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BO

BANK OF HAWAII CORP (BOH)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered solid operating performance: diluted EPS of $1.20 (+13% QoQ, +29% YoY) and sixth consecutive NIM expansion to 2.46%; credit quality remained pristine (NCOs 7 bps annualized; NPAs 0.12%) .
  • EPS beat consensus by roughly 2% ($1.20 vs $1.176*), while revenue was essentially in line to slightly below ($180.1M* actual vs $181.3M* estimate); drivers were fixed asset repricing (+$3.3M to NII) and lower deposit costs, partially offset by mix shift (-$0.8M NII) .
  • Management expects continued NIM expansion into Q4 and 2026, aided by CD repricing and balance sheet swaps; Q4 normalized noninterest income guided to $42–$43M and noninterest expense to ~$109M .
  • Strategic actions: sale of merchant services and AFS securities repositioning add ~+$0.9M quarterly to PPNR and ~+$0.02 EPS, improving securities spread ~335 bps; Board declared $0.70 dividend .
  • Potential catalysts: likely share repurchases in Q4/2026, ongoing wealth platform modernization (Cetera/“Bankoh Advisors”) targeting improved advisor count and client experience .

What Went Well and What Went Wrong

What Went Well

  • Sixth straight quarter of NIM expansion (2.46%, +7 bps QoQ) and NII growth (+$7.0M QoQ), driven by fixed asset repricing and deposit cost declines; “we remixed $594 million … from a roll-off rate of 4.1% into a roll-on rate of 6.3%” .
  • Credit quality remained “pristine”: NPAs 0.12% (down 1 bp QoQ, 2 bps YoY), NCOs 7 bps annualized (flat QoQ, -4 bps YoY); criticized loans fell to 2.05% of loans with 83% secured (WALTV 55%) .
  • Strategic portfolio actions accretive: merchant services sale and AFS repositioning yield ~+$1.0M quarterly pre-tax and ~+$0.02 EPS, raising quarterly NII by ~+$1.7M via 335 bps spread improvement on new securities .

What Went Wrong

  • Deposit mix shift continued to be a modest headwind (-$0.8M to NII in Q3), and noninterest expense included $2.1M severance, raising OpEx QoQ .
  • Revenue was near/just shy of consensus ($180.1M* actual vs $181.3M* estimate), despite strong NII; noninterest income included a $0.8M Visa Class B charge .
  • NIBD share declined to 25.6% (from 26.1% in Q2), and management noted two Fed cuts would be a short-term NII headwind (~-$0.3M per 25 bps), albeit turning positive longer-term (+$1.6M per 25 bps) .

Financial Results

EPS and Revenue vs Prior Periods and Estimates

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Diluted EPS ($)$0.93 $0.97 $1.06 $1.20
EPS Consensus Mean ($)n/a$0.891*$1.056*$1.176*
EPS vs Consensusn/aBeat by $0.079*Beat by $0.004*Beat by $0.024*
Revenue (S&P GAAP/operating, $USD Millions)n/a$166.6*$171.2*$180.1*
Revenue Consensus Mean ($USD Millions)n/a$169.3*$177.9*$181.3*
Revenue vs Consensusn/aMiss by $2.7*Miss by $6.7*Miss by $1.2*

Values retrieved from S&P Global.*

Components and Margins (Company-reported)

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Net Interest Income ($MM)$117.6 $125.8 $129.7 $136.7
Noninterest Income ($MM)$45.1 $44.1 $44.8 $46.0
Efficiency Ratio (%)65.81 65.03 63.49 61.53
Net Interest Margin (%)2.18 2.32 2.39 2.46
ROACE (%)9.90 10.65 11.21 12.10

KPIs and Balance Sheet/Asset Quality

MetricQ3 2024Q2 2025Q3 2025
Total Assets ($MM)$23,799 $23,710 $24,015
Total Loans & Leases ($MM)$13,919 $14,002 $14,022
Total Deposits ($MM)$20,978 $20,799 $21,081
NIBD (% deposits)25.8% 26.1% 25.6%
NPAs ($MM)$19.781 $17.881 $16.864
NPAs / Loans+OREO (%)0.14% 0.13% 0.12%
Net Charge-offs ($MM)$3.830 $2.618 $2.577
NCOs / Avg Loans (annualized, %)0.11% 0.07% 0.07%
ACL ($MM)$147.331 $148.543 $148.778
ACL / Loans (%)1.06% 1.06% 1.06%

Segment Results (Q3)

Metric ($000s)Consumer BankingCommercial BankingTreasury & OtherConsolidated
Q3 2025 Net Interest Income$95,948 $54,196 $(13,469) $136,675
Q3 2025 Noninterest Income$33,870 $9,550 $2,546 $45,966
Q3 2025 Noninterest Expense$87,122 $19,258 $6,007 $112,387
Q3 2025 Net Income$29,918 $33,091 $(9,664) $53,345
Q3 2024 Net Income$32,993 $28,929 $(21,564) $40,358

