Q4 2025 Bank of Hawaii Corporation Earnings Call

January 26, 2026

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone.

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Speaker #1: I would like to hand the conference over to your first speaker today, Chang Park. Please go ahead.

Speaker #1: ahead. Good morning and good

Chang Park: Good morning and good afternoon. Thank you for joining us today for our Q4 2025 earnings call. Joining me today is our Chairman and CEO, Peter Ho, President and Chief Banking Officer, Jim Polk, CFO, Brad Satenberg, and Chief Risk Officer, Brad Shairson. Before we get started, I want to remind you that today's conference call will contain some forward-looking statements, and while we believe our assumptions are reasonable, the actual results may differ materially from those projected. During the call today, we'll be referencing a slide presentation as well as our earnings release. Both of these are available on our website, boh.com, under the Investor Relations link. And now I would like to turn the call over to Peter.

Speaker #2: Good afternoon. Thank you for joining us today for our fourth quarter 2025 earnings call. Joining me today are our Chairman and CEO, Peter Ho; President and Chief Banking Officer, Jim Polk; CFO, Brad Satenberg; and Chief Risk Officer, Brad Shairson.

Speaker #2: Before we get started, I want to remind you that today's conference call will contain some forward-looking statements. And while we believe our assumptions are reasonable, the actual results may differ materially from those projected.

Speaker #2: During the call today, we'll be referencing a slide presentation as well as the earnings release. Both of these are available on our website, boh.com, under the Investor Relations link.

Q4 2025 Bank of Hawaii Corporation Earnings Call

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Bank of Hawaii

Earnings

Q4 2025 Bank of Hawaii Corporation Earnings Call

BOH

Monday, January 26th, 2026 at 6:00 PM

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Speaker #2: And now I would like to turn the call over to

Speaker #2: And now I would like to turn the call over to Peter. Thanks.

Peter Ho: Thanks, Chang. Good morning or good afternoon, everyone. Thank you for your continued interest in Bank of Hawaii. We recorded yet another set of strong results in the fourth quarter. Fully diluted earnings per share was $1.39 per share, 63% higher than results from a year ago and 16% higher than last quarter. Net interest margin improved for the seventh straight quarter, up 15 basis points to 2.61%. Return on common equity improved to 15%. Loans and deposits both grew modestly in the quarter. Importantly, non-interest-bearing demand deposits grew 6.6% on a linked basis. Credit quality remained and remains pristine. I'll now touch on some operating highlights. Brad Shairson will briefly update you on credit quality, and Brad Satenberg will dive a little deeper into the financials.

Speaker #3: Chang. Good morning or good afternoon, everyone. Thank you for your continued interest in Bank of Hawaii. We recorded yet another set of strong results in the fourth quarter.

Speaker #3: Fully diluted earnings per share was $1.39 per share, 63% higher than results from a year ago and 16% higher than last quarter. Net interest margin improved for the 7th straight quarter, up 15 basis points to 2.61%.

Speaker #3: Return on common equity improved to 15%. Loans and deposits both grew modestly in the quarter. Importantly, non-interest-bearing demand deposits grew 6.6% on a linked basis.

Speaker #3: Credit quality remained and remains pristine. I'll now touch on some operating highlights. Brad Shairson will briefly update you on credit quality, and Brad Satenberg will dive a little deeper into the financials.

Speaker #3: As you know, Bank of Hawaii has a unique business model that creates superior risk-adjusted returns by leveraging our unique core Hawaii market, our dominant brand and market position, and our fortress risk profile.

Peter Ho: As you know, Bank of Hawaii has a unique business model that creates superior risk-adjusted returns by leveraging our unique core Hawaii market, our dominant brand and market position, and our fortress risk profile. Our market-leading brand position is largely the driver of our market share outperformance, giving us both a robust and durable competitive franchise advantage. Our brand advantage is built on our 125+ year history in the islands, our physical branch system, and increasingly, our digital service, marketing, and commerce capabilities. Over the past 20 years, Bank of Hawaii has delivered market share growth nearly four times greater than that of our next closest competitors. The market share growth continued in 2025, advancing another 40 basis points. We are the clear deposit market share leader in Hawaii.

As you know, Bank of Hawaii has a unique business model that creates superior risk-adjusted returns by leveraging our unique core Hawaii market, our dominant brand and market position, and our fortress risk profile. Our market-leading brand position is largely the driver of our market share outperformance, giving us both a robust and durable competitive franchise advantage. Our brand advantage is built on our 125+ year history in the islands, our physical branch system, and increasingly, our digital service, marketing, and commerce capabilities. Over the past 20 years, Bank of Hawaii has delivered market share growth nearly four times greater than that of our next closest competitors. The market share growth continued in 2025, advancing another 40 basis points. We are the clear deposit market share leader in Hawaii.

Speaker #3: Our market-leading brand position is largely the driver of our market share outperformance, giving us both a robust and durable competitive franchise advantage. Our brand advantage is built on our 125-plus-year history in the islands.

Speaker #3: Our physical branch system and, increasingly, our digital service, marketing, and commerce capabilities—over the past 20 years, Bank of Hawaii has delivered market share growth nearly four times greater than that of our next closest competitors.

Speaker #3: The market share growth continued in 2025, advancing another 40 basis points. We have a clear deposit market share leader in Hawaii. Interest-bearing deposit costs improved by 20 basis points, and total cost of funds improved 16 basis points in the quarter.

