8-K: Bank of Hawaii Reports Strong Q4 2025 Earnings, NIM Expands

Bank of Hawaii Corporation announced robust fourth quarter and full year 2025 financial results, driven by increased net interest income, expanded net interest margin, and strong asset quality.

Summary

• Full year 2025 diluted earnings per common share was $4.63, a 33.8% increase from $3.46 in 2024.
• Net income for the full year 2025 was $205.9 million, up 37.3% from the previous year.
• Diluted earnings per common share for the fourth quarter of 2025 was $1.39, compared with $1.20 during the linked quarter and $0.85 during the same period last year.
• Net income for the fourth quarter of 2025 was $60.9 million, up 14.2% from the linked quarter and up 55.6% from the same period last year.
• Net interest margin increased for the seventh consecutive quarter to 2.61% in Q4 2025, a 15 basis point improvement from the linked quarter and 42 basis points from the same period last year.
• The average quarterly cost of total deposits decreased to 1.43% in Q4 2025, compared to 1.59% during the linked quarter, with the spot cost of total deposits decreasing to 1.30%.
• Noninterest-bearing deposit balances increased 6.6% from the linked quarter.
• Share repurchases resumed during the fourth quarter of 2025, with 76.5 thousand shares repurchased at a total cost of $5.0 million.
• Total non-performing assets were $14.2 million at December 31, 2025, down $2.7 million from September 30, 2025.
• The net loan and lease charge-off rate for Q4 2025 was 0.12% annualized of total average loans and leases outstanding.
• Total assets were $24.2 billion at December 31, 2025, an increase of 0.7% from the linked quarter.
• Total deposits were $21.2 billion at December 31, 2025, an increase of 0.5% from the linked quarter.
• Total loans and leases were $14.1 billion at December 31, 2025, an increase of 0.4% from the linked quarter.
• The Tier 1 Capital Ratio was 14.49% at December 31, 2025, compared with 14.34% at September 30, 2025.
• The Board of Directors declared a quarterly cash dividend of $0.70 per common share.

Sentiment

Score: 8

Explanation: The filing reports strong financial performance with significant year-over-year and sequential growth in earnings and net interest income, coupled with expanding net interest margin and excellent asset quality. The resumption of share buybacks and robust capital ratios further underscore a positive outlook, despite some noninterest income headwinds.

Positives

• Diluted earnings per common share for the full year 2025 increased significantly to $4.63 from $3.46 in 2024, a 33.8% rise.
• Net income for the full year 2025 grew by 37.3% to $205.9 million.
• Fourth quarter 2025 diluted EPS of $1.39 represents strong sequential (15.8%) and year-over-year (63.5%) growth.
• Net interest margin expanded for the seventh consecutive quarter, reaching 2.61% in Q4 2025, indicating sustained profitability improvement.
• The average quarterly cost of deposits decreased to 1.43% from 1.59% in the linked quarter, demonstrating effective cost management.
• Noninterest-bearing deposit balances increased by 6.6% from the linked quarter, contributing to a positive deposit mix shift.
• End of period total deposits and total loans and leases increased modestly, showing balance sheet growth.
• Credit quality remains outstanding, with total non-performing assets decreasing by $2.7 million from the linked quarter to $14.2 million.
• The net charge-off rate of 0.12% is low, reflecting strong asset quality.
• Capital levels are robust, with the Tier 1 Capital Ratio at 14.49% and Total Capital Ratio at 15.54%, both well above regulatory minimums.
• Share repurchases resumed in Q4 2025, signaling confidence in the company's valuation and commitment to shareholder returns.
• A $18.1 million gain was realized from the sale of the merchant services portfolio in Q4 2025.

Negatives

• Noninterest income decreased by 3.7% from the linked quarter to $44.3 million, primarily due to a $16.8 million loss on the sale of investments and a $0.8 million charge related to a Visa Class B share conversion ratio change.
• The average yield on total earning assets decreased by 1 basis point from the linked quarter to 4.07%, and the average yield on loans and leases decreased by 5 basis points to 4.81%, primarily driven by floating rate assets repricing to lower interest rates.
• Net loan and lease charge-offs increased by $1.6 million from the linked quarter and $0.7 million from the same period last year.
• The allowance for credit losses on loans and leases decreased by $2.0 million from the linked quarter and $1.8 million from December 31, 2024.
• Hawaii State General Fund Revenues decreased by 7.1% for the nine months ended September 30, 2025, compared to the prior year.
• Monthly visitor arrivals in Hawaii showed negative percentage changes for several months in 2025 compared to the previous year, potentially impacting the local economy.

