Q2 FY26

    Benefited from $2.8 million contribution from fixed asset repricing.

    Cost of interest-bearing liabilities
    1increased QoQ
    Q2 FY26

    Consistent with rise in deposit costs.

    Deposit beta (last rate hike cycle)
    34
    historical

    Expected to mirror beta from last rate hike cycle for any potential future rate hikes.

    Fixed to flow ratio
    58down 1 percentage point QoQ
    Q2 FY26

    At quarter end.

    Pay fixed received float swap portfolio
    $1.4B
    Q2 FY26
    Forward starting swaps
    $200M
    Q3 FY26 (effective)

    Will become effective during the third quarter.

    Noninterest income
    $43.3Mup $2.0M QoQ
    Q2 FY26

    Compared to $41.3 million during the linked quarter. Includes $400k charge related to BCP conversion ratio change.

    Adjusted noninterest income increase
    $2.2Mup QoQ
    Q2 FY26

    Adjusting for BCP conversion ratio charges ($400k in Q2, $200k in Q1).

    Noninterest expense
    $111.2Mdown $4.9M QoQ
    Q2 FY26

    Compared to $116.1 million during the linked quarter. Q1 included $2.8M seasonal payroll tax, $3.5M accelerated restricted stock vesting, $750k severance. Q2 includes $1.2M annual merit increases and $500k benefit from restricted stock forfeiture.

    Annual merit increases
    $1.2M
    Q2 FY26

    Included in Q2 noninterest expense.

    Benefit from restricted stock forfeiture
    $500k
    Q2 FY26

    Included in Q2 noninterest expense.

    Provision for credit losses
    $3.6M
    Q2 FY26
    Effective tax rate
    22.3down QoQ
    Q2 FY26

    Drop compared to linked quarter due to higher benefits from certain tax-advantaged investments.

    Tier 1 capital ratio
    14.5
    Q2 FY26

    Above well-capitalized regulatory thresholds.

    Total risk-based capital ratio
    15.5
    Q2 FY26

    Above well-capitalized regulatory thresholds.

    Common stock dividends paid
    $28Mconsistent QoQ
    Q2 FY26
    Preferred stock dividends paid
    $5.3Mconsistent QoQ
    Q2 FY26
    Common shares repurchased
    $17M
    Q2 FY26
    Remaining share repurchase authorization
    $89M
    Q2 FY26

    Under the current repurchase plan.

    Common dividend per share
    $0.70
    Q3 FY26 (declared)

    Declared by the Board, to be paid during the third quarter.

    Deposit spot rate
    1.26down 1 bp QoQ
    Q2 FY26 (end)

    Down 1 basis point from the average cost for the quarter.

    Normalized Net Interest Margin (NIM) target
    3.25% to 3.50%
    long-term

    Longer-term target, still on trajectory depending on interest rates.

    Public deposits
    $2B
    Q2 FY26

    Approximately $2 billion of total deposit base.

    High-cost public deposits targeted for runoff
    10% to 15%
    Q3 FY26

    Expected runoff from $2B public deposits in Q3 FY26.

    Industry KPIs

    13
    MetricValueDetails
    Loans$14.2BUSD
    Depositsdeclined modestly
    Rotce ROE15.5%%
    Cet1 ratio14.5%%
    Capital returns$17MUSD
    Fee income lines$43.3MUSD
    Allowance reserves$147MUSD
    Net interest income$153.6MUSD
    Net interest margin2.78%%
    Net charge offs npls10 bpsbps
    Total operating expenses$111.2MUSD
    Provision for credit losses$3.6MUSD
    Efficiency ratio operating leverage—

    Risks & headwinds

    5
    Elevated competitive environment for deposits.near term

    may limit opportunities for deposit cost improvement in the near term

    Mitigation: manage pricing thoughtfully while continuing to meet our customers' needs

    Moderated third quarter growth in consumer lending.Q3 FY26

    elevated interest rates and the absence of similar residential project closings

    Mitigation: commercial pipeline remains encouraging

    Increase in criticized asset ratio.Q2 FY26

    increased to 2.81% from 2.12%

    Mitigation: driven by a single borrower relationship rather than broader weakness across the portfolio. Loans continue to perform and exposure is well secured by real estate (93% of criticized assets secured by real estate with 58% LTV).

