American Savings Bank Reports Second Quarter 2019 Earnings

2Q 2019 Net Income of $17.0 Million

Good Loan and Deposit Growth

Strong Capital Position

Company Release - 7/30/2019 8:00 PM ET

HONOLULU, July 30, 2019 /PRNewswire/ -- American Savings Bank, F.S.B. (American), a wholly-owned subsidiary of Hawaiian Electric Industries, Inc. (NYSE: HE) today reported net income for the second quarter of 2019 of $17.0 million compared to $20.8 million in the first, or linked, quarter of 2019 and $20.6 million in the second quarter of 2018.  Key measures of profitability remained healthy, with return on average equity of 10.5% and return on assets of 0.96%.

"Our second quarter results were below our recent quarters' performance due to volatility in our investment portfolio yield driven by the lower than expected interest rate environment as well as higher credit costs, including for one commercial exposure," said Richard Wacker, president and chief executive officer. "We continued to deliver strong net interest margin, good loan and deposit growth, and improving year-over-year efficiency.  We are already seeing many of the benefits we anticipated from the consolidation of our non-branch teammates into our new ASB Campus and we are confident in the future improvements we will deliver for our customers, the bank, our team, and the community," said Wacker.

Financial Highlights

Net interest income was $61.5 million in the second quarter of 2019 compared to $63.7 million in the linked quarter and $59.6 million in the second quarter of 2018.  Net interest margin for the second quarter of 2019 was 3.82% compared to 3.99% in the linked quarter and 3.76% in the second quarter of 2018. Year-to-date, net interest margin was 3.90%. The decrease in net interest income and net interest margin compared to the linked quarter was primarily due to an increase in amortization of premiums in the investment securities portfolio.

The provision for loan losses was $7.7 million in the second quarter of 2019 compared to $6.9 million in the linked quarter and $2.8 million in the second quarter of 2018. The increase in provision over the linked quarter was primarily due to increased loss reserves for one commercial credit, increased reserves for loan portfolio growth, and additional loss reserves for the personal unsecured loan portfolio. The increase in provision over the prior year quarter was due to an increase in loan loss reserves for the personal unsecured loan portfolio, and a lower provision in the prior year due to a release of reserves for improved credit quality in the commercial, commercial real estate and home equity line of credit loan portfolios.

The net charge-off ratio was 0.29% in the second quarter of 2019 compared to 0.39% in the linked quarter and 0.32% in the prior year quarter. Nonaccrual loans as a percent of total loans receivable held for investment was 0.79% compared to 0.83% in the linked quarter and 0.57% in the prior year quarter.

Noninterest income was $15.5 million in the second quarter of 2019 compared to $14.6 million in the linked quarter and $13.8 million in the second quarter of 2018. The increase in noninterest income compared to the linked quarter was primarily due to increases in mortgage banking, debit card interchange and fee income. The increase in noninterest income compared to the prior year quarter was primarily due to bank-owned life insurance proceeds received during the quarter.

Noninterest expense was $48.0 million in the second quarter of 2019 compared to $45.2 million in the linked quarter and $44.2 million in the second quarter of 2018. As was the case in the first quarter of 2019, noninterest expense included depreciation and occupancy costs related to the new campus building while still including the costs of properties being vacated.

Total loans were $5.0 billion as of June 30, 2019, up $164.5 million or 6.8% annualized from December 31, 2018, driven mainly by increases in commercial loans, home equity lines of credit, and residential loans.

Total deposits were $6.3 billion at June 30, 2019, an increase of $98.5 million or 3.2% annualized from December 31, 2018. Low-cost core deposits were $5.4 billion as of June 30, 2019.

Overall, American's return on average equity was 10.5% in the second quarter of 2019 compared to 13.1% in the first quarter of 2019 and 13.6% in the prior year quarter.  Return on average assets was 0.96% in the second quarter of 2019 compared to 1.18% in the first quarter of 2019 and 1.20% in the second quarter of last year. The decreases from the linked and prior year quarters were primarily due to lower earnings in the second quarter of  2019. American paid dividends of $15.0 million to HEI during the quarter while maintaining healthy capital levels—leverage ratio of 8.7% and total capital ratio of 14.0% at June 30, 2019.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2019 EPS GUIDANCE

Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its second quarter 2019 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 2019.

HEI plans to announce its second quarter 2019 consolidated financial results on Friday, August 2, 2019 and will also conduct a webcast and conference call at 10:15 a.m. Hawaii time (4:15 p.m. Eastern time) that same day to discuss its consolidated earnings, including American's earnings, and 2019 EPS guidance.

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 or by accessing the webcast on HEI's website at www.hei.com under the "Investor Relations" section, sub-heading "News and Events."  HEI and Hawaiian Electric Company, Inc. (Hawaiian Electric) 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 the Investor Relations section of HEI's website at www.hei.com 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 2, 2019 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 16, 2019 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode:  10131926.

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; provides a wide array of banking and other financial services to consumers and businesses through American, one of Hawaii's largest financial institutions; and helps advance Hawaii's clean energy and sustainability goals through investments by its non-regulated subsidiary, Pacific Current, LLC.

