Regional banking institution Bank of Hawaii (NYSE:BOH) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 15% year on year to $192.6 million. Its non-GAAP profit of $1.39 per share was 9.9% above analysts’ consensus estimates.
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Bank of Hawaii (BOH) Q4 CY2025 Highlights:
- Revenue: $192.6 million vs analyst estimates of $185.4 million (15% year-on-year growth, 3.9% beat)
- Adjusted EPS: $1.39 vs analyst estimates of $1.26 (9.9% beat)
- Adjusted Operating Income: $80.27 million vs analyst estimates of $75.61 million (41.7% margin, 6.2% beat)
- Market Capitalization: $2.99 billion
StockStory’s Take
Bank of Hawaii’s fourth quarter was marked by robust performance, with management attributing the positive momentum to sustained net interest margin expansion, disciplined deposit cost management, and continued market share gains in its core Hawaii market. CEO Peter Ho pointed to a seventh consecutive quarter of net interest margin improvement and highlighted the bank’s ability to attract low-cost, noninterest-bearing deposits. Credit quality remained strong, with nonperforming assets declining and the loan portfolio showing resilience. Management credited both consumer and commercial teams for broad-based deposit growth.
Looking ahead, management expects further improvement in net interest margin, driven by ongoing fixed asset repricing and stable deposit costs, even as market interest rates fluctuate. CEO Peter Ho shared that the bank is targeting a net interest margin near 2.90 by the end of next year, emphasizing the importance of maintaining balanced loan growth across consumer and commercial segments. Additionally, the bank plans to capitalize on opportunities in wealth management and fee income, with President James Polk stating, “We’re seeing strong client engagement, and our pipeline for fee-based business remains healthy.”
Key Insights from Management’s Remarks
Management identified several factors supporting both the quarter’s performance and the outlook for 2026, including deposit strategy, loan book diversification, and prudent risk management.
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Net interest margin expansion: The seventh consecutive quarter of net interest margin improvement was attributed to successful deposit repricing, fixed asset roll-offs at higher yields, and a positive shift in deposit mix. CFO Bradley S. Satenberg noted that the deposit cost reduction and securities repositioning were crucial drivers.
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Market share leadership: CEO Peter Ho emphasized that Bank of Hawaii extended its deposit market share lead in Hawaii, benefiting from a 125-year local presence, a strong physical branch network, and investments in digital services. Market share growth advanced 40 basis points during 2025.
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Credit quality strength: Chief Risk Officer Bradley Shairson highlighted the “pristine” credit environment, with low nonperforming asset levels and a diversified loan book primarily secured by real estate. Conservative underwriting and low loan-to-value ratios provided a buffer against market volatility.
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Deposit mix improvement: The return to positive deposit mix shift—movement of funds from higher-cost to lower-cost deposits—was a first since 2022, providing an earnings tailwind. Noninterest-bearing deposit balances grew 6.6% sequentially, driven by both consumer and commercial clients.
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Expense discipline amid growth: Noninterest expenses declined from the previous quarter, reflecting lower FDIC assessments and the wind-down of certain nonrecurring items. The bank forecasted a 3% to 3.5% rise in expenses for 2026, mainly from incentives and seasonal payroll costs, but maintained a focus on efficiency.
Drivers of Future Performance
Management’s outlook for the coming year is anchored in further net interest margin gains, stable asset quality, and disciplined expense management.
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Continued NIM expansion: The bank expects further margin improvement as fixed-rate assets reprice upward and deposit costs remain stable. Management believes net interest margin could approach 2.90 by year-end, contingent on ongoing deposit remixing and orderly interest rate movements.
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Loan and fee income growth: Modest loan growth is anticipated, with pipelines improving in both commercial and residential segments. Additionally, management aims to grow fee-based revenue streams, particularly in wealth management, citing increased client engagement and a robust pipeline.
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Strong credit profile: The bank projects credit quality will remain resilient, supported by conservative underwriting and a diversified, largely secured loan portfolio. Management noted the local economic outlook has improved, further reducing near-term credit risk concerns.
Catalysts in Upcoming Quarters
Looking forward, our analysts will watch (1) whether the bank can maintain its momentum in noninterest-bearing deposit growth, (2) the pace and sustainability of net interest margin expansion as asset repricing continues, and (3) the success of fee income initiatives, especially in wealth management. Developments in the Hawaii real estate and economic environment will also be important for monitoring credit quality.
Bank of Hawaii currently trades at $75.04, up from $70.80 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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