American Savings Bank Reports Second Quarter 2016 Earnings

Net Income of $13.3 Million

American Continues to Deliver Solid Results

Company Release - 7/29/2016 8:37 PM ET

HONOLULU, July 29, 2016 /PRNewswire/ -- American Savings Bank, F.S.B. (American), a wholly-owned indirect subsidiary of Hawaiian Electric Industries, Inc. (HEI) (NYSE - HE), today reported net income of $13.3 million for the second quarter of 2016 compared to $12.7 million in the first (or linked) quarter of 2016 and $12.9 million in the second quarter of 2015.

"American delivered strong deposit and loan growth this quarter, driving higher net interest income and bottom line improvement," said Rich Wacker, president and chief executive officer of American.  "We also launched our new eBanking platform, providing improved account access and eServices for our consumer and business customers from their desktop, tablet or mobile devices, as well as lower ongoing costs for the bank."     

Second quarter 2016 net income was $0.6 million higher than the linked quarter primarily driven by $1 million (after-tax) higher revenues due to higher noninterest income which included gains on sale of securities and higher mortgage banking income and higher net interest income primarily due to growth in the commercial real estate and consumer loan portfolios.  Higher revenues were partially offset by $1 million (after-tax) higher noninterest expense due primarily to costs related to the replacement and upgrade of the electronic banking platform.

Compared to the second quarter of 2015, net income improved by $0.4 million primarily driven by $3 million (after-tax) higher net interest income due to growth in the commercial real estate, consumer loan and investment portfolios and higher yields on interest-earning assets.  This was offset by the following on an after-tax basis:

  • $2 million higher provision for loan losses mainly driven by commercial real estate and consumer loan growth and downgrades of specific commercial credits in the second quarter of 2016; and
  • $1 million higher noninterest expense primarily due to costs related to the replacement and upgrade of the electronic banking platform. 

 




Note:  Amounts indicated as "after-tax" in this earnings release are based upon adjusting items for the composite statutory tax rate of 40% for American.

Net interest income (pretax) was $51.0 million in the second quarter of 2016 compared to $50.4 million in the linked quarter of 2016 and $46.6 million in the prior year quarter.  The increase compared to the prior year quarter was primarily attributable to growth in the commercial real estate loan, the consumer loan and the investment securities portfolios and to higher yields on interest-earning assets.  Net interest margin was 3.58% compared to 3.62% in the linked quarter and 3.52% in the second quarter of 2015.

Provision for loan losses (pretax) was $4.8 million in the second quarter of 2016, flat compared to the $4.8 million in the linked quarter of 2016 and higher than the $1.8 million in the second quarter of 2015.  The increase in provision compared to the prior year quarter was mainly due to commercial real estate and consumer loan growth and specific downgrades to commercial credits in the second quarter of 2016. The net charge-off ratio was 0.15% compared to 0.21% in the linked quarter and 0.11% in the prior year quarter.  Credit quality remains within acceptable limits and the increasing loan loss reserves reflect growth in commercial real estate and consumer loans which require higher reserve levels.

Noninterest income (pretax) was $16.6 million in the second quarter of 2016, compared to $15.4 million in the linked quarter and $16.4 million in the second quarter of 2015.  The $1.2 million higher noninterest income compared to the linked quarter was primarily due to the gain on sale of investment securities and slightly higher mortgage banking income in the second quarter of 2016.

Noninterest expense (pretax) was $42.6 million in the second quarter of 2016, compared to $41.4 million in the linked quarter and $41.5 million in the second quarter of 2015.  The higher noninterest expense in the second quarter of 2016 was impacted by $1.2 million due to costs related to the replacement and upgrade of the electronic banking platform.

Total loans were $4.8 billion at June 30, 2016, an increase of $112 million and $138 million in the second quarter and year-to-date 2016, respectively.  Year-to-date annualized loan growth was 6.0%, in line with American's target of mid-single digit loan growth for the full year. 

Total deposits were $5.2 billion at June 30, 2016, an increase of $92 million and $207 million in the second quarter and year-to-date 2016, respectively.  Year-to-date annualized deposit growth of 8.2% was primarily driven by the $126 million (5.6% year-to-date annualized) increase in low-cost core deposits.   Average cost of funds remained low at 0.23% for the second quarter of 2016, unchanged from the linked quarter and 1 basis point higher than the prior year quarter.

