FIRST HAWAIIAN, INC. (FHB): what the price requires

At today's price, FIRST HAWAIIAN, INC. (FHB) is priced for 11.9% return on equity. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/FHB

Headline

FieldValue
TickerFHB
CompanyFIRST HAWAIIAN, INC.
Current price$29.23/sh
CompositionRetail Banking 68% / Commercial Banking 32%

What The Price Requires (Inversion)

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

FieldValue
Inversion basisfinancials
Return on equity needed11.9%
Return on equity now10.0%
ROE gap+1.9pp
Price-to-book1.28x

Solve inputs: computed at a 10.2% cost of equity with 4% terminal growth over a 5-year stage, on common book equity (FY2026); each 1pp of cost of equity moves the implied ROE ~1.3pp.

How unusual the bet is: elevated

ReferenceValue
vs own history+2.24σ
cohort percentile (of 119 peers)42
sustained it ~10 years at this level70%
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
Asset1.11x3expensive
Earnings0.79x2justifies
Relative0.53x3justifies
Growth0.97x2justifies

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 5.0%); the inversion above states its own rate.

Per-Model Detail (n=10)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
Bank Fair Value (P/TBV)—$17.881.63xyesTBVPS $14.37 × 1.24x (ROE (TTM) 10.3% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption))
Relative ValuationRelative$25.301.16xyesP/E 10x (static sector reference · 2026-04), scenarios: 8.3x / 10.0x / 11.7x (bear / base = reference held flat / bull), EV/EBITDA N/Ax
Simple DDMGrowth——no—
Two-Stage DDMGrowth$38.050.77xyesStage 1: 20% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$24.961.17xyesBV/sh $22.44, ROE (TTM) 10.3%, ke 9.3%
Two-Stage Excess ReturnAsset$26.281.11xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$25.111.16xyesRev $0.9B, growth 10% (input: historical growth; tapered), Terminal P/S: 3.4x / 4.0x / 4.7x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$55.490.53xyesEPS $2.28, growth 24% (input: historical EPS growth), PEG=0.52 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset——no—
Graham NumberAsset$33.930.86xyes√(22.5 × EPS $2.28 × BVPS $22.44) — Graham's conservative floor
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$73.570.40xyesEPS $2.28 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative——no—
PEG Fair ValueRelative$83.240.35xyesEPS $2.28 × (PEG 1.5 × growth 24.3% (input: historical EPS growth)) → PE 36.5x
Earnings YieldEarnings$24.651.19xyesEPS $2.28 / 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 (buyback)-0.9%

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

The counterintuitive number here is the net interest margin: at 3.19% it is among the lowest of any regional bank, yet First Hawaiian still earns about 10.3% on equity. The reason is a deposit franchise so cheap and loyal that a thin spread is still profitable.

The valuation is value-supported. Relative valuation, excess-return, and earnings-yield methods all cluster near or just above the $28 price, while the conservative tangible-book model anchors lower at about $18.

Q1 2026 was steady: net income of $67.8 million, EPS of $0.55, a 13.1% CET1 ratio, and net charge-offs of just 0.14%. The shares pay a roughly 3.9% dividend, but analysts have been cutting 2026 earnings estimates.

Bull Case

The surprising thing about First Hawaiian is that it makes money on one of the thinnest margins in U.S. banking. The net interest margin sits at 3.19%, well below mainland regionals that run near 3.9%, and yet the bank earns about 10.3% on equity, above its 9.3% cost of capital. The explanation is the deposit franchise. The 10-K is candid that the majority of the business is with customers in Hawaii, Guam, and Saipan (accession 0001104659-26-021544), and that island geography produces a captive, low-cost, low-churn deposit base that no mainland competitor can easily contest. A bank that can fund itself this cheaply does not need a fat spread to clear its cost of capital, and that is the quiet edge the headline NIM hides.

The quality of the book reinforces the point. Q1 2026 produced net income of $67.8 million and EPS of $0.55 on $24.3 billion of assets, with a common equity tier 1 ratio of 13.12% and a tier 1 leverage ratio of 9.21%, both comfortably strong. Credit is clean: nonperforming assets were just 0.27% of loans and net charge-offs ran 0.14% annualized. The filing notes that Hawaii commercial real estate benefits from a limited supply of attractively located land and long development timelines (accession 0001104659-26-021544), a structural scarcity that supports collateral values through cycles.

The valuation pays the investor to wait. The relative-valuation method lands at $25 on a sector P/E near 10x, the excess-return methods at $25 to $26, and the earnings-yield method at $25, all close to the price, while the dividend-discount method reaches $38. The dividend yields about 3.9% on a sustainable 46% payout. For a buyer who values a fortress capital position and a deposit moat over growth, a well-run island bank at roughly its earnings-based fair value, collecting a near-4% yield, is a defensible holding.

