Bank of Hawaii Corporation

Bank of Hawaii reported second-quarter diluted EPS of $1.47 and net income of $63.8 million, up 13% and 11%, respectively, from the prior quarter. Net interest income was $153.6 million, and net interest margin expanded 4 bps to 2.78%; return on average common equity improved to 15.5%. Net charge-offs were $3.4 million, or 10 bps annualized; non-performing assets were 8 bps; delinquency levels were 41 bps; and the ACL ended the quarter at $147 million, or 1.03% of outstandings. For the third quarter, management guided to normalized non-interest income of about $43 million and normalized non-interest expense of about $112.5 million. Management continues to expect full-year loan growth in the lower mid-single-digit range and a net interest margin approaching 2.9% by year-end, with a December exit rate near 2.90% assuming one 25 bps rate hike in mid-September.

Jim Polk characterized the quarter as another solid one and said the franchise’s underlying earnings power continued to improve. He emphasized the strength of the deposit franchise, the repricing benefit from fixed-rate assets, and the bank’s conservative balance sheet positioning, while noting that elevated deposit competition may limit near-term cost improvement. He also highlighted strategic progress in wealth management, including better coordination across commercial banking, the private bank, and Bankoh Advisors, plus the new Center for Family Business & Entrepreneurs.

Brad Satenberg detailed the quarter’s financial drivers: NII increased $2.6 million sequentially, NIM improved to 2.78%, and yield on earning assets rose 5 bps, aided by a $2.8 million benefit from fixed-asset repricing. Deposit costs were 1.27%, the deposit beta was 35.5%, and he expects deposit costs to settle around 1.25%-1.3% near term; he also expects public deposits to decline in Q3 as higher-cost funds run off. He guided to third-quarter normalized non-interest income of about $43 million and non-interest expense of about $112.5 million, said public deposits are about $2 billion with 10%-15% expected to run off at 3.5%-4% costs, and noted capital ratios remained well above well-capitalized thresholds with Tier 1 capital at 14.5% and total risk-based capital at 15.5%.

Analysts focused on the sustainability of wealth-management growth, the path to a 2.9% year-end margin, deposit pricing pressure, loan-growth momentum, and buyback cadence. Management said wealth fee growth looked sustainable even without a market tailwind because of production, trust and testamentary fees, and the Bankoh Advisors platform; they also said the margin path still looks achievable with fixed-asset repricing, moderating mix shift, and the expected September rate hike. On deposits, management acknowledged more competition and slightly higher CD pricing, but said it was not material and that they are strategically allowing some higher-cost public deposits to run off. They also said $20 million of buybacks is expected in both Q3 and Q4, with a reevaluation in 2027.