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Noninterest Income ($MM, normalized)Q4 2025Not provided$42–$43 New
Noninterest Expense ($MM, normalized)Q4 2025Not provided~$109 New
Effective Tax Rate (%)FY 2025Not provided21.0–21.5 New
EPS impact from merchant services + AFS repositioningOngoing quarterlyNot provided~+$0.02/share New
NII sensitivity per 25 bps Fed cutNear-term vs LTNot provided~-$0.3M ST; +$1.6M LT New
Dividend per common shareQ4 2025$0.70 (prior cadence)$0.70 declared Maintained
BuybacksQ4 2025/2026Not provided“likely … this quarter and into next year” New qualitative

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
NIM trajectoryQ1/Q2: NIM expanded 2.32%→2.39% on deposit cost declines and fixed asset repricing Sixth consecutive expansion to 2.46%; base case ~+25 bps per year with upside as Fed funds declines Improving
Deposit costs/mixQ1: avg total deposit rate 1.60%; Q2: 1.60%; mix shift slowing Q3: avg total deposit rate 1.59%; spot deposit rate 1.54%; mix shift still a modest NII headwind Slight improvement; residual headwind
Credit quality/CREQ1/Q2: NPAs ~0.12–0.13%; diversified CRE with low WALTVs NPAs 0.12%; 83% criticized secured, WALTV 55%; CBD office exposure reduced Stable/strong
Balance sheet optimizationQ1/Q2: active securities management; swaps supporting fixed-to-float balance Terminated $1B swaps; added $200M new swaps; total pay-fixed swaps $1.4B; fixed/floating ratio to 57% Ongoing optimization
Wealth/technologyQ1/Q2: groundwork for wealth investment In production with Cetera; advisor count expected to grow; better client experience (Bankoh Advisors) Accelerating execution
Capital & shareholder returnsQ1/Q2: $0.70 dividend; no buybacks; strong Tier 1 Dividend maintained; management signals likely buybacks; Tier 1 14.34% Potential buyback tailwind

Management Commentary

  • Peter Ho (CEO): “We remixed $594 million in fixed-rate loans and investments from a roll-off rate of 4.1% and into a roll-on rate of 6.3%, helping to improve net interest margin…We anticipate NIM to expand further for a number of quarters” .
  • Brad Shairson (CRO): “Credit metrics have actually improved…Net charge-offs were just $2.6 million at seven basis points annualized…Non-performing assets…12 basis points” .
  • Brad Satenberg (CFO): “Noninterest income…adjusting for normalizing items, increased by $2.8 million…Q4 normalized noninterest income will be between $42 and $43 million…Q4 normalized noninterest expense ~ $109 million” .
  • Peter Ho (CEO): Wealth initiative: “We are in production with Saterra…The new platform…will help us delight both clients and prospective advisors…we have been adding…talent in the advisory space” .
  • Capital return: “We think there’s a great opportunity to deploy capital into repurchases…likely…this quarter and into next year” .

Q&A Highlights

  • Deposits: spot total deposit rate 1.54%; CD spot rate 3.32% with >52% maturing in next three months expected to reprice down to ~2.5–3% .
  • NIM outlook: Base case ~+25 bps per year; upside from lower Fed funds and deposit repricing; discussion of potential path toward 3% NIM over time .
  • Loan growth: Low single-digit growth outlook affirmed; pipelines improving Q2→Q3→Q4 .
  • Expenses: 2026 OpEx growth modeled in “3+%” range; Q1 seasonally higher due to payroll .
  • Swaps: Maintain ~$1.4B notional; forward swaps staged into 2026; optimization expected to continue .
  • CRE office: Reduced CBD office exposure by exiting a relationship SNC facility; improved risk posture .

Estimates Context

  • EPS beat: $1.20 actual vs $1.176* consensus; roughly +2% surprise, with # of EPS estimates = 6* (Q3 2025) and sustained upward trajectory across 2025 [GetEstimates].
  • Revenue near-line: $180.1M* actual vs $181.3M* consensus; modest miss, likely reflecting the Visa charge and timing/mix effects in noninterest income despite strong NII [GetEstimates].
  • Prior quarters: Q2 EPS $1.06 vs $1.056* (beat); revenue $171.2M* vs $177.9* (miss); Q1 EPS $0.97 vs $0.891* (beat); revenue $166.6M* vs $169.3* (miss) [GetEstimates].

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Core engine strengthening: NII/NIM momentum remains intact, underpinned by fixed asset repricing, swap optimization, and declining deposit costs; expect further NIM expansion into 2026 .
  • Credit safety valve: Exceptionally low NPAs/NCOs and diversified, low-LTV CRE portfolio reduce downside tail risk, supporting valuation resilience .
  • Tactical portfolio actions accretive: Merchant services sale and securities repositioning immediately lift quarterly PPNR and EPS; monitor Q4 carry-through .
  • Capital return optionality: Strong Tier 1 (14.34%) and explicit buyback commentary create potential positive stock catalysts in Q4/2026; dividend maintained .
  • Wealth strategy execution: Cetera/Bankoh Advisors modernization, advisor hiring, and cross-sell focus may add fee stability over time, diversifying revenue mix .
  • Model updates: Raise near-term EPS on NIM trajectory and PPNR accretion; trim revenue where noninterest items (Visa charge, merchant services sale) reduce run-rate; incorporate Q4 guidance for OpEx and noninterest income .
  • Macro sensitivity: Two 25 bps cuts are a short-term NII headwind but become tailwinds post-CD repricing; track deposit beta/spot rates and swap laddering .