BANK OF HAWAII CORPORATION (BOH): what the price assumes

In the published model solve dated 2026-Q2, anchored at $79.95, BANK OF HAWAII CORPORATION (BOH) is priced for 14.5% return on equity. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/BOH

Headline

FieldValue
TickerBOH
CompanyBANK OF HAWAII CORPORATION
Sector / IndustryFinancial Services
Current price$79.95/sh

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisfinancials
Price-to-book1.71x
Return on equity now10.0%

The implied return on book is non-physical at this price-to-book and is suppressed as misleading. The price sits beyond a 13.2% return on equity sustained for 40 years and is not resolvable as a sustainable-ROE point. The rarity read below is the honest signal.

Solve inputs: computed at a 10.2% cost of equity; ROE searched up to the 13.2% ROE ceiling.

How unusual the bet is: extreme

ReferenceValue
vs own history-0.18σ
cohort percentile (of 163 peers)80
sustained it ~10 years at this level62%
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.20x3expensive
Earnings1.00x2justifies
Relative0.46x3justifies
Growth0.88x2justifies

Families that justify the price: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.4%); the inversion above states its own rate.

Per-Model Detail (n=10)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
Bank Fair Value (P/TBV)—$67.661.18xyesTBVPS $45.60 × 1.48x (ROE (TTM) 11.8% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption), credit 1.05% allowance/loans → ×0.92)
Relative ValuationRelative$64.501.24xyesP/E 10x (static sector reference · 2026-04), scenarios: 8.2x / 10.0x / 11.8x (bear / base = reference held flat / bull), EV/EBITDA N/Ax
Simple DDMGrowth——no—
Two-Stage DDMGrowth$100.520.80xyesStage 1: 20% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$59.311.35xyesBV/sh $46.39, ROE (TTM) 11.8%, ke 9.3%
Two-Stage Excess ReturnAsset$66.701.20xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$83.200.96xyesRev $0.6B, growth 18% (input: historical growth; tapered), Terminal P/S: 4.7x / 5.7x / 6.7x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair ValueRelative$173.600.46xyesEPS $4.96, growth 35% (input: historical EPS growth), PEG=0.42 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset——no—
Graham NumberAsset$71.951.11xyes√(22.5 × EPS $4.96 × BVPS $46.39) — Graham's conservative floor
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$160.040.50xyesEPS $4.96 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative——no—
PEG Fair ValueRelative$186.000.43xyesEPS $4.96 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$53.621.49xyesEPS $4.96 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Share count CAGR (dilution)0.0%

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

Bull Case

Roughly sixty-four cents of every dollar this bank earns goes back out the door as dividends and buybacks, and the share count has not moved in four years. That combination tells you what management believes about its own growth opportunities, and it happens to be an honest belief. A bank whose lending is concentrated in one island economy cannot reinvest capital indefinitely without either lowering its credit standards or buying something on the mainland. So it pays the money out. The dividend has been the most conspicuous part of that: "We maintained a quarterly dividend of $0.70 per common share throughout 2025 and 2024."

Restraint on the balance sheet is the reason the payout is affordable. Credit costs here are not merely good, they are close to invisible. The annual report records that "Net charge-offs of loans and leases were $13.7 million or 0.10% of total average loans and leases in 2025 compared to $12.9 million or 0.09% of total" average loans a year earlier. A tenth of a percent is the kind of loss rate that only shows up where underwriting is conservative and the borrower base is known personally, which in a market this size it largely is.

The commercial franchise has been the engine underneath that discipline. Segment results for 2025 show "Net income increased by $22.7 million or 19% in 2025 compared to the prior year, primarily due to an increase in net interest income and noninterest income, and a decrease in noninterest expense." Three favourable lines at once is unusual. It also points at the mechanism a bull is relying on: the securities book has been rolling out of low-yielding vintages and into current rates, which lifts interest income without requiring a single new loan. That process runs on its own schedule and does not need the Hawai‘i economy to cooperate.

The margin trend has followed. Net interest margin reached 2.74% in the first quarter of 2026, an improvement of thirteen basis points, while net income for the quarter came in at 57.4 million dollars. For a bank, thirteen basis points of margin on a balance sheet this size is not a rounding error; it is the difference between a flat year and a growing one.

Set against the cohort, the argument is about quality rather than pace. SSB grew revenue 43.6% over the trailing year to 2.32 billion dollars and GBCI grew 32.9% to 968 million dollars, both far faster than a bank confined to one island chain can grow organically. What those numbers do not carry is a hundred and thirty years of deposit relationships in a market where the number of serious competitors can be counted on one hand. The bull case here has never been growth. It is that the deposit franchise is close to unrepeatable and the credit book keeps proving it.

Bear Case

Read the deposit sentence in the annual report slowly, because one word in it is doing a great deal of work: "Our core deposits have historically provided us with a long-term source of stable and low-cost source of funding." Historically. The whole premium this stock carries rests on that funding advantage continuing, and the composition of the deposit base has been quietly changing. Consumer balances barely moved last year, and the movement inside them was churn rather than growth: "Consumer deposits increased by $68.8 million due to increases of $185.2 million in savings deposits and $47.2 million in noninterest-bearing deposits, partially offset by a decrease of $163.6 million in time deposits and interest-bearing demand deposits." A franchise that once gathered free money now shuffles it between buckets.

