FIRST HAWAIIAN, INC. (FHB) stock intrinsic value fair value estimate & owner earnings analysis

First Hawaiian, Inc. is the holding company for First Hawaiian Bank, founded in 1858 and the largest bank headquartered in Hawaii by loans and by net income. It operates 49 branches: 45 in Hawaii, 3 in Guam and 1 in Saipan. It earns money mainly from the spread between what it charges on loans (about $14 billion, of which commercial real estate is $4.6 billion or 32%) and what it pays on deposits, plus fees. Net interest income was $663.7 million in 2025 and the net interest margin was 3.15%, up 20 basis points from 2024. How we measured earnings. For a bank, interest paid is the raw material of the business, so we value cash earnings after interest and subtract no separate debt. We start from operating cash flow, remove the timing swings in other assets and other liabilities, and deduct stock compensation (a real cost to owners, $15.9 million in 2025) and the capital spending needed to keep the branches and systems running. One judgement matters: operating cash flow adds back the provision for loan losses, but actual loan losses never appear in cash flow, so we deduct the provision as a genuine cost. In 2025 that provision was $27.2 million against actual net charge-offs of $16.3 million (0.11% of loans), so this is a conservative choice. On this basis owner earnings per share for 2016 through 2025 were $1.74, $2.06, $2.21, $2.57, $1.36, $2.47, $2.63, $1.91, $1.96 and $2.20. The 2020 figure carries the $121.7 million pandemic loan-loss provision; the 2021 figure benefits from a $39.0 million release of that reserve. We kept both years in and used the median of all ten years, $2.13 per share, as the earnings level. A ten-year window is right for a bank because it spans near-zero interest rates, the 2022-2023 rate rises and the pandemic. Owner earnings grew 12.4% in 2025 ($1.96 to $2.20). Earnings per share for the first half of 2026 were $1.15 against $1.05 a year earlier, so recent results do not point to a lower level. What we credited as growth. Dollar earnings have grown steadily but slowly: net income rose from $230.2 million in 2016 to $276.3 million in 2025 (about 2.0% a year, through the pandemic) and total owner earnings from $242.8 million to $276.2 million (about 1.4% a year). That slow, repeatable pace is the only growth we credited: 1.5% a year for ten years in the base case (well below the 12.4% of 2025, so nothing is assumed to reverse a slowdown) and 2.0% in the bull case. After year ten, earnings are held flat, not grown, because the lasting advantage is the deposit and lending franchise of the dominant Hawaii bank, which has operated since 1858, and nothing we can name and evidence supports growth beyond it. We did not credit share buybacks (the share count fell from 139.5 million in 2016 to 125.5 million in 2025), because the cash used for them is already counted in owner earnings; crediting both would count it twice. We also left out any further widening of the interest margin, loan growth beyond the historical pace, and expansion in Guam and Saipan, because none is contracted or already demonstrated. The cases. All are discounted at 6%. Bear ($27.30 per share): Hawaii is a single-state economy that depends on tourism, the military, real estate and government, and 32% of loans are commercial real estate. We assume earnings settle at $1.70 a year, about the weakest ordinary year in the decade (2016: $1.74), with no growth, and that one pandemic-sized shock arrives in year two, cutting that year to about $0.54. That shock size is taken from 2020, when owner earnings fell about $1.17 below the average of the years on either side. The business is worth $27.30 per share; a bank's deposits are already inside the earnings calculation, so nothing further is subtracted, and the difference is $27.30. The bank is leveraged roughly eight to nine times its equity, which is why this case carries a full credit shock. Base ($39.91): earnings start at $2.13 and grow 1.5% a year for ten years, then stay flat. The business is worth $39.91 per share with no separate debt to subtract, so the difference is $39.91. Bull ($47.74): earnings return to $2.45, a level reached or exceeded in three of the last seven years (2019, 2021 and 2022), and grow 2.0% a year for ten years, then stay flat. The business is worth $47.74 per share with nothing further to subtract. How we tested it. We challenged the earnings level with the two weakest ordinary years, 2023 and 2024 ($1.91 and $1.96), when deposit costs were at their peak; both sit within about 10% of the $2.13 level, so it is not stretched. We also checked the loan-loss deduction against actual charge-offs (above), and it is more conservative than the losses actually taken. The filings show 2025 non-accrual loans of only $3.0 million and a 2.2% Hawaii unemployment rate at year-end, so the bear case rests on a demonstrated downturn (2020), not on a loss we have no evidence for. What would make us wrong: a longer or deeper tourism collapse than 2020, a sustained squeeze on deposit costs that keeps earnings near the bear level, or losses concentrated in Hawaii commercial real estate. Change since our prior view. We previously valued the shares at $14.30, $23.65 and $28.95 (bear, base, bull) using book value and a 10% required return. We now apply the same 6% discount rate to every company and value the earnings stream directly, which raises the per-share figures without any change in the bank's health: earnings, credit quality and the Hawaii franchise are little changed. Because the bank is concentrated in one state and highly leveraged, the margin-of-safety price is set well below these values, at $20.00, roughly 26% below the bear case and half of the base case.