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, political 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 "Cautionary Note Regarding 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, 2018 and HEI's other 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, 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,
2019


March 31,
2019


June 30,
2018


2019


2018

Interest and dividend income











Interest and fees on loans


$

58,620



$

57,860



$

54,633



$

116,480



$

107,433


Interest and dividends on investment securities


7,535



10,628



8,628



18,163



17,830


Total interest and dividend income


66,155



68,488



63,261



134,643



125,263


Interest expense











Interest on deposit liabilities


4,287



4,252



3,284



8,539



6,241


Interest on other borrowings


411



528



393



939



889


Total interest expense


4,698



4,780



3,677



9,478



7,130


Net interest income


61,457



63,708



59,584



125,165



118,133


Provision for loan losses


7,688



6,870



2,763



14,558



6,304


Net interest income after provision for loan losses


53,769



56,838



56,821



110,607



111,829


Noninterest income











Fees from other financial services


4,798



4,562



4,744



9,360



9,398


Fee income on deposit liabilities


5,004



5,078



5,138



10,082



10,327


Fee income on other financial products


1,830



1,593



1,675



3,423



3,329


Bank-owned life insurance


2,390



2,259



1,133



4,649



2,004


Mortgage banking income


976



614



617



1,590



1,230


Other income, net


534



458



536



992



972


Total noninterest income


15,532



14,564



13,843



30,096



27,260


Noninterest expense











Compensation and employee benefits


25,750



25,512



23,655



51,262



48,095


Occupancy


5,479



4,670



4,194



10,149



8,474


Data processing


3,852



3,738



3,540



7,590



7,004


Services


2,606



2,426



3,028



5,032



6,075


Equipment


2,189



2,064



1,874



4,253



3,602


Office supplies, printing and postage


1,663



1,360



1,491



3,023



2,998


Marketing


1,323



990



1,085



2,313



1,730


FDIC insurance


628



626



727



1,254



1,440


Other expense


4,519



3,854



4,556



8,373



8,657


Total noninterest expense


48,009



45,240



44,150



93,249



88,075


Income before income taxes


21,292



26,162



26,514



47,454



51,014


Income taxes


4,276



5,323



5,953



9,599



11,493


Net income


$

17,016



$

20,839



$

20,561



$

37,855



$

39,521


Comprehensive income


$

31,291



$

27,091



$

16,579



$

58,382



$

23,464


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









Return on average assets


0.96



1.18



1.20



1.07



1.16


Return on average equity


10.46



13.09



13.56



11.76



13.07


Return on average tangible common equity


11.97



15.03



15.68



13.48



15.13


Net interest margin


3.82



3.99



3.76



3.90



3.76


Efficiency ratio


62.36



57.80



60.13



60.06



60.58


Net charge-offs to average loans outstanding


0.29



0.39



0.32



0.34



0.30


As of period end











Nonaccrual loans to loans receivable held for investment


0.79



0.83



0.57






Allowance for loan losses to loans outstanding


1.17



1.12



1.11






Tangible common equity to tangible assets


8.2



8.1



7.6






Tier-1 leverage ratio


8.7



8.7



8.6






Total capital ratio


14.0



13.9



13.9






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


$

15.0



$

18.0



$

11.1



$

33.0



$

22.0


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, 2019



December 31, 2018


Assets





Cash and due from banks


$

115,214



$

122,059


Interest-bearing deposits


52,415



4,225


Investment securities





Available-for-sale, at fair value


1,298,010



1,388,533


Held-to-maturity, at amortized cost


137,029



141,875


Stock in Federal Home Loan Bank, at cost


8,434



9,958


Loans held for investment


5,008,489



4,843,021


Allowance for loan losses


(58,425)



(52,119)


Net loans


4,950,064



4,790,902


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


9,196



1,805


Other


511,502



486,347


Goodwill


82,190



82,190


Total assets


$

7,164,054



$

7,027,894


Liabilities and shareholder's equity





Deposit liabilities–noninterest-bearing


$

1,883,044



$

1,800,727


Deposit liabilities–interest-bearing


4,374,339



4,358,125


Other borrowings


111,485



110,040


Other


134,162



124,613


Total liabilities


6,503,030



6,393,505


Common stock


1



1


Additional paid in capital


348,423



347,170


Retained earnings


330,141



325,286


Accumulated other comprehensive loss, net of tax benefits





     Net unrealized losses on securities

$

(830)



$

(24,423)



     Retirement benefit plans

(16,711)


(17,541)


(13,645)


(38,068)


Total shareholder's equity


661,024



634,389


Total liabilities and shareholder's equity


$

7,164,054



$

7,027,894


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

Contact:

Julie R. Smolinski

Telephone: (808) 543-7300


Director, Investor Relations & Strategic Planning

E-mail:  ir@hei.com

 

American Savings Bank Logo (PRNewsfoto/American Savings Bank)

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/american-savings-bank-reports-second-quarter-2019-earnings-300893668.html

SOURCE Hawaiian Electric Industries, Inc.