Peter Ho: Interest-bearing deposit costs improved by 20 basis points, and total cost of funds improved 16 basis points in the quarter. Also in the quarter, we remixed $659 million in fixed-rate loans and investments from a roll-off rate of 4% and into a roll-on rate of 5.8%, helping to improve net interest margin. As I mentioned, Q4 was the seventh consecutive quarter of NIM expansion. In early 2025, we had a goal of achieving a 2.50 NIM by year-end based on fixed asset repricing, improving deposit remix, and rate cuts. We were gratified to see NIM results for Q4 well exceeding that goal. We believe NIM, by the end of 2026, could come in near the 2.90 range. Our fortress credit position is a long-standing strength of Bank of Hawaii.

Interest-bearing deposit costs improved by 20 basis points, and total cost of funds improved 16 basis points in the quarter. Also in the quarter, we remixed $659 million in fixed-rate loans and investments from a roll-off rate of 4% and into a roll-on rate of 5.8%, helping to improve net interest margin. As I mentioned, Q4 was the seventh consecutive quarter of NIM expansion. In early 2025, we had a goal of achieving a 2.50 NIM by year-end based on fixed asset repricing, improving deposit remix, and rate cuts. We were gratified to see NIM results for Q4 well exceeding that goal. We believe NIM, by the end of 2026, could come in near the 2.90 range. Our fortress credit position is a long-standing strength of Bank of Hawaii.

Speaker #3: Also in the quarter, we remixed $659 million in fixed-rate loans and investments from a roll-off rate of 4% into a roll-on rate of 5.8%, helping to improve net interest margin.

Speaker #3: As I mentioned, Q4 was the seventh consecutive quarter of NIM expansion. In early 2025, we had a goal of achieving a 2.50 NIM by year-end, based on fixed asset repricing, improving deposit remix, and rate cuts.

Speaker #3: See NIM results for Q4—well, we were gratified to exceed that goal. We believe NIM by the end of 2026 could come in near the 2.90% range.

Speaker #3: Our fortress credit position is a long-standing strength of Bank of Hawaii. The portfolio is diversified by product type, predominantly secured, and possesses superior long-term loss experience.

Peter Ho: The portfolio is diversified by product type, predominantly secured and possessing superior long-term loss experience. We dynamically manage our credit portfolio, actively managing off loan categories that we find not to meet our stringent loss standards. And now, let me turn the call over to Brad Shairson, who will provide a brief overview on credit. Brad?

The portfolio is diversified by product type, predominantly secured and possessing superior long-term loss experience. We dynamically manage our credit portfolio, actively managing off loan categories that we find not to meet our stringent loss standards. And now, let me turn the call over to Brad Shairson, who will provide a brief overview on credit. Brad?

Speaker #3: We dynamically manage our credit portfolio, actively managing off loan categories that we find do not meet our stringent loss standards. And now, let me turn the call over to Brad Shairson, who will provide a brief overview on credit.

Speaker #3: Brad?

Speaker #4: Thanks, Peter. I'll begin with an overview of our credit portfolio and conclude with asset quality metrics. And as you will see, our performance has remained strong, consistent with prior quarters.

Brad Shairson: Thanks, Peter. I'll begin with an overview of our credit portfolio and conclude with asset quality metrics. As you will see, our performance has remained strong, consistent with prior quarters. Turning to our lending philosophy, the Bank of Hawaii is dedicated to serving our local communities, lending primarily within our core markets, where our expertise allows us to make informed and disciplined credit decisions. Our portfolio is built on long-tenured relationships, with approximately 60% of both our commercial and consumer clients having been with the bank for more than 10 years. Geographically, our loan book is concentrated in markets we know well. Approximately 93% of loans are based in Hawaii, with 4% in the Western Pacific and just 3% on the mainland, primarily supporting existing clients who operate both locally and on the mainland. Our loan portfolio remains well balanced between consumer and commercial exposure.

Speaker #4: Turning to our lending philosophy, Bank of Hawaii is dedicated to serving our local communities, lending primarily within our core markets where our expertise allows us to make informed and disciplined credit decisions.

Speaker #4: Our portfolio is built on long-tenured relationships, with approximately 60% of both our commercial and consumer clients having been with the bank for more than 10 years.

Speaker #4: Geographically, our loan book has concentrated in markets we know well. Approximately 93% of loans are based in Hawaii, with 4% in the Western Pacific and just 3% on the mainland, primarily supporting existing clients who operate both locally and on the mainland.

Speaker #4: Our loan portfolio remains well-balanced between consumer and commercial exposure. Consumer loans represent 57% of total loans, or approximately $8 billion. Within the consumer portfolio, 86% consists of residential mortgage and home equity loans, with a weighted average LTV of 48% and a weighted average FICO score of 799.

Brad Shairson: Consumer loans represent 57% of total loans or approximately $8 billion. Within the consumer portfolio, 86% consists of residential mortgage and home equity loans, with a weighted average LTV of 48% and a weighted average FICO score of 799. The remaining 14% of consumer loans are comprised of auto and personal lending. Credit quality in these segments also remains strong, with average FICO scores of 730 for auto loans and 761 for personal loans. Turning to commercial lending, the portfolio totals $6.1 billion, representing 43% of total loans. Seventy-three percent is secured by real estate, with a weighted average LTV of 54%, reflecting our ongoing emphasis on collateral protection. CRE remains the largest component of commercial book, totaling $4.2 billion, or 30% of total loans.

Consumer loans represent 57% of total loans or approximately $8 billion. Within the consumer portfolio, 86% consists of residential mortgage and home equity loans, with a weighted average LTV of 48% and a weighted average FICO score of 799. The remaining 14% of consumer loans are comprised of auto and personal lending. Credit quality in these segments also remains strong, with average FICO scores of 730 for auto loans and 761 for personal loans. Turning to commercial lending, the portfolio totals $6.1 billion, representing 43% of total loans. Seventy-three percent is secured by real estate, with a weighted average LTV of 54%, reflecting our ongoing emphasis on collateral protection. CRE remains the largest component of commercial book, totaling $4.2 billion, or 30% of total loans.

