American Savings Bank Reports Second Quarter 2017 Earnings

Net Income of $16.7 Million - Return on Assets of 1.02%

Solid Profitability In Line with Expectations

Company Release - 7/28/2017 6:45 PM ET

HONOLULU, July 28, 2017 /PRNewswire/ -- American Savings Bank, F.S.B. (American), a wholly-owned subsidiary of Hawaiian Electric Industries, Inc. (HEI) (NYSE - HE) today reported net income of $16.7 million for the second quarter of 2017 compared to $15.8 million in the first, or linked, quarter of 2017 and $13.3 million in the second quarter of 2016. 

"We continued our strong performance into the second quarter, delivering well for our customers, the bank, and for shareholders.  Our results through the second quarter demonstrate broad improvement in our profitability with better yields, efficiency, asset quality, and bottom line return on equity compared to last year," said Richard Wacker, president and chief executive officer of American. "Our balance sheet continued to grow nicely as customers entrusted us with more of their deposits. Total lending was flat as our work to improve commercial loan asset quality offset growth we saw in consumer, home equity, residential, and commercial real estate lending." 

Second quarter of 2017 net income of $16.7 million was $3.4 million higher than the second quarter of 2016 and $0.9 million higher than the first (linked) quarter of 2017. 

Compared to the second quarter of 2016, the $3.4 million increase was primarily driven by $3 million (after-tax) higher net interest income mainly due to growth in the commercial real estate and consumer loan portfolios as well as the deployment of deposit growth into our investment portfolio.  The $1 million (after-tax) lower provision for loan losses was offset by $1 million (after-tax) higher non-interest expense.

Compared to the linked first quarter of 2017, the $0.9 million increase was primarily driven by the following on an after-tax basis:

  • $1 million higher net interest income driven mainly by higher loan portfolio yields and growth in our consumer loan and investment portfolios;
  • $1 million lower provision for loan losses; and
  • $1 million higher noninterest income mainly due to improved performance from bank-owned life insurance investments.

These increases were offset by $2 million (after-tax) higher noninterest expense primarily due to higher compensation and benefits.

Net interest income (pretax) was $55.9 million in the second quarter of 2017, compared to $54.8 million in the linked quarter and $51.0 million in the prior year quarter.  Net interest margin was 3.68% in the second quarter of 2017, unchanged from the linked quarter and 3.58% in the second quarter of 2016.  The higher net interest margin compared to the prior year quarter was primarily attributable to higher investment portfolio yields and growth of our higher yielding consumer and commercial real estate portfolios.

The provision for loan losses (pretax) was $2.8 million in the second quarter of 2017 compared to $3.9 million in the linked quarter and $4.8 million in the second quarter of 2016.  The decrease from the linked quarter reflected improved credit quality.  The second quarter of 2017 net charge-off ratio was 0.21%, compared to 0.29% in the linked quarter and 0.15% in the prior year quarter.  Nonaccrual loans as a percent of total loans receivable held for investment was 0.44% compared to 0.41% in the linked quarter and 1.02% in the prior year quarter.  

Noninterest income (pretax) was $16.2 million in the second quarter of 2017 compared to $15.1 million in the linked quarter and $16.6 million in the prior year quarter. Noninterest expense (pretax) was $44.6 million compared to $41.9 million in the linked quarter and $42.6 million in the second quarter of 2016. 

Total loans were $4.7 billion at June 30, 2017 and included growth in the consumer, home equity line of credit, and residential loan portfolios during the second quarter of 2017.

________________________

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

Total deposits were $5.7 billion at June 30, 2017, an increase of $175 million or 6.3% annualized from December 31, 2016.  Low-cost core deposits increased $143 million or 5.8% annualized from December 31, 2016.  The average cost of funds was 0.21% for the second quarter of 2017 compared to 0.20% for the first quarter of 2017 and 0.23% for the second quarter of 2016.

American's return on average equity was 11.3% for the second quarter of 2017 compared to 10.8% in the linked quarter and 9.2% in the second quarter of 2016.  Return on average assets was 1.02% for the second quarter of 2017, compared to 0.98% in the linked quarter and 0.86% in the same quarter last year.  American's solid results enabled it to pay dividends of $9.4 million to HEI while maintaining healthy capital levels, including a leverage ratio of 8.5% and a total capital ratio of 13.7% at June 30, 2017.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2017 EPS GUIDANCE
Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its second quarter 2017 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 2017.

HEI plans to announce its second quarter 2017 consolidated financial results on Thursday, August 3, 2017 and will conduct a webcast and conference call to discuss its consolidated earnings, including American's earnings, and 2017 EPS guidance on Thursday, August 3, 2017, at 9:00 a.m. Hawaii time (3:00 p.m. Eastern time). 

Interested parties within the United States may listen to the conference by calling (844) 834-0652 and international parties may listen to the conference by calling (412) 317-5198.  Parties may also listen to the conference by accessing the webcast on HEI's website at www.hei.com under the heading "Investor Relations."  HEI and Hawaiian Electric Company, Inc. (Hawaiian Electric) intend to continue to use HEI's website 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's and American's press releases, HEI's and Hawaiian Electric'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'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's SEC filings.

An on-line replay of the August 3, 2017 webcast will be available on HEI's 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 17, 2017 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode:  10108918.