American's return on average equity was 9.2% for the second quarter of 2016, compared to 8.9% in the linked quarter and 9.4% in the second quarter of 2015.  Return on average assets was 0.86% for the second quarter of 2016, compared to 0.84% in the linked quarter and 0.89% in the same quarter last year.  American's solid results enabled it to pay dividends of $9.0 million to HEI in the quarter while maintaining healthy capital levels – leverage ratio of 8.7% and total capital ratio of 13.2% at June 30, 2016.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2016 EPS GUIDANCE

Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its second quarter 2016 financial results today.  Please note that these reported results relate only to American and are not necessarily indicative of HEI's consolidated financial results for the second quarter of 2016.

HEI plans to announce its second quarter and year-to-date 2016 consolidated financial results on Thursday, August 4, 2016 and will conduct a webcast and conference call to discuss its consolidated earnings, including American's earnings, and 2016 EPS guidance on Thursday, August 4, 2016, at 11:00 a.m. Hawaii time (5:00 p.m. Eastern time). 

Interested parties within the United States may listen to the conference by calling (888) 311-8190 and entering passcode: 16065228.  International parties may listen to the conference by calling (330) 863-3378 and entering passcode: 16065228 or by accessing the webcast on HEI's website at www.hei.com under the heading "Investor Relations."  HEI and Hawaiian Electric Company intend to continue to use HEI's website, www.hei.com, as a means of disclosing additional information.  Such disclosures will be included on HEI's website in the Investor Relations section.  Accordingly, investors should routinely monitor such portions of HEI's website, in addition to following HEI's, Hawaiian Electric Company's and American's press releases, HEI's and Hawaiian Electric Company's Securities and Exchange Commission (SEC) filings and HEI's public conference calls and webcasts.  The information on HEI's website is not incorporated by reference in this document or in HEI's and Hawaiian Electric Company's SEC filings unless, and except to the extent, specifically incorporated by reference.  Investors may also wish to refer to the Public Utilities Commission of the State of Hawaii (PUC) website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC.  No information on the PUC website is incorporated by reference in this document or in HEI's and Hawaiian Electric Company's SEC filings.

An online replay of the webcast will be available at the same website beginning about two hours after the event.  Replays of the conference call will also be available approximately two hours after the event through August 18, 2016, by dialing (855) 859-2056 or (404) 537-3406 and entering passcode: 16065228.

HEI supplies power to approximately 95% of Hawaii's population through its electric utilities, Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited and provides a wide array of banking and other financial services to consumers and businesses through American, one of Hawaii's largest financial institutions.

FORWARD-LOOKING STATEMENTS

This release may contain "forward-looking statements," which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as "will," "expects," "anticipates," "intends," "plans," "believes," "predicts," "estimates" or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries, the performance of the industries in which they do business and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance.

Forward-looking statements in this release should be read in conjunction with the "Forward-Looking Statements" and "Risk Factors" discussions (which are incorporated by reference herein) set forth in HEI's Annual Report on Form 10-K for the year ended December 31, 2015, HEI's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 and HEI's future periodic reports that discuss important factors that could cause HEI's results to differ materially from those anticipated in such statements. These forward-looking statements speak only as of the date of the report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric Company, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

American Savings Bank, F.S.B.

STATEMENTS OF INCOME DATA

(Unaudited)








Three months ended


Six months ended June 30

(in thousands)


