American Savings Bank Reports Third Quarter 2017 Earnings

Net Income of $17.6 Million - Return on Assets of 1.07%

Company Release - 10/30/2017 5:05 PM ET

HONOLULU, Oct. 30, 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 $17.6 million for the third quarter of 2017 compared to $16.7 million in the second, or linked, quarter of 2017 and $15.1 million in the third quarter of 2016. 

"Our results for the third quarter show that we continue to deliver well for our customers, the bank, and for shareholders," said Richard Wacker, president and chief executive officer of American.  "Solid deposit growth and improved asset quality continue to fuel the bank's broad profitability improvement compared to last year.   Overall loan growth lagged as we continued to reduce our commercial lending exposure to national syndicated credits and resolve specific problem loans that paid in full, offsetting the continued good growth in other segments of the loan portfolio."

Third quarter of 2017 net income of $17.6 million was $2.5 million higher than the third quarter of 2016 and $0.9 million higher than the second (linked) quarter of 2017. 

Compared to the third quarter of 2016, the $2.5 million increase was primarily driven by the following on an after-tax basis:

  • $3 million higher net interest income driven mainly by growth in interest-earning assets funded by strong deposit growth and overall improvement in asset yields; and
  • $3 million lower provision for loan losses resulting from our work to improve commercial loan asset quality.

These items were offset by the following on an after-tax basis:

  • $2 million lower noninterest income primarily due to lower mortgage banking income and no gain on sale of real estate; and

  • $1 million higher noninterest expense primarily due to higher performance based incentive cost.

 

________________________

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.

Compared to the linked second quarter of 2017, the $0.9 million increase was primarily driven by lower provision for loan losses.

Net interest income (pretax) was $56.1 million in the third quarter of 2017, compared to $55.9 million in the linked quarter and $51.9 million in the prior year quarter.  Net interest margin was 3.69% in the third quarter of 2017, compared to 3.68% in the linked quarter and 3.57% in the third quarter of 2016.

The provision for loan losses (pretax) was $0.5 million in the third quarter of 2017 compared to $2.8 million in the linked quarter and $5.7 million in the third quarter of 2016.  The decrease from the linked quarter reflected the release of reserves attributed to the strategic reduction in our commercial loan portfolio, including a $53 million decrease in our exposure to national syndicated credits.  The higher provision in the prior year quarter was largely due to reserves for specific commercial credits.  The third quarter of 2017 net charge-off ratio was 0.32%, compared to 0.21% in the linked quarter and 0.20% in the prior year quarter.  Nonaccrual loans as a percent of total loans receivable held for investment was 0.50% compared to 0.44% in the linked quarter and 1.11% in the prior year quarter.  

Noninterest income (pretax) was $15.2 million in the third quarter of 2017 compared to $16.2 million in the linked quarter and $18.5 million in the prior year quarter.   The higher noninterest income in the prior year quarter was largely due to $1.8 million higher mortgage banking income and the $1.0 million gain on sale of real estate.

Noninterest expense (pretax) was $44.1 million compared to $44.6 million in the linked quarter and $41.9 million in the third quarter of 2016. 

Total loans were $4.7 billion at September 30, 2017, a decrease of $65 million or 1.8% annualized from December 31, 2016.  This decrease reflects our work to improve overall commercial loan quality through the strategic decrease in our exposure to national syndicated credits, as well as the reduction in the commercial real estate loan portfolio.  The decrease in our commercial portfolio was partially offset by growth in the home equity lines of credit, consumer and residential loan portfolios. 

Total deposits were $5.8 billion at September 30, 2017, an increase of $203 million or 4.9% annualized from December 31, 2016.  Low-cost core deposits increased $153 million or 4.2% annualized from December 31, 2016.  The average cost of funds was 0.20% for the third quarter of 2017 compared to 0.21% for the second quarter of 2017 and 0.24% for the third quarter of 2016.

American's return on average equity was 11.6% for the third quarter of 2017 compared to 11.3% in the linked quarter and 10.4% in the third quarter of 2016.  Return on average assets was 1.07% for the third quarter of 2017, compared to 1.02% in the linked quarter and 0.97% 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 8.7% and a total capital ratio of 13.9% at September 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 third 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 third quarter of 2017.

HEI plans to announce its third quarter 2017 consolidated financial results on Thursday, November 2, 2017 and will conduct a webcast and conference call to discuss its consolidated earnings, including American's earnings, and 2017 EPS guidance on Thursday, November 2, 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 November 2, 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 November 16, 2017 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode:  10112461.

