Regional banking institution Bank of Hawaii (NYSE: BOH) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 12.2% year on year to $182.6 million. Its GAAP profit of $1.20 per share was 4% above analysts’ consensus estimates.

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StockStory’s Take

Bank of Hawaii’s third quarter was marked by a modest outperformance relative to Wall Street expectations, with management attributing the results to improved net interest margin and disciplined credit practices. CEO Peter Ho highlighted, “Net interest margin improved for the sixth straight quarter,” as deposit growth and prudent asset repricing helped offset some headwinds from deposit mix shifts. The bank’s continued dominance in its core Hawaii market, supported by a diversified and conservatively underwritten loan book, was also emphasized as a key factor in maintaining stable asset quality and driving market share gains.

Looking forward, Bank of Hawaii’s strategy centers on further net interest margin expansion, continued investment in its wealth management segment, and disciplined cost control. Management anticipates ongoing improvement in margins, with Ho noting that a 25 basis point uplift per year is possible if current conditions persist. The bank also expects to benefit from repricing its certificate of deposit portfolio and sees potential upside in loan growth if economic stability improves. The rollout of its enhanced wealth management platform is expected to strengthen cross-segment opportunities, while CFO Bradley S. Satenberg projects non-interest expenses will remain tightly managed, supporting profitability.

Key Insights from Management’s Remarks

Management attributed the quarter’s growth to sequential increases in net interest margin, strength in core deposits, and proactive asset repricing. The sale of the merchant services business and enhancements in wealth management were also highlighted as operational milestones.

• Net interest margin expansion: The bank saw its net interest margin rise for the sixth consecutive quarter, driven by successful repricing of fixed assets and a favorable deposit cost trend. Management expects this trend to continue, with further upside if interest rates decline.

• Deposit franchise strength: Average deposits increased at a 7% annualized rate, reinforcing Bank of Hawaii’s leading market share in Hawaii. CEO Peter Ho attributed this to the bank’s “dominant brand and market positions,” particularly within consumer and commercial segments.

• Conservative credit profile: Credit quality remained strong, with minimal loan losses and low nonperforming asset ratios. Chief Risk Officer Bradley Shairson emphasized a diversified, secured loan book with low average loan-to-value ratios and consistent credit standards across commercial and consumer portfolios.

• Wealth management platform upgrade: The partnership with Saterra enabled the launch of Banco Advisors, a modernized broker-dealer platform aimed at delivering enhanced technology and client experience. Management sees this as a way to capture more of the fragmented local wealth market and improve cross-selling between commercial and wealth teams.

• Merchant services divestiture: The sale of the merchant services business allowed the bank to reposition its securities portfolio, increasing net interest income by replacing low-yielding assets with higher-yielding ones. This transaction is expected to add approximately $1 million to quarterly pretax earnings.

Drivers of Future Performance

Bank of Hawaii’s outlook is shaped by anticipated net interest margin tailwinds, targeted loan growth, and the scaling of its revamped wealth management business.

• NIM and deposit strategy: Management expects continued net interest margin (NIM) expansion, driven by asset repricing and the anticipated positive impact from repricing its certificate of deposit (CD) book. CEO Peter Ho suggested that margins could rise by 25 basis points annually under current conditions, with further benefits if Federal Reserve rate cuts materialize.

• Loan growth pipeline: Low single-digit loan growth is projected, with Ho stating, “Q4 should be better than Q3, and we'll just continue to watch the pipelines as we get into the new year.” The bank believes more economic stability or interest rate reductions could unlock additional upside.

• Wealth management investments: The rollout of Banco Advisors and increased advisory hiring are central to expanding Bank of Hawaii’s presence in the local wealth segment. Management believes these investments will drive cross-segment synergies and diversify revenue streams, though upfront costs may cause slightly higher expense growth in the next year.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will monitor (1) net interest margin progression as deposit and asset repricing strategies mature, (2) the scaling and client acquisition of the Banco Advisors wealth platform, and (3) disciplined loan growth amid evolving economic conditions. Execution on expense control and the impact of the merchant services divestiture will also be important signposts.

Bank of Hawaii currently trades at $64.07, in line with $63.90 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).

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