Bank of Hawaii Q1 Earnings Call Highlights

20 Apr 2026, 15:04 by Teresa Graham · The Cerbat Gem

Bank of Hawaii (NYSE:BOH) opened fiscal 2026 with what new President and CEO Jim Polk described as “another solid set of results,” highlighting continued net interest margin expansion, easing deposit costs, and strong credit performance. The bank also discussed its outlook for loan growth, capital deployment, and longer-term wealth management initiatives during its first quarter earnings call.

Margin expansion continues as deposit costs fall

Polk said net interest income and net interest margin (NIM) expanded for an eighth consecutive quarter, driven by fixed-rate asset repricing and a “meaningful decline in total deposit costs.” He noted NIM rose 13 basis points in the quarter as the bank “remixed $643 million in fixed rate loans and investments from a roll-off yield of approximately 4% to a roll-on yield of 5.6%.”

Management reiterated its goal of “approaching 2.9% NIM by the end of the year,” which Polk said remains achievable “even against an uncertain rate backdrop.” CFO Brad Satenberg added this was the second consecutive quarter of double-digit NIM expansion, with a 28-basis-point improvement over the past six months.

Satenberg said net interest income increased $5.6 million from the prior quarter despite two fewer days, supported by fixed asset repricing, deposit repricing following Fed rate cuts late last year, and a positive deposit mix shift of $94 million. He said the yield on interest-earning assets declined 4 basis points as the impact of those rate cuts was “fully recognized” during the quarter, partially offset by $2.6 million of net interest income benefit from fixed asset repricing.

On funding, Satenberg said the cost of interest-bearing liabilities improved 21 basis points as deposits repriced downward. The cost of deposits declined 17 basis points to 1.26%, with a spot deposit rate of 1.25% at quarter-end. Deposit beta improved to 36%, exceeding the bank’s prior 35% target. Satenberg said he expects only “modest improvements” from here unless additional Fed rate changes occur, noting the bank is “currently forecasting no rate cuts in 2026.”

Loan growth outlook tempered by uncertainty

In Q&A, management framed loan growth expectations as “low single-digit” for the overall portfolio, citing uncertainty tied to geopolitics and the rate environment. Polk said residential mortgage activity has been “coming along okay,” while pressure has been more evident in home equity lines and indirect lending, where the bank is pursuing initiatives to stabilize balances.

Polk said the bank is using direct mail and “special programs” to retain home equity balances rolling off fixed rates. In indirect lending, he said Bank of Hawaii has implemented digital contracting and is working to speed up funding timeframes to improve competitiveness.

Asked about pipelines, Polk said the commercial and residential (purchase) pipelines “have remained strong.” He said some residential projects are expected to close in the second quarter, while commercial growth may moderate compared with a strong first quarter but should remain consistent with the bank’s guidance.

Credit metrics remain strong; storm-related overlay added to reserves

Chief Risk Officer Brad Shairson said credit performance “remained strong, consistent with prior quarters,” emphasizing the bank’s relationship-based underwriting and geographic concentration in core markets. Shairson said approximately 93% of loans are based in Hawaii, with 4% in the Western Pacific and 3% on the mainland, largely supporting existing clients.

Shairson detailed the composition of the portfolio:

Consumer loans represent 56% of total loans, or approximately $8 billion; 86% of that is residential mortgage and home equity with weighted average LTV of 48% and weighted average FICO of 798.
Commercial loans total $6.2 billion (44% of total loans), with 73% secured by real estate at a weighted average LTV of 55%.
Commercial real estate totals $4.3 billion, or 31% of total loans, with no single property type exceeding 9% of total loans.

On asset quality, Shairson said net charge-offs were $1.1 million, or 3 basis points annualized, which he called “abnormally low.” Non-performing assets declined to 9 basis points. Delinquencies increased to 40 basis points, while criticized loans were 2.12% of total loans, flat versus the prior quarter.

The allowance for credit losses ended the quarter at $147 million, with the ACL ratio flat at 1.04%. Shairson said the ACL includes a $3.2 million qualitative overlay related to the recent Kona low storm, intended to cover potential flood damage to roughly 15 to 20 properties, net of anticipated insurance recoveries. He added that the bank is still assessing the potential impact of Typhoon Sinlaku and expects it will take “several weeks” to gain clearer insight.

Shairson also addressed industry concerns about private credit, stating the bank “doesn’t lend to private credit funds or providers.” He said exposure to non-bank financial intermediaries is “negligible,” at about $80 million or 0.6% of total loans, largely tied to “diversified publicly traded equity REITs.”

Expenses elevated in Q1; outlook adjusted for FDIC assessment

Satenberg reported net income of $57.4 million and diluted EPS of $1.30, down from the prior quarter, primarily due to higher noninterest expense. He said first quarter expenses reflected the “annual bump” in seasonal payroll taxes and benefits, plus a non-recurring compensation-related charge tied to accelerated vesting of restricted stock awards under the retirement provision of the bank’s share-based compensation plan. The quarter also included a $750,000 severance charge.

Noninterest expense totaled $116.1 million versus $109.5 million in the prior quarter. Satenberg said the bank’s reported normalized noninterest expense was lower than expected due to a reduction in the quarterly FDIC insurance assessment. Going forward, he expects that assessment to be around $3.2 million, or about $500,000 less per quarter than the recent run rate. As a result, he lowered the forecast range for annual overhead expense growth to 2.5% to 3%.

Noninterest income was $41.3 million, down from $44.3 million, reflecting lower loan and deposit fee income and weaker wealth management earnings due to “less than favorable market conditions.” Satenberg said he expects second quarter noninterest income to be approximately $42 million.

Capital return and longer-term wealth management focus

The bank’s capital ratios remained above well-capitalized thresholds, with Tier 1 capital at 14.4% and total risk-based capital at 15.4%. Satenberg said Bank of Hawaii paid $28 million in common dividends and $5.3 million in preferred dividends during the quarter and repurchased about $15 million of common shares at an average price of $77 per share. He said he plans to repurchase an additional $15 million to $20 million in the second quarter, with $106 million remaining under the current repurchase authorization. The board declared a quarterly common dividend of $0.70 per share for payment in the second quarter.

In Q&A, Polk said discussions about dividend levels occur but management is “comfortable with where our dividend is today,” adding that additional capital return beyond the dividend would “probably” come through buybacks.

On potential regulatory capital changes, management said it has begun assessing the proposed rules. Satenberg said early analysis suggests the proposal could improve regulatory capital ratios by 50 to 100 basis points, while emphasizing that the changes are still in proposal form and not final.

Polk also highlighted wealth management as an expanding strategic priority, including growth through Bankoh Advisors and its partnership with Cetera, as well as the recently opened Center for Family Business & Entrepreneurs offering planning and advisory resources. In Q&A, management indicated near-term improvement could come as the Bankoh Advisors business normalizes following repapering activity in the fourth quarter, while broader wealth management initiatives are expected to be more meaningful beginning in 2027.

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.