Speaker #4: The remaining 14% of consumer loans are comprised of auto and personal lending. Credit quality in these segments also remains strong, with average FICO scores of 730 for auto loans and 761 for personal loans.

Speaker #4: Turning to commercial lending, the portfolio totals $6.1 billion, representing 43% of total loans. Seventy-three percent is secured by real estate with a weighted average LTV of 54%, reflecting our ongoing emphasis on collateral protection.

Speaker #4: CRE remains the largest component of the commercial book, totaling $4.2 billion, or 30% of total loans. And in O'ahu, the state's largest CRE market, a combination of consistently low vacancy rates and flat inventory levels continue to support a stable real estate market.

Brad Shairson: In Oahu, the state's largest CRE market, a combination of consistently low vacancy rates and flat inventory levels continue to support a stable real estate market. Across industrial, office, retail, and multifamily property types, vacancy rates remain below or close to their 10-year averages. Total office space on Oahu has declined by approximately 10% over the past decade, driven primarily by conversions to multifamily residential and lodging. This structural reduction in supply, combined with the return to office trend, has brought vacancy rates closer to long-term averages and well below national levels. Our CRE portfolio remains well diversified, with no single property type exceeding 8.5% of total loans. Conservative underwriting practices continue to be applied consistently, with weighted average LTVs below 60% across all CRE categories. In addition, diversification within each segment remains strong, supported by modest average loan sizes.

In Oahu, the state's largest CRE market, a combination of consistently low vacancy rates and flat inventory levels continue to support a stable real estate market. Across industrial, office, retail, and multifamily property types, vacancy rates remain below or close to their 10-year averages. Total office space on Oahu has declined by approximately 10% over the past decade, driven primarily by conversions to multifamily residential and lodging. This structural reduction in supply, combined with the return to office trend, has brought vacancy rates closer to long-term averages and well below national levels. Our CRE portfolio remains well diversified, with no single property type exceeding 8.5% of total loans. Conservative underwriting practices continue to be applied consistently, with weighted average LTVs below 60% across all CRE categories. In addition, diversification within each segment remains strong, supported by modest average loan sizes.

Speaker #4: Across industrial, office, retail, and multifamily property types, vacancy rates remain below or close to their 10-year averages. Total office space on O'ahu has declined by approximately 10% over the past decade, driven primarily by conversions to multifamily residential and lodging.

Speaker #4: This structural reduction in supply, combined with the return-to-office trend, has brought vacancy rates closer to long-term averages and well below national levels.

Speaker #4: Our CRE portfolio remains well-diversified, with no single property type exceeding 8.5% of total loans. Conservative underwriting practices continue to be applied consistently, with weighted average LTVs below 60% across all CRE categories.

Speaker #4: In addition, diversification within each segment remains strong, supported by modest average loan sizes. Scheduled maturities are also well balanced, with more than 60% of CRE loans maturing in 2030 or later, reducing near-term refinancing risk.

Brad Shairson: Scheduled maturities are also well balanced, with more than 60% of CRE loans maturing in 2030 or later, reducing near-term refinancing risk. Looking at the distribution of LTVs, there isn't much tail risk in our CRE portfolio. Only 1.6% of CRE loans have greater than 80% LTV. C&I accounts for 11% of total loans. This portfolio is diversified across industries, characterized by modest average loan sizes with very little leveraged lending. Turning to asset quality, credit metrics continued to perform exceptionally well. Net charge-offs totaled $4.1 million, or 12 basis points annualized. That's up 5 basis points from linked quarter and 2 basis points higher year-over-year. Non-performing assets declined to 10 basis points, down 2 basis points from linked quarter and 4 basis points year-over-year. Delinquencies increased to 36 basis points.

Scheduled maturities are also well balanced, with more than 60% of CRE loans maturing in 2030 or later, reducing near-term refinancing risk. Looking at the distribution of LTVs, there isn't much tail risk in our CRE portfolio. Only 1.6% of CRE loans have greater than 80% LTV. C&I accounts for 11% of total loans. This portfolio is diversified across industries, characterized by modest average loan sizes with very little leveraged lending. Turning to asset quality, credit metrics continued to perform exceptionally well. Net charge-offs totaled $4.1 million, or 12 basis points annualized. That's up 5 basis points from linked quarter and 2 basis points higher year-over-year. Non-performing assets declined to 10 basis points, down 2 basis points from linked quarter and 4 basis points year-over-year. Delinquencies increased to 36 basis points.

Speaker #4: Of LTVs, there isn't much tail. Looking at the distribution risk in our CRE portfolio, only 1.6% of CRE loans have greater than 80% LTV.

Speaker #4: CNI accounts for 11% of total loans. This portfolio is diversified across industries, characterized by modest average loan sizes with very little leveraged lending. Turning to asset quality, credit metrics continue to perform exceptionally well.

Speaker #4: Net charge-offs totaled $4.1 million, or 12 basis points annualized. That's up 5 basis points from the linked quarter and 2 basis points higher year over year.

Speaker #4: Non-performing assets declined 10 basis points, down 2 basis points from the linked quarter and 4 basis points year over year. Delinquencies increased to 36 basis points, up 7 basis points from the linked quarter and up 2 basis points year over year. Criticized loans increased to 2.12% of total loans, up 7 basis points from the linked quarter and 2 basis points higher year over year.

Brad Shairson: That's up 7 basis points from linked quarter and up 2 basis points year-over-year, and criticized loans increased to 2.12% of total loans, up 7 basis points from linked quarter and 2 basis points higher year-over-year. Notably, 86% of criticized assets are real estate secured, with a weighted average LTV of 54%. As an update on the allowance for credit losses on loans and leases, the ACL ended the quarter at $146.8 million. That's down $2 million from the linked quarter. The ratio of our ACL to outstandings dropped 2 basis points to 1.04%. I will now turn the call over to Brad Satenberg for a discussion of our financial performance.