Risks

• Forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from expectations.
• Forecasts of financial results and condition, expectations for operations and business prospects, and assumptions used in those forecasts and expectations are subject to various factors that could cause significant divergence from actual outcomes.

Future Outlook

The company anticipates continued accretive and predictable net interest income expansion, driven by a balance sheet remix where loan and investment cashflows are reinvested at higher rates (5.8% roll-on rate vs. 4.0% roll-off rate). Management projects a long-term positive net interest income impact from a potential 25 basis point Fed Funds decrease, primarily due to the favorable repricing of rate-sensitive deposits.

Management Comments

• "Bank of Hawaii completed 2025 with strong financial performance."
• "We continued to deliver consistent growth in net interest income and margin for the seventh consecutive quarter."
• "Noninterest-bearing deposit balances increased 6.6% from the linked quarter and end of period total deposits and total loans and leases increased modestly."
• "Credit quality remains outstanding, and we continue to be disciplined in managing expenses."
• "Our strong performance reflects the hard work and exceptional commitment of our employees, whose dedication continues to drive our success."

Industry Context

Bank of Hawaii operates in a unique and concentrated deposit market in Hawaii and the West Pacific, maintaining a dominant market position with 34.5% market share in 2025, an increase from 28.3% in 2005. The company consistently demonstrates a lower cost of funds for both interest-bearing and total deposits compared to the KBW Regional Banking Index (KRX) median, indicating a competitive advantage in deposit gathering. While the local real estate market shows stability with low vacancy rates, recent declines in Hawaii's visitor arrivals could pose a modest headwind to broader economic activity.

Comparison to Industry Standards

• Bank of Hawaii's average cost of interest-bearing deposits was 1.94% in Q4 2025, significantly lower than the KRX median of 2.64% in Q3 2025.
• The average cost of total deposits for Bank of Hawaii was 1.43% in Q4 2025, substantially below the KRX median of 1.98% in Q3 2025.
• The company's downward deposit beta of 31% as of Q4 2025 indicates superior management of deposit costs in a declining rate environment compared to general industry trends.
• Bank of Hawaii's non-performing assets at 0.10% and net charge-off rate at 0.12% reflect exceptional asset quality, likely outperforming broader industry averages, although direct comparative data for these specific metrics against the KRX median was not provided in the filing.
• Capital ratios, such as the Tier 1 Capital Ratio of 14.49%, are well above regulatory well-capitalized minimums, demonstrating a strong capital position relative to industry requirements.

Stakeholder Impact

• Shareholders: Positive impact due to increased earnings, expanded net interest margin, resumption of share repurchases, and consistent dividend payments, indicating strong shareholder returns.
• Employees: Positive impact from strong company performance, potentially leading to job stability, growth opportunities, and continued employee dedication.
• Customers: Stable deposit costs and continued loan growth suggest a healthy and reliable banking environment, fostering trust and continued business relationships.
• Creditors: Strong capital ratios and excellent asset quality indicate low credit risk, enhancing the company's creditworthiness.

Next Steps

• The company will review its fourth quarter financial results via a live conference call and webcast on January 26, 2026, at 8:00 a.m. Hawaii Time (1:00 p.m. Eastern Time).
• Investors should monitor the company's investor relations website, social media channels, press releases, SEC filings, and public conference calls and webcasts for future financial and other information, in compliance with Regulation FD.

Key Dates

Recommendation

The company demonstrates exceptional financial health with consistent growth in key profitability metrics like EPS, net income, and net interest margin. Its ability to reduce deposit costs below industry averages, maintain pristine asset quality, and hold robust capital levels positions it strongly for future performance. The resumption of share buybacks signals management's confidence and commitment to shareholder returns. These factors, combined with a dominant market position in a unique market, make it a highly attractive investment.

Keywords

Bank of Hawaii, BOH, financial results, Q4 2025, full year 2025, earnings, net interest income, net interest margin, deposits, loans, asset quality, capital ratios, share repurchase, dividends, Hawaii banking, regional bank