Bear Case

The structural truth a holder has to name is that this stock looks reasonably priced because the earnings power is quietly eroding, not because the market is missing value. Analysts have been cutting their 2026 and 2027 EPS estimates to about $2.23 and $2.31, explicitly citing lower net interest income and fees, higher non-interest expenses, and rising loan-loss provisions. A bank whose forward estimates are being revised down on every line is not cheap, it is fairly priced against a deteriorating run-rate, and the cluster of valuation methods near the current price reflects exactly that.

The low margin that the bull case frames as efficiency is also a vulnerability. A 3.19% net interest margin leaves very little room to absorb pressure, and the margin slipped two basis points sequentially even with management guiding modest improvement. A bank running this thin has almost no buffer if funding costs rise or asset yields fall, and the deposit advantage that keeps the spread positive is the same concentration that makes the whole franchise fragile. The 10-K states plainly that operations are heavily concentrated in Hawaii, Guam, and Saipan, so results depend largely on conditions in those markets (accession 0001104659-26-021544). A tourism-dependent island economy is a single, undiversified bet on visitor flows, construction, and real estate, and the commercial real estate book carries high interest-rate sensitivity by the filing's own description (accession 0001104659-26-021544).

The sell-side has already moved to the cautious side. The consensus is a Hold with a third of analysts at Sell and none at Buy, the average target near $27 sits essentially at the price, and one analyst's Sell rests on just 12x 2026 earnings. The conservative tangible-book model lands at about $18, well below the price, which says the most rigorous bank frame sees the stock as full once the optimistic growth assumptions are stripped out. A fairly valued bank with falling estimates, a wafer-thin margin, and a single-economy concentration is a value trap shape: it stays cheap-looking precisely because the underlying numbers keep drifting the wrong way.

Valuation

First Hawaiian is a financial, so the read is the return on equity against its cost and the multiple of book the market assigns. The bank earns about 10.3% on equity against a 9.3% cost of capital, a thin positive spread. The bank-specific tangible-book model captures that conservatively: TBVPS of $14.37 at about 1.24 times lands at $18, the asset-anchored floor. The stock trades near $28 (June 27, 2026), well above that anchor.

The earnings-based methods are where the value-supported label comes from, and they bracket the price closely. Relative valuation puts it at $25 on a sector P/E near 10x, the simple and two-stage excess-return methods at $25 and $26, the earnings-yield method at $25, and the future-market-cap method at $24. The Graham number sits above the price at $34 and the dividend-discount method, the most optimistic, at $38. The blended view across the applicable methods is near $26, just under the price.

The resulting band runs from about $15 at the low end to $20 at the base and $22 at the high, with reliability tagged as ok, and today's price sits above that high mark. That is the tension: on the earnings and relative methods the stock is roughly fair, but on its own band and on tangible book it is full. The composite still reads within range as a value-supported name, but the model flags the implied expectations as above the bank's own history, and the deciding variable is whether the margin and estimates stabilize rather than keep slipping.

Catalysts

Q1 2026, reported April 24, was the most recent data point and it was steady rather than exciting. Net income was $67.8 million, EPS was $0.55, total assets reached $24.3 billion with $14.4 billion of loans and $20.8 billion of deposits, and the net interest margin was 3.19%, down two basis points sequentially. Management guided full-year NIM to a 3.22% to 3.23% range with the second quarter two to three basis points above the first, so margin stabilization is the near-term thing to watch.

The estimate trend is the real catalyst, and it is pointed down. Analysts have trimmed 2026 and 2027 EPS to roughly $2.23 and $2.31 on expectations of lower net interest income and fees, higher expenses, and larger provisions. Any quarter that arrests that drift, or that shows the deposit franchise re-pricing favorably, would matter more than the headline. Credit stayed clean in Q1, with net charge-offs of 0.14% and nonperforming assets at 0.27% of loans, and capital is strong at a 13.1% CET1 ratio.

Sentiment is cautious. The consensus rating is Hold, with two-thirds of analysts holding and a third at Sell, and the average 12-month target near $27 sits essentially at the current price. The dividend yields about 3.9% on a sustainable 46% payout, which is the main reason to own a name whose forward earnings are being marked down.

Sources: stocktitan.net (Q1 2026 release), fool.com (Q1 2026 transcript), public.com (FHB forecast), gurufocus.com (Piper Sandler target).

Peer Cohorts (Per Segment, With Filing Citations)

Retail Banking (reported)

Commercial Banking (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.

View the full interactive FHB report on boothcheck