That's up 7 basis points from linked quarter and up 2 basis points year-over-year, and criticized loans increased to 2.12% of total loans, up 7 basis points from linked quarter and 2 basis points higher year-over-year. Notably, 86% of criticized assets are real estate secured, with a weighted average LTV of 54%. As an update on the allowance for credit losses on loans and leases, the ACL ended the quarter at $146.8 million. That's down $2 million from the linked quarter. The ratio of our ACL to outstandings dropped 2 basis points to 1.04%. I will now turn the call over to Brad Satenberg for a discussion of our financial performance.

Speaker #4: Notably, 86% of criticized assets are real estate secured with a weighted average LTV of 54%. And as an update on the allowance for credit losses on loans and leases, the ACL ended the quarter at $146.8 million, that's down $2 million from the linked quarter; the ratio of our ACL to outstandings dropped 2 basis points to 1.04%.

Speaker #4: I will now turn the call over to Brad Satenberg for a discussion of our financials.

Speaker #4: performance. Thanks,

Brad Satenberg: Thanks, Brad. For the quarter, we reported net income of $60.9 million and a diluted EPS of $1.39, an increase of $7.6 million and $0.19 per share compared to the linked quarter. These increases were primarily due to the continued expansion of our net interest income and our net interest margin. As Peter mentioned, this is the seventh consecutive quarter that we've expanded both our NII and NIM, and this quarter's expansion of $8.7 million and 15 basis points represents the most significant improvement during that stretch. Driving this expansion is the successful repricing of our deposits, a $200 million securities repositioning that we executed in early October, as well as the deposit mix shift, which is a positive $100 million this quarter.

Speaker #1: Brad. For the quarter, we reported net income of $60.9 million and a diluted EPS of $1.39. An increase of $7.6 million and $0.19 per share compared to the linked quarter.

Speaker #1: These increases were primarily due to the continued expansion of our net interest income and our net interest margin. As Peter mentioned, this is the seventh consecutive quarter that we've expanded both our NII and NIM, and this quarter's expansion of $8.7 million and 15 basis points represents the most significant improvement during that stretch.

Speaker #1: Driving this expansion is the successful repricing of our deposits, a $200 million securities repositioning that we executed in early October, as well as the deposit mix shift, which is a positive $100 million this quarter.

Speaker #1: This is the first time since the second quarter of 2022, after the Fed started raising rates, that the mix shift had a positive impact on our earnings.

Brad Satenberg: This is the first time since Q2 2022, after the Fed started raising rates, that the mix shift had a positive impact on our earnings. As a reminder, the mix shift represents deposits shifting from non-interest-bearing and low-yielding deposits to higher-cost deposits. The mix shift peaked at $967 million in Q2 2023 and has moderated since then. During the year, the average quarterly mix shift was $25 million, compared to $340 million in 2024. During the quarter, the yield on interest-earning assets declined modestly by 1 basis point, as floating rate assets repriced down in response to rate cuts during the latter half of the year. The impact of these rate cuts was almost entirely offset by the positive impact from our fixed asset repricing.

This is the first time since Q2 2022, after the Fed started raising rates, that the mix shift had a positive impact on our earnings. As a reminder, the mix shift represents deposits shifting from non-interest-bearing and low-yielding deposits to higher-cost deposits. The mix shift peaked at $967 million in Q2 2023 and has moderated since then. During the year, the average quarterly mix shift was $25 million, compared to $340 million in 2024. During the quarter, the yield on interest-earning assets declined modestly by 1 basis point, as floating rate assets repriced down in response to rate cuts during the latter half of the year. The impact of these rate cuts was almost entirely offset by the positive impact from our fixed asset repricing.

Speaker #1: As a reminder, the mix shift represents deposits shifting from non-interest-bearing and low-yielding deposits to higher-cost deposits. The mix shift peaked at $967 million in the second quarter of 2023 and has moderated since then.

Speaker #1: During the year, the average quarterly mix shift was $25 million compared to $340 million in 2024. During the quarter, the yield on interest-earning assets declined modestly by 1 basis point as floating-rate assets repriced down in response to rate cuts during the latter half of the year.

Speaker #1: The impact of these rate cuts was almost entirely offset by the positive impact from our fixed asset repricing. While the yield on interest-earning assets dipped modestly, the cost of our interest-bearing liabilities improved by 19 basis points, or 9% compared to the linked quarter, and was driven by the successful repricing of our deposits, which declined to 1.43%—a 16 basis point reduction from the third quarter.

Brad Satenberg: While the yield on interest-earning assets dipped modestly, the cost of our interest-bearing liabilities improved by 19 basis points, or 9% compared to the linked quarter, and was driven by the successful repricing of our deposits, which declined to 1.43%, a 16 basis point reduction from the third quarter. In addition, our deposit beta improved from 28% to 31%, and I remain optimistic that we will ultimately achieve a beta of at least 35% after Fed Funds hits its terminal rate. It's also important to point out that we ended the quarter with a spot rate on our deposits of 1.3%, or 13 basis points lower than our average cost during the quarter.

While the yield on interest-earning assets dipped modestly, the cost of our interest-bearing liabilities improved by 19 basis points, or 9% compared to the linked quarter, and was driven by the successful repricing of our deposits, which declined to 1.43%, a 16 basis point reduction from the third quarter. In addition, our deposit beta improved from 28% to 31%, and I remain optimistic that we will ultimately achieve a beta of at least 35% after Fed Funds hits its terminal rate. It's also important to point out that we ended the quarter with a spot rate on our deposits of 1.3%, or 13 basis points lower than our average cost during the quarter.