    Potential for deposit cost increase.Q2 FY26

    deposit pricing has become more competitive than earlier in the year, contributing to the higher deposit mix shift, along with a modest increase in deposit costs this quarter.

    Mitigation: expect our cost of deposits to settle in the range of 1.25% to 1.3% in the near term

    Impact of interest rate hikes on NII/NIM.future

    any interest rate hikes would initially benefit NII and NIM, but would ultimately become a modest headwind once our deposits fully reprice.

    Mitigation: well positioned to remain balanced from an interest rate sensitivity perspective

    What to watch in Q3 FY26

    5

    Net Interest Margin (NIM) trajectory

    Q3 FY26, Q4 FY26
    Current2.78% (Q2 average), 2.79% (June spot)
    TargetApproaching 2.9% by year-end, with 5 bps quarterly expansion

    Why it matters

    NIM expansion is a key driver of profitability and has been a consistent positive trend for the bank.

    Based on our performance through the first half of the year and our current interest rate assumptions, we continue to trend toward a net interest margin approaching 2.9% by year-end. [...] I think we get to $290 million by the end of the year. And that's -- I think we're looking at 5 basis points in NIM per quarter going forward⏳?

    Q&A highlights

    5

    Inquired about the sustainability and drivers of Wealth Management growth, excluding market conditions, for the rest of the year.

    Management stated that Q2 wealth management fee increase was roughly half from market and half from production, plus some trust/testamentary fees. They expect this production-driven growth to be sustainable. Noted improved efficiency and additional products through the Sotera partnership and adviser additions.

    “I would say that if you looked at the performance in Q3 on the wealth management side, the increase in fees was driven probably half by market and half by production. And then we had some trust and testamentary fees that came in as well. So I would see that as sustainable without market change going forward.”

    asked by Jeff Rulis · answered by James Polk

    1 min read5 chapters

    Detailed Narrative

    01

    Economic Outlook

    Hawaii's economy remains resilient, supported by low unemployment, healthy visitor spending, strong construction activity, and military investment. The Department of Business, Economic Development and Tourism projects real economic growth of 1.6% in 2026. The bank continues to monitor inflation, energy costs, consumer confidence, travel demand, and broader geopolitical and fiscal developments.

    02

    Wealth Management Strategy

    The company is strengthening coordination across commercial banking, private bank, Banco advisers, and broader advisory capabilities. The Center for Family Business and Entrepreneurs, opened in April, is developing its client pipeline around succession and estate planning, business valuation, and M&A. This initiative leverages the bank's unique market position to assist clients with complex financial decisions.

    03

    Loan Portfolio Diversification and Quality

    The loan portfolio is well-balanced between consumer (56%) and commercial (44%) exposure, primarily concentrated in Hawaii (94%). Consumer loans are largely residential mortgage and home equity (86%) with strong LTVs and FICO scores. Commercial real estate (CRE) is the largest commercial component (30% of total loans), characterized by low Oahu vacancy rates, declining office space supply, and conservative underwriting with weighted average LTVs below 60%.

    04

    Interest Rate Sensitivity

    The balance sheet is well-positioned for an elevated interest rate environment, with higher rates supporting earning asset yields and continued repricing of the fixed-rate portfolio. The bank expects to remain balanced from an interest rate sensitivity perspective, with a fixed-to-flow ratio of 58% and an active pay-fixed received-float swap portfolio of $1.4 billion.

    05

    Deposit Franchise Strength

    Bank of Hawaii's deposit franchise is a key structural advantage, characterized by a leading market position, trusted brand, diversified customer base, and deep relationships. This provides a stable core funding base, allowing thoughtful pricing management despite an elevated competitive environment for deposits. Noninterest-bearing deposits represent approximately 27% of total deposits.

    AI-generated summary of the company’s earnings call. Not investment advice.