First Hawaiian beats earnings, launches $250M buyback amid valuation concerns
Regional bank authorizes 7% market cap repurchase program while analysts warn stock has run too far after 12% gain
First Hawaiian Inc. reported stronger-than-expected fourth quarter earnings and announced a $250 million share repurchase program, yet analysts caution the stock may have already priced in the growth after a 12% surge over the past three months.
The Honolulu-based regional bank posted net income of $69.9 million, or $0.56 per diluted share, beating analyst estimates by 7.2% according to company results released Thursday. Revenue reached $225.9 million, 3.4% above expectations, driven by net interest income of $170.3 million and noninterest income of $55.6 million.
The bank's net interest margin expanded by 2 basis points to 3.21%, while total loans and leases grew by $183 million during the quarter to $14.3 billion. Retail and commercial deposits also increased, positioning First Hawaiian as "the most profitable bank in the state," according to Bob Harrison, chairman, president and CEO.
Alongside the earnings beat, First Hawaiian's board authorized a stock repurchase program for up to $250 million of outstanding common stock—approximately 7% of the company's $3.4 billion market capitalization. The board also declared a quarterly dividend of $0.26 per share, payable February 27 to shareholders of record February 13.
However, the stock's recent rally has prompted analyst caution. First Hawaiian shares reached a new 52-week high of $28.35 on January 22, extending a 90-day gain of roughly 12%. The stock currently trades at $27.57, above the consensus analyst price target of $27.61.
Analysts have assigned a consensus "Reduce" rating, with six recommending "Hold" and four recommending "Sell" or "Strong Sell" among the nine covering the stock, according to MarketBeat. The valuation concerns center on First Hawaiian's price-to-earnings ratio of 13.2x, which trades above the broader U.S. banks group average of 11.8x and exceeds an estimated fair P/E of 11.3x, Simply Wall St analysis shows.
"Valuation concerns were explicitly a key factor in these downgrades," noted Simply Wall St in a January 30 report, suggesting that First Hawaiian's fair value was closely aligned with its recent share price, implying limited upside potential.
Beneath the headline numbers, credit quality metrics showed signs of stress. The bank recorded a provision for credit losses of $7.7 million during the quarter, while non-performing assets increased to $41 million, or 0.29% of total loans and leases. Net charge-offs were $5 million, representing 0.14% of average loans on an annualized basis.
The allowance for credit losses stood at $168.5 million, or 1.18% of total loans, as of December 31, 2025.
Risks highlighted by analysts include potential increases in credit costs, diminished loan demand, and pressure on margins in a volatile interest rate environment. These concerns come despite positive sentiment across Hawaiian regional banks following optimistic projections from peer Bank of Hawaii.
First Hawaiian, the oldest and largest bank in Hawaii with $25 billion in assets, operates through its flagship subsidiary First Hawaiian Bank across the U.S. Pacific Islands and selected mainland markets. The company's strong profitability and dominant market position have supported its premium valuation relative to regional peers.
The new $250 million repurchase authorization follows the company's buyback of approximately 1 million shares at a cost of $26 million during the fourth quarter. The aggressive capital return program signals management confidence in the bank's earnings power and suggests the board views the current valuation as attractive, even as Wall Street analysts warn the stock has run ahead of fundamentals.
Investors will be watching upcoming credit quality trends and net interest margin sustainability in the face of potential Federal Reserve rate cuts, which could pressure regional bank profitability. The next key catalyst will be first quarter 2026 results, expected in late April.