HEI supplies power to approximately 95% of Hawaii's population through its electric utilities, Hawaiian Electric, 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.

American Savings Bank, F.S.B.

STATEMENTS OF INCOME DATA

(Unaudited)




Three months ended


Six months ended June 30

(in thousands)


June 30, 2017


March 31, 2017


June 30, 2016


2017


2016

Interest and dividend income











Interest and fees on loans


$

52,317


$

50,742


$

49,690


$

103,059


$

98,127

Interest and dividends on investment securities


6,763


6,980


4,443


13,743


9,460

Total interest and dividend income


59,080


57,722


54,133


116,802


107,587

Interest expense









Interest on deposit liabilities


2,311


2,103


1,691


4,414


3,283

Interest on other borrowings


824


816


1,467


1,640


2,952

Total interest expense


3,135


2,919


3,158


6,054


6,235

Net interest income


55,945


54,803


50,975


110,748


101,352

Provision for loan losses


2,834


3,907


4,753


6,741


9,519

Net interest income after provision for loan losses


53,111


50,896


46,222


104,007


91,833

Noninterest income









Fees from other financial services


5,810


5,610


5,701


11,420


11,200

Fee income on deposit liabilities


5,565


5,428


5,262


10,993


10,418

Fee income on other financial products


1,971


1,866


2,207


3,837


4,412

Bank-owned life insurance


1,925


983


1,006


2,908


2,004

Mortgage banking income


587


789


1,554


1,376


2,749

Gains on sale of investment securities, net




598



598

Other income, net


391


458


288


849


621

Total noninterest income


16,249


15,134


16,616


31,383


32,002

Noninterest expense









Compensation and employee benefits


24,742


23,237


21,919


47,979


44,353

Occupancy


4,185


4,154


4,115


8,339


8,253

Data processing


3,207


3,280


3,277


6,487


6,449

Services


2,766


2,360


2,755


5,126


5,666

Equipment


1,771


1,748


1,771


3,519


3,434

Office supplies, printing and postage


1,527


1,535


1,583


3,062


2,948

Marketing


839


517


899


1,356


1,760

FDIC insurance


822


728


913


1,550


1,797

Other expense


4,705


4,311


5,382


9,016


9,357

Total noninterest expense


44,564


41,870


42,614


86,434


84,017

Income before income taxes


24,796


24,160


20,224


48,956


39,818

Income taxes


8,063


8,347


6,939


16,410


13,860

Net income


$

16,733


$

15,813


$

13,285


$

32,546


$

25,958

Comprehensive income


$

18,956


$

16,648


$

16,051


$

35,604


$

36,361

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







Return on average assets


1.02


0.98


0.86


1.00


0.85

Return on average equity


11.25


10.82


9.22


11.04


9.06

Return on average tangible common equity


13.06


12.58


10.75


12.82


10.57

Net interest margin


3.68


3.68


3.58


3.68


3.60

Efficiency ratio


61.73


59.87


63.05


60.81


63.00

Net charge-offs to average loans outstanding


0.21


0.29


0.15


0.25


0.18

As of period end









Nonaccrual loans to loans receivable held for investment


0.44


0.41


1.02




Allowance for loan losses to loans outstanding


1.19


1.19


1.16




Tangible common equity to tangible assets


7.88


7.78


8.15




Tier-1 leverage ratio


8.5


8.5


8.7




Total capital ratio


13.7


13.6


13.2




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


$

9.4


$

9.4


$

9.0


$

18.8


$

18.0


This information should be read in conjunction with the condensed 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, 2017

December 31, 2016






Assets





Cash and due from banks


$

128,609


$

137,083

Interest-bearing deposits


37,049


52,128

Restricted cash



1,764

Available-for-sale investment securities, at fair value


1,302,886


1,105,182

Stock in Federal Home Loan Bank, at cost


11,706


11,218

Loans receivable held for investment


4,744,634


4,738,693

Allowance for loan losses


(56,356)


(55,533)

   Net loans


4,688,278


4,683,160

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


5,261


18,817

Other


354,898


329,815

Goodwill


82,190


82,190

   Total assets


$

6,610,877


$

6,421,357

Liabilities and shareholder's equity





Deposit liabilities–noninterest-bearing


$

1,694,150


$

1,639,051

Deposit liabilities–interest-bearing


4,030,236


3,909,878

Other borrowings


188,130


192,618

Other


101,974


101,635

   Total liabilities


6,014,490


5,843,182

Common stock


1


1

Additional paid in capital


344,062


342,704

Retained earnings


271,739


257,943

Accumulated other comprehensive loss, net of tax benefits





     Net unrealized losses on securities

$

(5,687)


$

(7,931)


     Retirement benefit plans

(13,728)

(19,415)

(14,542)

(22,473)

   Total shareholder's equity


596,387


578,175

   Total liabilities and shareholder's equity


$

6,610,877


$

6,421,357


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

 

Contact:

Clifford H. Chen

Telephone: (808) 543-7300


Treasurer, Manager Investor Relations & Strategic Planning

E-mail:  ir@hei.com

 

American Savings Bank Logo (PRNewsfoto/American Savings Bank)

 

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SOURCE Hawaiian Electric Industries, Inc.