Speaker #1: In addition, our deposit beta improved to 28% to 31%, and we remain optimistic that we ultimately achieve a beta of at least 35% after Fed funds hit its terminal rate.

Speaker #1: It's also important to point out that we ended the quarter with a spot rate on our deposits of 1.3%, or 13 basis points lower than our average cost during the quarter.

Speaker #1: Based on the spot rate, I anticipate another solid improvement in the cost of our deposits during the first quarter. Additionally, our CD book continues to reprice down, and during the fourth quarter, the average cost of our CDs declined by 22 basis points to 3.18%.

Brad Satenberg: Based on the spot rate, I anticipate another solid improvement in the cost of our deposits during Q1. Additionally, our CD book continues to reprice down, and during Q4, the average cost of our CDs declined by 22 basis points to 3.18%. During the next three months, 52% of our CDs will mature at an average rate of 3.1%. The majority of these CDs are expected to renew into new CDs at rates ranging from 2.25% to 3%. We made no changes to our interest rate swap portfolio during the quarter, and we finished the year with an active pay fixed receive float portfolio of $1.5 billion at a weighted average fixed rate of 3.5%.

Based on the spot rate, I anticipate another solid improvement in the cost of our deposits during Q1. Additionally, our CD book continues to reprice down, and during Q4, the average cost of our CDs declined by 22 basis points to 3.18%. During the next three months, 52% of our CDs will mature at an average rate of 3.1%. The majority of these CDs are expected to renew into new CDs at rates ranging from 2.25% to 3%. We made no changes to our interest rate swap portfolio during the quarter, and we finished the year with an active pay fixed receive float portfolio of $1.5 billion at a weighted average fixed rate of 3.5%.

Speaker #1: During the next three months, 52% of our CDs will mature at an average rate of 3.1%. The majority of these CDs are expected to renew into new CDs at rates ranging from 2.25% to 3%.

Speaker #1: We made no changes to our interest rate swap portfolio during the quarter, and we finished the year with an active pay-fixed receipt flow portfolio of $1.5 billion at a weighted average fixed rate of 3.5%.

Speaker #1: $1.1 billion of these swaps are hedging our loan portfolio, while $400 million are hedging our securities. In addition, we have $500 million of forward-starting swaps at a weighted average fixed rate of 3.1%.

Brad Satenberg: $1.1 billion of these swaps are hedging our loan portfolio, while $400 million are hedging our securities. In addition, we have $500 million of forward starting swaps at a weighted average fixed rate of 3.1%. $300 million of these forward swaps will become active during the first half of 2026, while the remaining $200 million will become effective during Q3. At the end of the year, our fixed float ratio remained stable at 57%, and I believe that we are well positioned for any interest rate environment. Non-interest income was $44.3 million during the quarter, compared to $46 million during the linked quarter.

$1.1 billion of these swaps are hedging our loan portfolio, while $400 million are hedging our securities. In addition, we have $500 million of forward starting swaps at a weighted average fixed rate of 3.1%. $300 million of these forward swaps will become active during the first half of 2026, while the remaining $200 million will become effective during Q3. At the end of the year, our fixed float ratio remained stable at 57%, and I believe that we are well positioned for any interest rate environment. Non-interest income was $44.3 million during the quarter, compared to $46 million during the linked quarter.

Speaker #1: Three hundred million of these forward swaps will become active during the first half of 2026, while the remaining two hundred million will become effective during the third quarter.

Speaker #1: At the end of the year, our fixed flow ratio remained stable at 57%, and I believe that we are well positioned for any interest-rate environment.

Speaker #1: Non-interest income was $44.3 million during the quarter compared to $46.0 million during the linked quarter, as I discussed last quarter. Non-interest income in the fourth quarter was impacted by an $18.1 million gain on the sale of our merchant services portfolio, which was largely offset by a $16.8 million loss incurred in connection with the repositioning of our investment portfolio.

Brad Satenberg: As I discussed last quarter, non-interest income in Q4 was impacted by an $18.1 million gain on the sale of our merchant services portfolio, which was largely offset by a $16.8 million loss incurred in connection with the repositioning of our investment portfolio. The current quarter also includes a $770,000 charge related to a Visa B conversion ratio change, while the linked quarter includes a similar Visa B charge. Q3 also includes approximately $3 million of merchant services fee income that will not recur following the sale of that business. Adjusting for these normalizing items, non-interest income was essentially flat. My expectation is Q1 normalized non-interest income will be between $42 million and $43 million.

As I discussed last quarter, non-interest income in Q4 was impacted by an $18.1 million gain on the sale of our merchant services portfolio, which was largely offset by a $16.8 million loss incurred in connection with the repositioning of our investment portfolio. The current quarter also includes a $770,000 charge related to a Visa B conversion ratio change, while the linked quarter includes a similar Visa B charge. Q3 also includes approximately $3 million of merchant services fee income that will not recur following the sale of that business. Adjusting for these normalizing items, non-interest income was essentially flat. My expectation is Q1 normalized non-interest income will be between $42 million and $43 million.

Speaker #1: The current quarter also includes a $770,000 charge related to a Visa B conversion ratio change, while the linked quarter includes a similar Visa B charge.

Speaker #1: The third quarter also includes approximately $3 million of merchant services fee income that will not recur following the sale of that business. Adjusting for these normalizing items, non-interest income was essentially flat.

Speaker #1: My expectation is the first quarter normalized non-interest income will be between 42 and 43 million dollars. Non-interest expense was 109.5 million dollars compared to 112.4 million dollars during the linked quarter, included in non-interest expense this quarter is a 1.4 million dollar reduction in our FDIC special assessment, as well as a non-recurring 1.1 million dollar donation to our Bank of Hawaii Foundation.

