Bank of Hawaii Corp. posted a 50.9% increase in net income during the fourth quarter and announced Monday that it will give a 5% merit raise to its rank-and-file employees this year.

Chairman, President and CEO Peter Ho said the increase is in response to rising inflation costs.

“We just think with inflation being a real number out there, we just want people to be in as good of shape as possible fiscally,” Ho said today during the bank’s earnings conference call with analysts.

The state’s second-largest bank said last quarter its net income rose to $63.8 million, or $1.55 a share, on the strength of double-digit deposit growth and the release of $9.7 million from its loan-loss reserve. Analysts were forecasting earnings per share of $1.35.

A year earlier, the bank earned $42.3 million, or $1.06 a share, when it set aside $15.2 million for potential loan losses.

“Bank of Hawaii finished 2021 with solid financial performance despite the continued impacts of the COVID-19 pandemic,” Ho said in a statement. “Core loan balances grew 6.2% in 2021 and deposits surpassed $20 billion, growing 11.8% in 2021. Overall asset quality remained good, and capital and liquidity remain strong as we finished the year. During the year, we continued making significant progress on our strategic initiatives which position us well for continued growth in the future.”

For the year, Bankoh’ earnings rose 64.7% to a record $253.4 million, or a record $6.25 a share, compared with $153.8 million, or $3.86 a share, in 2020.

Loans rose 2.7% to $12.26 billion from the year-earlier quarter. But excluding Paycheck Protection Program loans, core loans increased 6.2% from the fourth quarter of 2020.

The bank’s net interest income, which is the difference between what it generates from loans and pays out in deposits, rose 5.8% to $126.4 million. The bank’s net interest margin worsened by 14 basis points to 2.34% from 2.48% largely due to higher levels of liquidity from continued strong deposit growth and lower interest rates.

Noninterest income, which includes charges and fees, declined 5.9% to $42.6 million as mortgage banking income fell 57.6% to $2.9 million from $6.9 million.

Bankoh kept its quarterly dividend at 70 cents a share. It will be payable March 14 to shareholders of record at the close of business Feb. 28.

The bank also repurchased 87,500 shares of common stock at a total cost of $7.3 million under its share repurchase program in the fourth quarter at an average cost of $83.83 per share.

Bankoh’s shares rose 98 cents to $88.50 today after the earnings were announced.