Asked for more color on how the bank expects to reach the 'approaching 2.9%' NIM target by year-end, given the Q2 sequential increase.

CFO Brad Satenberg confirmed the 2.9% NIM target by year-end, including a forecasted 25 bps rate hike in mid-September. He expects NIM to increase by approximately 5 basis points per quarter, driven by fixed asset repricing and moderated mix shift. “So with the rate hike and with the mix shift and with the fixed asset repricing, 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?”

Asked for the spot rate on deposits at quarter-end and if the bank is making tweaks to exception pricing or promotional rates due to competition.

The spot rate on deposits was 1.26%, down 1 bp from the quarter's average cost. Competition has slightly increased, leading to some additional requests for exception pricing, but it hasn't been material. The bank plans to slightly push up CD rates in the 3- and 12-month categories to grow deposits. “So the spot is to answer your first question, Matt, the spot rate was $1.26. So it was down 1 basis point from what our cost was for the quarter. And as far as exception pricing, obviously, I think competition has increased slightly, and I think there are some additional requests for some exception pricing.”

Inquired about any unique DDA trends this quarter, apart from public funds, and the outlook for DDA as a component of growth.

Management characterized the DDA decline as normal seasonality for Q2, noting consistent growth over the last five quarters. They are confident in the long-term trend and sustainability of DDA growth, despite some project-related funds moving out. “I just went back 5 quarters. We've had really nice growth going back to the beginning of 2025, and we had particularly strong growth in and in Q1 of '26. So I really look at -- particularly on the NIBD side is just sort of the normal ebbs and flows and the seasonality of Q2.”

BOH

Bank of Hawaii (BOH) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Jul 27, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Net interest margin (NIM)	approaching 2.9% high materiality	FY26 · 2026	High
Full-year loan growth	lower mid-single-digit range medium materiality	FY26 · 2026	Medium
Cost of deposits	1.25% to 1.3% medium materiality	near term	Medium
Public deposits	decline medium materiality	Q3 · 2026	High
Yield on earning assets	continue to improve at a similar pace medium materiality	remainder of the year · 2026	Medium
Normalized noninterest income	approximately $43 million medium materiality	Q3 · 2026	High
Normalized noninterest expense	approximately $112.5 million medium materiality	Q3 · 2026	High
Share repurchase	$20 million medium materiality	Q3 · 2026	High
Net interest margin (NIM) expansion	5 basis points per quarter medium materiality	going forward	Medium
Average earning assets	$100 million to $200 million medium materiality	Q3 · 2026	Medium

Risks & headwinds

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

Net Interest Margin (NIM) trajectory

Q3 FY26, Q4 FY26

Current 2.78% (Q2 average), 2.79% (June spot)

Target Approaching 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?

Find out whether BOH delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 5 chapters

Detailed narrative

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.

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.

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%.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.