Brad Satenberg: Non-interest expense was $109.5 million compared to $112.4 million during the linked quarter. Included in non-interest expense this quarter is a $1.44 million reduction in our FDIC special assessment, as well as a non-recurring $1.1 million donation to our Bank of Hawaii Foundation. The linked quarter includes a severance charge of $2.1 million and approximately $2.2 million of non-recurring merchant services expenses. Compared to my previous forecast, actual normalized non-interest expense was higher than expected, mainly due to additional incentives that were recorded during the period.

Non-interest expense was $109.5 million compared to $112.4 million during the linked quarter. Included in non-interest expense this quarter is a $1.44 million reduction in our FDIC special assessment, as well as a non-recurring $1.1 million donation to our Bank of Hawaii Foundation. The linked quarter includes a severance charge of $2.1 million and approximately $2.2 million of non-recurring merchant services expenses. Compared to my previous forecast, actual normalized non-interest expense was higher than expected, mainly due to additional incentives that were recorded during the period.

Speaker #1: The linked quarter includes a severance charge of $2.1 million, and approximately $2.2 million of non-recurring merchant services expenses. Compared to my previous forecasts, actual normalized non-interest expense was higher than expected, mainly due to additional incentives that were recorded during the period.

Speaker #1: For 2026, I am forecasting that expenses will increase by between 3% and 3.5% from our 2025 normalized expenses. And I anticipate that our first quarter normalized non-interest expense will be approximately $113 million.

Brad Satenberg: For 2026, I am forecasting that expenses will increase by between 3% and 3.5% from our 2025 normalized expenses, and I anticipate that our first quarter normalized non-interest expense will be approximately $113 million. The first quarter generally tends to be elevated as compared to the rest of the year due to seasonal payroll taxes and incentive-related charges. During the quarter, we also recorded a provision for credit losses of $2.5 million, which is unchanged from the linked quarter and resulted in a coverage ratio of 1.04%. Further, we reported a provision for taxes of $17 million during the quarter, resulting in an effective tax rate of 21.5%.

For 2026, I am forecasting that expenses will increase by between 3% and 3.5% from our 2025 normalized expenses, and I anticipate that our first quarter normalized non-interest expense will be approximately $113 million. The first quarter generally tends to be elevated as compared to the rest of the year due to seasonal payroll taxes and incentive-related charges. During the quarter, we also recorded a provision for credit losses of $2.5 million, which is unchanged from the linked quarter and resulted in a coverage ratio of 1.04%. Further, we reported a provision for taxes of $17 million during the quarter, resulting in an effective tax rate of 21.5%.

Speaker #1: The first quarter generally tends to be elevated as compared to the rest of the year, due to seasonal payroll taxes and incentive-related charges. During the quarter, we also recorded a provision for credit losses of $2.5 million, which is unchanged from the linked quarter and resulted in a coverage ratio of 1.04%.

Speaker #1: Further, we reported a provision for taxes of $17 million during the quarter, resulting in an effective tax rate of 21.5%. I anticipate that our tax rate will be closer to 23% in 2026, due to the impact from forecasts to discrete items.

Brad Satenberg: I anticipate that our tax rate will be closer to 23% in 2026 due to the impact from forecasted discrete items. Our capital ratios remained above the well-capitalized regulatory thresholds during the quarter, with Tier one capital and total risk-based capital improving to 14.5% and 15.5% respectively. Consistent with the linked quarter, we paid dividends of $28 million on our common stock and $5.3 million on our preferreds. We resumed our stock repurchase program in Q4 and purchased approximately $5 million of common shares at an average price of $65 per share. I'm currently planning to increase the level of our repurchases next quarter. At the end of the year, $121 million remained available under the current plan.

I anticipate that our tax rate will be closer to 23% in 2026 due to the impact from forecasted discrete items. Our capital ratios remained above the well-capitalized regulatory thresholds during the quarter, with Tier one capital and total risk-based capital improving to 14.5% and 15.5% respectively. Consistent with the linked quarter, we paid dividends of $28 million on our common stock and $5.3 million on our preferreds. We resumed our stock repurchase program in Q4 and purchased approximately $5 million of common shares at an average price of $65 per share. I'm currently planning to increase the level of our repurchases next quarter. At the end of the year, $121 million remained available under the current plan.

Speaker #1: Our capital ratios remained above the well-capitalized regulatory thresholds during the quarter, with Tier 1 capital and total risk-based capital improving to 14.5% and 15.5%, respectively.

Speaker #1: And, consistent with the linked quarter, we paid dividends of $28 million on our common stock and $5.3 million on our preferreds. Plus, we resumed our stock repurchase program in the fourth quarter and purchased approximately $5 million of common shares at an average price of $65 per share.

Speaker #1: I am currently planning to increase the level of our repurchases next quarter. At the end of the year, $121 million remained available under the current plan.

Speaker #1: Finally, our board declared a dividend of $0.70 per common share that will be paid during the first quarter. Now, I'll turn the call back over to

Brad Satenberg: Finally, our board declared a dividend of $0.70 per common share that we paid during Q1. Now I'll turn the call back over to Peter.

Finally, our board declared a dividend of $0.70 per common share that we paid during Q1. Now I'll turn the call back over to Peter.

Speaker #1: Peter. Thanks, Brad.

Peter Ho: Thanks, Brad. This concludes our prepared remarks. Now we'd be happy to take whatever questions you might have.

Speaker #2: This concludes our prepared remarks. Now, I'd be happy to take whatever questions you might have.

Speaker #2: This concludes our prepared remarks. Now, I'd be happy to take whatever questions you might have. Answer session.

Operator: Q&A session. As a reminder, to ask a question, you'll need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Now, our first question comes from the line of Matthew Clark of Piper Sandler. Your line is now open.