June 30, 2016


March 31, 2016


June 30, 2015


2016


2015

Interest and dividend income











Interest and fees on loans


$

49,690



$

48,437



$

46,035



$

98,127



$

91,233


Interest and dividends on investment securities


4,443



5,017



3,306



9,460



6,357


Total interest and dividend income


54,133



53,454



49,341



107,587



97,590


Interest expense











Interest on deposit liabilities


1,691



1,592



1,266



3,283



2,526


Interest on other borrowings


1,467



1,485



1,487



2,952



2,953


Total interest expense


3,158



3,077



2,753



6,235



5,479


Net interest income


50,975



50,377



46,588



101,352



92,111


Provision for loan losses


4,753



4,766



1,825



9,519



2,439


Net interest income after provision for loan losses


46,222



45,611



44,763



91,833



89,672


Noninterest income











Fees from other financial services


5,701



5,499



5,550



11,200



10,905


Fee income on deposit liabilities


5,262



5,156



5,424



10,418



10,739


Fee income on other financial products


2,207



2,205



2,103



4,412



3,992


Bank-owned life insurance


1,006



998



1,058



2,004



2,041


Mortgage banking income


1,554



1,195



2,068



2,749



3,890


Gains on sale of investment securities, net


598







598




Other income, net


288



333



239



621



974


Total noninterest income


16,616



15,386



16,442



32,002



32,541


Noninterest expense











Compensation and employee benefits


21,919



22,434



22,319



44,353



44,085


Occupancy


4,115



4,138



4,009



8,253



8,122


Data processing


3,277



3,172



2,953



6,449



6,069


Services


2,755



2,911



2,833



5,666



5,174


Equipment


1,771



1,663



1,690



3,434



3,391


Office supplies, printing and postage


1,583



1,365



1,303



2,948



2,786


Marketing


899



861



844



1,760



1,685


FDIC insurance


913



884



773



1,797



1,584


Other expense


5,382



3,975



4,755



9,357



8,960


Total noninterest expense


42,614



41,403



41,479



84,017



81,856


Income before income taxes


20,224



19,594



19,726



39,818



40,357


Income taxes


6,939



6,921



6,875



13,860



14,031


Net income


$

13,285



$

12,673



$

12,851



$

25,958



$

26,326


Comprehensive income


$

16,051



$

20,310



$

9,544



$

36,361



$

26,862


OTHER BANK INFORMATION (annualized %, except as of period end)









Return on average assets


0.86



0.84



0.89



0.85



0.93


Return on average equity


9.22



8.89



9.38



9.06



9.67


Return on average tangible common equity


10.75



10.39



11.04



10.57



11.39


Net interest margin


3.58



3.62



3.52



3.60



3.52


Efficiency ratio


63.05



62.96



65.81



63.00



65.67


Net charge-offs to average loans outstanding


0.15



0.21



0.11



0.18



0.08


As of period end











Nonperforming assets to loans outstanding and real estate owned


1.02



1.03



0.70






Allowance for loan losses to loans outstanding


1.16



1.13



1.04






Tangible common equity to tangible assets


8.15



8.08



8.16






Tier-1 leverage ratio


8.7



8.7



8.8






Total capital ratio


13.2



13.2



13.5






Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)


$

9.0



$

9.0



$

7.5























This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

 

 

American Savings Bank, F.S.B.

BALANCE SHEETS DATA

(Unaudited)




(in thousands)

June 30, 2016


December 31, 2015







Assets





Cash and due from banks


$

111,738



$

127,201


Interest-bearing deposits


62,850



93,680


Available-for-sale investment securities, at fair value


894,021



820,648


Stock in Federal Home Loan Bank, at cost


11,218



10,678


Loans receivable held for investment


4,754,954



4,615,819


Allowance for loan losses


(55,331)



(50,038)


Net loans


4,699,623



4,565,781


Loans held for sale, at lower of cost or fair value


6,217



4,631


Other


320,233



309,946


Goodwill


82,190



82,190


Total assets


$

6,188,090



$

6,014,755


Liabilities and shareholder's equity





Deposit liabilities–noninterest-bearing


$

1,583,420



$

1,520,374


Deposit liabilities–interest-bearing


3,648,783



3,504,880


Other borrowings


272,887



328,582


Other


103,396



101,029


Total liabilities


5,608,486



5,454,865


Common stock


1



1


Additional paid in capital


341,849



340,496


Retained earnings


244,622



236,664


Accumulated other comprehensive loss, net of tax benefits





     Net unrealized gains (losses) on securities

$

8,111



$

(1,872)



     Retirement benefit plans

(14,979)


(6,868)


(15,399)


(17,271)


Total shareholder's equity


579,604



559,890


Total liabilities and shareholder's equity


$

6,188,090



$

6,014,755



This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

 

Contact:

Clifford H. Chen



Manager, Investor Relations &

Telephone: (808) 543-7300


Strategic Planning

E-mail:  ir@hei.com

 

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SOURCE Hawaiian Electric Industries, Inc.