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


Nine months ended September 30

(in thousands)


September 30,
2017


June 30,
2017


September 30,
2016


2017


2016

Interest and dividend income











Interest and fees on loans


$

52,210



$

52,317



$

50,444



$

155,269



$

148,571


Interest and dividends on investment securities


6,850



6,763



4,759



20,593



14,219


Total interest and dividend income


59,060



59,080



55,203



175,862



162,790


Interest expense











Interest on deposit liabilities


2,444



2,311



1,871



6,858



5,154


Interest on other borrowings


470



824



1,464



2,110



4,416


Total interest expense


2,914



3,135



3,335



8,968



9,570


Net interest income


56,146



55,945



51,868



166,894



153,220


Provision for loan losses


490



2,834



5,747



7,231



15,266


Net interest income after provision for loan losses


55,656



53,111



46,121



159,663



137,954


Noninterest income











Fees from other financial services


5,635



5,810



5,599



17,055



16,799


Fee income on deposit liabilities


5,533



5,565



5,627



16,526



16,045


Fee income on other financial products


1,904



1,971



2,151



5,741



6,563


Bank-owned life insurance


1,257



1,925



1,616



4,165



3,620


Mortgage banking income


520



587



2,347



1,896



5,096


Gains on sale of investment securities, net










598


Other income, net


380



391



1,165



1,229



1,786


Total noninterest income


15,229



16,249



18,505



46,612



50,507


Noninterest expense











Compensation and employee benefits


23,724



24,742



22,844



71,703



67,197


Occupancy


4,284



4,185



3,991



12,623



12,244


Data processing


3,262



3,207



3,150



9,749



9,599


Services


2,863



2,766



2,427



7,989



8,093


Equipment


1,814



1,771



1,759



5,333



5,193


Office supplies, printing and postage


1,444



1,527



1,483



4,506



4,431


Marketing


934



839



747



2,290



2,507


FDIC insurance


746



822



907



2,296



2,704


Other expense


5,050



4,705



4,591



14,066



13,948


Total noninterest expense


44,121



44,564



41,899



130,555



125,916


Income before income taxes


26,764



24,796



22,727



75,720



62,545


Income taxes


9,172



8,063



7,623



25,582



21,483


Net income


$

17,592



$

16,733



$

15,104



$

50,138



$

41,062


Comprehensive income


$

18,009



$

18,956



$

13,176



$

53,613



$

49,537


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









Return on average assets


1.07



1.02



0.97



1.02



0.89


Return on average equity


11.64



11.25



10.36



11.24



9.50


Return on average tangible common equity


13.47



13.06



12.06



13.04



11.07


Net interest margin


3.69



3.68



3.57



3.68



3.59


Efficiency ratio


61.82



61.73



59.54



61.15



61.81


Net charge-offs to average loans outstanding


0.32



0.21



0.20



0.27



0.19


As of period end











Nonaccrual loans to loans receivable held for investment


0.50



0.44



1.11






Allowance for loan losses to loans outstanding


1.13



1.19



1.24






Tangible common equity to tangible assets


8.01



7.88



8.03






Tier-1 leverage ratio


8.7



8.5



8.6






Total capital ratio


13.9



13.7



13.3






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


$

9.4



$

9.4



$

9.0



$

28.1



$

27.0



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)

September 30, 2017

December 31, 2016






Assets





Cash and due from banks


$

120,492



$

137,083


Interest-bearing deposits


69,223



52,128


Restricted cash




1,764


Available-for-sale investment securities, at fair value


1,320,110



1,105,182


Stock in Federal Home Loan Bank, at cost


9,706



11,218


Loans receivable held for investment


4,676,281



4,738,693


Allowance for loan losses


(53,047)



(55,533)


Net loans


4,623,234



4,683,160


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


15,728



18,817


Other


378,224



329,815


Goodwill


82,190



82,190


Total assets


$

6,618,907



$

6,421,357


Liabilities and shareholder's equity





Deposit liabilities–noninterest-bearing


$

1,710,698



$

1,639,051


Deposit liabilities–interest-bearing


4,041,628



3,909,878


Other borrowings


153,552



192,618


Other


107,558



101,635


Total liabilities


6,013,436



5,843,182


Common stock


1



1


Additional paid in capital


344,512



342,704


Retained earnings


279,956



257,943


Accumulated other comprehensive loss, net of tax benefits





     Net unrealized losses on securities

$

(5,479)



$

(7,931)



     Retirement benefit plans

(13,519)


(18,998)


(14,542)


(22,473)


Total shareholder's equity


605,471



578,175


Total liabilities and shareholder's equity


$

6,618,907



$

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.