Speaker #3: As a reminder, to ask a question, you will need to press *11 on your telephone and wait for your name to be announced.

Speaker #3: To withdraw your question, please press star 1-1 to compile the Q&A roster. Now, our first question concerns the line of Matthew Clark of Piper Sandler. Your line is now open.

Speaker #3: open. Hey, good morning

[Analyst] (Piper Sandler): Hey, good morning, everyone.

Matthew Clark: Hey, good morning, everyone.

Speaker #5: Good everyone.

Speaker #5: Morning. Just want to start on the

Peter Ho: Morning.

[Analyst] (Piper Sandler): Just want to start on the non-interest bearing deposit growth this quarter. Good to see some strength there. Sounds like less mix shift, you know, people seeking higher rate, probably some seasonality too. But just, can you just drill down on that, those balances there at the end of the year, whether or not that's sticky and, what your outlook is for growth, this year?

Matthew Clark: Just want to start on the non-interest bearing deposit growth this quarter. Good to see some strength there. Sounds like less mix shift, you know, people seeking higher rate, probably some seasonality too. But just, can you just drill down on that, those balances there at the end of the year, whether or not that's sticky and, what your outlook is for growth, this year?

Speaker #4: non-interest bearing deposit growth this quarter. good to see some strength there. sounds like less mixed shift, you know, people seeking higher rate, probably some seasonality too, but just can you just drill down on that, those balances there at the end of the year, whether or not that's sticky and, what you're, what your outlook is for growth, this year?

Speaker #5: Yeah, man, I think the fourth quarter might be a bit outsized. I mean, it was a 6% pickup in NIBD, but I think, directionally, we've seen growth in that category for a few quarters now, and that's coming from a pretty balanced grouping of business segments participating.

Peter Ho: Yeah, Matt, I think, I think, the fourth quarter might be a bit outsized. I mean, it was a 6% pickup in NIBD, but I think directionally, we've seen growth in, in that category for a few quarters now, and that's coming from a pretty balanced, grouping of, of business segments participating. So commercial, our consumer folks are doing a good job bringing in sticky, low-cost deposits. So we would anticipate this probably continuing, would be my sense, but probably not at that same clip of 6, you know, 6+% . That's probably a little bit overstated. And I think there's probably some seasonality in there, as you, as you alluded to.

Speaker #5: So commercial, our consumer folks are doing a good job bringing in sticky low-cost deposits. So we would anticipate this probably continuing would be my sense, but probably not at that same clip of six, you know, 6 plus percent.

Speaker #5: That's probably a little bit overstated. And I think there's probably some seasonality in there, as you alluded.

Speaker #5: to. Okay, great.

[Analyst] (Piper Sandler): Okay, great. And then on the loan side, pretty much in line. Anything you're seeing there in the pipeline that would suggest... I know you'd, you know, ideally like to get back to mid-single digits. I don't know if that's realistic this year or not, but just want to get a sense for the pipeline and your outlook there, too.

Matthew Clark: Okay, great. And then on the loan side, pretty much in line. Anything you're seeing there in the pipeline that would suggest... I know you'd, you know, ideally like to get back to mid-single digits. I don't know if that's realistic this year or not, but just want to get a sense for the pipeline and your outlook there, too.

Speaker #4: And then on the loan side, pretty much in line. Anything you're seeing there in the pipeline that would suggest any—you know, ideally, like to get back to mid-single digits?

Speaker #4: I don't know if that's realistic this year or not, but I just want to get a sense for the pipeline and your outlook there.

Speaker #4: too. I'll let Jim cover that.

Peter Ho: I'll let Jim cover that. Jim?

Speaker #2: Yeah, I feel generally better about where our pipelines are at, but until we can get both consumer and commercial kind of both contributing to growth, I think we'd probably stick in the mid-single digits, you know, in the low-single digits at this point.

Brad Satenberg: Yeah, I feel generally better about where our pipelines are at, but until we can get both consumer and commercial kind of both contributing to growth, I think we'd probably stick in the mid-single dig- you know, in the low single digits at this point. But I think there's opportunity to improve as we work throughout the year.

James Polk: Yeah, I feel generally better about where our pipelines are at, but until we can get both consumer and commercial kind of both contributing to growth, I think we'd probably stick in the mid-single dig- you know, in the low single digits at this point. But I think there's opportunity to improve as we work throughout the year.

Speaker #2: But I think there's opportunity to improve as we

Speaker #2: But I think there's opportunity to improve as we work throughout the year. Yeah.

Speaker #4: But I mean, I think, to be clear, the, you know, '25 was basically—it was a flat year from an end-of-period standpoint, year on year.

Peter Ho: Yeah, but I mean, I think to be clear, you know, 25 was basically, it was a flat year from an end of period standpoint, year-on-year. So I think that 26, at least from our forward vision into at least the Q1, feels like it's going to be more of a, kind of a mid-single digit type of year for us. So, you know, a bit of an improvement, but still, you know, we still love to see growth accelerate there, obviously.

Speaker #4: So I think that '26, at least from our forward vision into at least the first quarter, feels like it's going to be more of a kind of mid-single-digit type of year for us.

Speaker #4: So, you know, a bit of an improvement, but still, you know, we still love to see growth accelerate there, obviously. Okay, great.

[Analyst] (Piper Sandler): Okay, great. And then just last one for me. Do you happen to have the, your special mention in classified balances at the end of the year?

Matthew Clark: Okay, great. And then just last one for me. Do you happen to have the, your special mention in classified balances at the end of the year?

Speaker #4: And then just last one for me, do you happen to have your special mention in classified balances at the end of the—

Speaker #4: year? I

Brad Shairson: I will take a look and see if I can get that for you. I don't have that offhand.