Meanwhile a growing slice of the funding is not really core at all. The 10-K discloses that "As of December 31, 2025 and 2024, deposits of governmental entities of $ 2.1 billion and $ 1.9 billion, respectively, required collateralization by acceptable investment securities of the Company." Public money is rate-sensitive, it moves on a bidding calendar rather than a relationship, and every dollar of it ties up securities that could otherwise be sold. Calling that a low-cost core deposit stretches the term.

The asset side concentrates the same economy the funding does. Commercial real estate here is "well diversified among property types, with primary concentrations in multi-family, industrial, retail and lodging". Lodging is tourism, retail in Hawai‘i is substantially tourism, and multi-family rents in the islands depend on the employment tourism supports. Diversification across property types is not diversification when the properties share one demand driver.

Which brings the argument to what the price requires. At about 1.8 times book, the highest price-to-book in its peer group, the market is paying for performance beyond the 13.2% ceiling that only the elite tier of banks has held across forty years. On trailing earnings measured against total book equity, this bank has recently been earning about 10%. That gap is the entire bear case in one line, and the arithmetic of a bank makes the consequence mechanical: the price-to-book a bank supports is a function of the return it earns on that book, so if the return settles where it has been rather than climbing past the elite threshold, the multiple compresses toward the peer group rather than the peer group rising to meet it. Even among banks that have reached this level of return, only about 59% held it for a decade.

The near-term evidence is not pointing the right way either. First-quarter net income fell 5.7% against the prior quarter while noninterest expense rose 6.0% to 116.1 million dollars. Costs climbing faster than earnings is the ordinary shape of a franchise defending its position rather than extending it.

Valuation

A bank's valuation question is narrower than most companies': what return does it earn on the equity it holds, and what is the market paying for that return. The answer to the second half is about 1.8 times book, which is the top of this peer group. The answer to the first half is a return on equity around 10% on trailing earnings against total book equity. Those two figures do not sit together comfortably. Working backwards from the price does not produce a clean required return at all; it produces a bound, and the bound sits beyond the 13.2% level that only the strongest banks have sustained across forty years. The price is not asking for a good bank. It is asking for one that outruns the historical ceiling of the category.

The methods used to triangulate split along a revealing line. The approaches that treat this as a bank, valuing it on tangible book adjusted for the return actually earned and on the excess of that return over the cost of capital, all land below today's price. The approaches that treat it as a generic equity compounding recent earnings growth land above it. The disagreement is not really about valuation technique. It is about whether a rebound in earnings off a rate-cycle trough is a growth rate, and for a bank in a fixed geography it usually is not.

Book quality is at least not in question. The 10-K reports that "As of December 31, 2025, shareholders' equity was $1.9 billion, an increase of $183.4 million or 11.0% from the prior year", and the commercial book behind it is written to a stated standard: "Commercial mortgage loans are secured by first mortgages on commercial real estate at loan-to-value ratios generally not exceeding 75%." An eleven percent increase in equity while paying out roughly 63.8% of earnings as dividends and buybacks is a genuinely strong year of capital formation.

That payout figure is the right lens for a bank rather than any coverage or leverage arithmetic, which does not apply to a balance sheet funded by customer deposits. Returning close to two-thirds of earnings while holding the share count flat over four years means the capital base is growing off retained earnings and securities marks rather than off issuance, and it leaves roughly a third of earnings available to absorb credit surprises or to fund loan growth if the island economy offers any.

What the premium ultimately rests on is scarcity rather than arithmetic. There is one Hawai‘i, a small number of banks in it, and a deposit base assembled over generations. Whether that is worth the highest price-to-book in the cohort depends on a return the bank has not recently produced, and the July print is the next place that question gets answered rather than argued.

Catalysts

The immediate event is dated and close. Second-quarter 2026 results are scheduled for release before the market opens on Monday, July 27, 2026, with the conference call the same afternoon, and the board separately declared its quarterly preferred stock dividends. Seven analysts carry a Q2 2026 consensus of $1.46 per share on quarterly revenue near 199.5 million dollars, an estimate that has drifted down about 2% over the past three months. A drifting estimate into a print is usually a signal about margin or credit expectations rather than about the top line.

The first quarter set the shape the second has to confirm. Net income was 57.4 million dollars, down 5.7% from the linked quarter, and net interest margin improved thirteen basis points to 2.74%. Noninterest expense rose 6.0% from the linked quarter to 116.1 million dollars. The margin is expanding and the cost base is expanding faster, which is the tension the July report will either resolve or extend.

Beyond the print, the variable with the most leverage on this bank is not on its own calendar. Hawai‘i's economy runs on visitor arrivals and the employment they support, and the loan book is written against that base. Management commentary on tourism conditions and on the pace of deposit repricing tends to matter more for the next twelve months here than any single line in the income statement.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Bank of Hawai‘i conference call announcement, July 6, 2026; consensus per Investing.com analyst survey, July 2026 · Q1 2026 results release, April 20, 2026 · Bank of Hawai‘i Corporation announcement, July 6, 2026 · Investing.com analyst survey, July 2026

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