Bank of Hawai‘i Q1 Margin Grows Amid Mixed Economic Signals

HONOLULU, HI – April 03, 2026 – Bank of Hawai‘i Corporation (NYSE: BOH) presented a nuanced financial picture for the first quarter of 2026, characterized by strengthening core profitability even as headline earnings per share fell short of some analyst expectations. The regional financial stalwart reported improved net interest income and an expanding net interest margin, signaling effective management amid shifting economic tides, while also reaffirming its commitment to shareholders with the declaration of its regular preferred stock dividends.

For the quarter ending March 31, 2026, the bank announced diluted earnings per common share of $1.30 on a net income of $57.4 million. While this represents a decrease from the strong finish in the previous quarter, which saw an EPS of $1.39, the underlying operational trends point toward a solid start to the year. The results come as the institution navigates a complex local economy marked by both resilience and signs of moderation.

A Deeper Dive into the Quarter

Bank of Hawai‘i's first-quarter performance was largely driven by its core lending and deposit activities. Net interest income rose to $151.0 million, a 3.9% increase from the fourth quarter of 2025. This growth helped fuel an expansion of the net interest margin (NIM) to 2.74%, up 13 basis points from the linked quarter. This improvement is significant as it suggests the bank is successfully managing its funding costs, a critical task for financial institutions. The average quarterly cost of total deposits fell by 17 basis points to 1.26%, a direct benefit from the stabilization and subsequent cuts in interest rates seen in late 2025.

In a statement, President and CEO Jim Polk noted the bank's positive start to the year. "Bank of Hawai‘i began the year on firm footing, demonstrating the strength and resilience of our franchise," he said. Polk highlighted the "continued improvement in net interest income and net interest margin, supported by our disciplined balance sheet management and a stable deposit base."

On the balance sheet, total loans and leases grew by a modest 0.8% to $14.2 billion. However, total deposits saw a slight contraction of 1.1%, ending the quarter at $21.0 billion. The bank's return on average common equity (ROCE), a key measure of profitability, stood at a healthy 13.90%, though down from the 15.03% reported in the prior quarter.

Navigating Hawaiʻi's Economic Crosscurrents

The bank's performance cannot be viewed in a vacuum; it is intrinsically linked to the economic health of Hawaiʻi and the West Pacific. The first quarter of 2026 saw the state grappling with a multifaceted economic environment. On one hand, the labor market remained solid, with low unemployment rates and rising incomes providing a stable foundation for consumers. On the other hand, key sectors showed signs of cooling.

The vital tourism industry, a cornerstone of the state's economy, has presented a mixed picture. While visitor spending has increased—suggesting a shift toward a higher-spending demographic—the actual number of visitor arrivals has softened, remaining below pre-pandemic levels. This trend has direct implications for businesses across the islands, from hospitality to retail, which form a significant portion of the bank's commercial client base.

Similarly, the real estate market is sending varied signals. After a period of rapid appreciation, prices have begun to level off, with some segments experiencing modest downward adjustments from their recent peaks. While sales volume in the Honolulu metro area saw a seasonal increase in the first quarter, overall transaction volumes remain below the prior year. For Bank of Hawai‘i, which has a substantial portion of its loan portfolio secured by real estate, the stability of this market is paramount. The bank has consistently reported pristine credit quality, indicating it has thus far navigated this environment without significant distress.

This backdrop of a resilient but moderating economy, with some analysts from the University of Hawaiʻi Economic Research Organization (UHERO) even warning of a potential mild recession, makes the bank's ability to grow its core interest income all the more noteworthy.

Dividends Signal Confidence

For income-focused investors, a key highlight of the bank's announcement was the board's decision to declare quarterly dividends on its preferred stock. The board approved a dividend of $10.94 per share for its Series A preferred stock and $20.00 per share for its Series B preferred stock. These dividends are payable on May 1, 2026, to shareholders of record as of April 16, 2026.

The consistent payment of preferred dividends is widely seen as a signal of a company's financial stability and management's confidence in its future earnings power. For a bank, it reinforces the perception of a strong capital base and prudent risk management. This action continues Bank of Hawai‘i's long-standing policy of returning capital to its shareholders, which includes an uninterrupted history of paying common stock dividends for over 50 consecutive years, a testament to its enduring presence and stability in the region.

The Competitive Landscape

Bank of Hawai‘i operates in a competitive regional market, with First Hawaiian Bank (FHB) and Central Pacific Bank (CPF) as its primary peers. A comparative look at the first quarter shows a dynamic banking environment. Both FHB and CPF reported higher net interest margins in Q1 2026, at 3.19% and 3.53% respectively, compared to BOH's 2.74%. This suggests varying strategies in asset and liability management among the state's leading banks.

In terms of profitability, First Hawaiian Bank reported a higher net income of $67.8 million, while Central Pacific Bank, a smaller institution, posted net income of $20.7 million. All three banks demonstrated loan growth and maintained strong credit quality, indicating a generally healthy and competitive banking sector in Hawaiʻi. Bank of Hawai‘i's return on common equity of 13.90% was identical to that of Central Pacific Bank, showing it is generating strong returns for its shareholders relative to its peers.

Ultimately, Bank of Hawai‘i's first quarter results tell a story of a mature, disciplined institution leveraging its market position to build core profitability. While facing the same economic headwinds as its competitors, the bank's ability to expand its net interest margin and maintain its commitment to shareholder returns underscores a strategy focused on long-term stability and resilience.