Speaker #5: I will take a look and see if I can get that for you. I don't have that offhand. Yep.

Speaker #4: I might come back to you.

Peter Ho: Might come back to you in a-

Brad Shairson: Yep

Speaker #4: A minute or so on that. Great, okay.

Peter Ho: A minute or so on that.

[Analyst] (Piper Sandler): Okay. Great. Thanks.

Matthew Clark: Okay. Great. Thanks.

Speaker #4: thanks. All right, for our

Operator: Waiting for our next question. Our next question comes on the line of Jeff Rulis of D.A. Davidson. Your line is now open.

Speaker #3: Next question. And our next question concerns the line of Jeff Ruiz of D.A. Davidson. Your line is now open.

Speaker #5: Thanks. Good morning. A couple questions on the margin—I just want to confirm that kind of update on the margin to reach near the 2.90 range.

Jeff Rulis: Thanks. Good morning. A couple of questions on the margin. I just want to confirm that kind of update on the margin to reach near the 2.90 range. That's a kind of end of year, not a fourth quarter average of 2.90. Is that correct?

Speaker #5: That's a kind of end-of-year, not a, not a fourth-quarter average of, of 290. Is that, is that correct?

Speaker #4: That's where we're thinking about it, Jeff.

Peter Ho: That's, that's the way we're thinking about it, Jeff. That's right.

Speaker #4: That's right. Okay.

Jeff Rulis: Okay. Okay, and do you happen to have the December margin average?

Speaker #5: Okay. And do you happen to have the December margin average?

Speaker #3: Yeah, we finished the year at 2.67, so about six basis points above where we, you know, finished the

Brad Satenberg: Yeah, we finished the year at 267, so about 6 basis points above where we, you know, finished the fourth quarter at.

Speaker #3: fourth quarter at. Great.

Jeff Rulis: Great. And just on the sensitivity, it seems like that margin has been almost absent, Fed hasn't really impacted. It's kind of a mechanical increase. Would you say the same sensitivities or lack thereof? It's a pretty, from your seat, looks like a pretty extended increase, I guess, regardless of rate moves upcoming.

Speaker #5: And just on the sensitivity, it seems like that margin has been almost absent—Fed hasn't really impacted. It's kind of a mechanical increase.

Speaker #5: Do you would you say the same sensitivities or, or lack thereof? It, it, it's a pretty from, from your seat looks like a pretty extended increase I guess regardless of, of rate, moves.

Speaker #5: Upcoming?

Speaker #3: Yeah, I would agree with that. I mean, I would say that any rate cuts that we see, as long as they're orderly and sort of telegraphed, I think we'll see a benefit from that.

Brad Satenberg: Yeah, I, I would agree with that. I mean, I would say that any rate cuts that we see, as long as they're orderly and sort of telegraphed, I think, you know, we'll see a benefit from that. And then also, you know, you look at the mix shifts and to the extent that we can keep that either moderated at, you know, breakeven or even positive, I think that'll actually contribute to margin as well.

Speaker #3: And then also, you know, you look at the mixed shifts, and to the extent that we can keep that either moderated at, you know, break-even or even positive, I think that'll actually contribute to margin as well.

Speaker #4: Yeah. And let me and let me just a-add a little bit to that, Jeff. I think, you know, what, what you saw in the quarter, was the convergence of, of a number of things that were supportive of the margin expansion.

Peter Ho: Yeah. Now, let me just add a little bit to that, Jeff. I think, you know, what you saw in the quarter was the convergence of a number of things that were supportive of the margin expansion. Obviously, as you pointed to, the fixed asset repricing is mechanical. I mean, we just have assets coming off at lower yields than they're going back onto, which is a good thing, obviously. But, you know, rate cuts did have a positive impact for us. To the extent we get rate cuts moving forward, we think that's going to continue to be a positive for us. And then also in the quarter, we had very strong, as you know, we had strong deposit remix characteristics, so we're able to grow out the lower yielding NIVD, in particular, deposits.

Speaker #4: You know, obviously, as you pointed to, the fixed asset repricing is mechanical. I mean, we just have assets coming off at lower yields and they're going back on to higher yields, which is a good thing, obviously.

Speaker #4: But, you know, rate cuts did have a positive impact for us to the extent we get rate cuts moving forward. We think that's going to continue to be a positive for us.

Speaker #4: And then also, in the quarter, we had very strong—as you know, we had strong deposit remix characteristics. So we were able to grow out the lower-yielding NIBD, in particular, deposits.

Speaker #4: And if that continues to persist, that'll be another tailwind for us. And then finally, I'd say that I think that, you know, certainly, effectively, there have been two rate cut periods, '24 and '25.

Peter Ho: And if that continues to persist, that'll be another tailwind for us. And then finally, I'd say that I think that, you know, certainly the fact that we have been two, you know, rate cut periods, 2024 and 2025, I'd say that our ability to manage deposit pricing with the 2025 vintage was materially better than 2024. So I think the team's gotten better at managing, you know, a little more of a rate reduction cycle, and that's coming through on our betas.

And if that continues to persist, that'll be another tailwind for us. And then finally, I'd say that I think that, you know, certainly the fact that we have been two, you know, rate cut periods, 2024 and 2025, I'd say that our ability to manage deposit pricing with the 2025 vintage was materially better than 2024. So I think the team's gotten better at managing, you know, a little more of a rate reduction cycle, and that's coming through on our betas.

Speaker #4: I'd say that our ability to manage deposit pricing with the '25 vintage was materially better than '24. So I think the team's gotten better at managing a little more of a rate reduction cycle.

Speaker #4: And that's coming through on our—on our

Speaker #4: betas. Got it.

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Q4 2025 Bank of Hawaii Corporation Earnings Call

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