American Savings Bank Reports Fourth Quarter And Full Year 2019 Financial Results

Full Year 2019 Performance Highlights

- Net Income of $89 million, an increase of $6.5 million or 7.8% over the previous year

- Results for 2019 include after-tax gain of $5.5 million[1] related to the sales of former properties, net of exit costs to transition to new campus

- Grew total loans $277 million or 5.7% to $5.1 billion and total deposits $113 million or 1.8% to $6.3 billion

- Achieved return on average assets of 1.25% and return on average equity of 13.5%

- Net interest margin remained above peers, at 3.85%, despite lower interest rate environment

- Efficiency ratio improved to 57.8%, compared to 59.4% in prior year

Company Release - 1/30/2020 7:40 PM ET

HONOLULU, Jan. 30, 2020 /PRNewswire/ -- American Savings Bank, F.S.B. (American), a wholly-owned subsidiary of Hawaiian Electric Industries, Inc. (NYSE: HE), today reported 2019 net income of $89.0 million, compared to $82.5 million in 2018.  Net income for 2019 included an after-tax gain of $5.5 million1 related to the sales of former properties, net of exit costs to transition to American's new campus.  Key measures of efficiency and profitability were healthy, with an efficiency ratio for the full year of 57.8% compared to 59.4% in 2018, net interest margin of 3.85% compared to 3.83% for 2018, and return on average equity of 13.5% unchanged compared to last year.

1  The after-tax gain on sale of properties and the after-tax campus transition costs for 2019 was $7.9 million and $2.4 million, respectively, and $7.9 million and $0.2 million for the fourth quarter of 2019, respectively.

"We continued to execute on our strategic plan in the fourth quarter of 2019 and successfully completed the sale of our former headquarters and Mililani Service Center," said Rich Wacker, president and chief executive officer of American.  "We are pleased that this quarter caps a year of strong financial results, driven by healthy net interest margins and improved operational efficiencies.  As we look into 2020, we are excited to continue to make banking easy for our customers," said Wacker.

Net income for the fourth quarter of 2019 was $28.2 million, compared to $22.9 million in the third, or linked, quarter of 2019 and $21.8 million in the fourth quarter of 2018.  Net income for the fourth quarter of 2019 included an after-tax gain of $7.7 million1 related to the aforementioned sales of properties, net of exit costs to transition to the new campus.

Financial Highlights

Net interest income was $248.1 million in 2019, an increase of 2.2% compared to $242.7 million in 2018.  Fourth quarter 2019 net interest income was $60.9 million compared to $62.1 million in the linked quarter and $63.4 million in the fourth quarter of 2018.  The decrease in net interest income in the fourth quarter of 2019 reflects lower asset yields within the loan portfolio and, compared to the fourth quarter of 2018, higher amortization of premiums in the investment securities portfolio as a result of the lower yielding rate environment.

The provision for loan losses was $23.5 million in 2019 compared to $14.7 million in 2018.  The fourth quarter of 2019 provision for loan losses was $5.6 million compared to $3.3 million in the linked quarter and $2.4 million in the fourth quarter of 2018.  The higher provision for loan losses for the year and the quarter was due in part to additional loan loss reserves for the consumer loan portfolio and borrower-specific circumstances requiring additional reserves on loans within the commercial and commercial real estate portfolios.

The 2019 net charge-off ratio was 0.45% compared to 0.34% in 2018, primarily due to charge-off activity in the personal unsecured and commercial loan portfolios.  The net charge-off ratio was 0.41% in the fourth quarter of 2019 compared to 0.69% in the linked quarter and 0.37% in the prior year quarter.  Nonaccrual loans as a percent of total loans receivable held for investment was 0.58% in the fourth quarter of 2019, compared to 0.63% in the linked quarter and 0.56% in the prior year quarter.

1  The after-tax gain on sale of properties and the after-tax campus transition costs for 2019 was $7.9 million and $2.4 million, respectively, and $7.9 million and $0.2 million for the fourth quarter of 2019, respectively.

Noninterest income for 2019 was $72.8 million compared to $56.1 million in 2018.  Fourth quarter of 2019 noninterest income was $26.3 million compared to $16.3 million in the linked quarter and $13.5 million in the fourth quarter of 2018.  The higher noninterest income for the year and the quarter was primarily due to the $10.8 million pre-tax gain on the sales of former properties and increased mortgage banking income.

Noninterest expense for 2019 was $185.4 million compared to $177.4 million in 2018.  Fourth quarter of 2019 noninterest expense was $46.2 million compared to $45.9 million in the linked quarter and $45.7 million in the fourth quarter of 2018.  The increase in noninterest expense for the year was primarily due to higher compensation and benefit expense, as well as higher occupancy costs related to American's move to its new campus.  For 2019, non-recurring campus transition costs totaled approximately $3.2 million pre-tax.

Total loans were $5.1 billion as of December 31, 2019, up 5.7% from December 31, 2018, with retail loans up 4.1%.  Commercial real estate and commercial loans grew 9.6% from December 31, 2018.

Total deposits were $6.3 billion at December 31, 2019, an increase of 1.8% from December 31, 2018.  The average cost of funds was 0.29% for the full year 2019, up four basis points versus the prior year.  For the fourth quarter of 2019, the average cost of funds was 0.26%, down four basis points from the linked quarter and down two basis points from the prior year quarter.

Overall, American's return on average equity for the full year 2019 was solid at 13.5%, consistent with full year 2018.  Return on average assets for the full year was 1.25% in 2019 compared to 1.20% in 2018.  For the fourth quarter of 2019, return on average equity was 16.5%, compared to 13.8% in the linked quarter and 14.1% in the fourth quarter of 2018.  Return on average assets was 1.58% for the fourth quarter of 2019, compared to 1.29% in the linked quarter and 1.25% in the same quarter last year.

In 2019, American paid dividends of $56 million to HEI while maintaining healthy capital levels—leverage ratio of 9.1% and total capital ratio of 14.3% at December 31, 2019.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2020 EPS GUIDANCE

Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its fourth quarter and full year 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 fourth quarter and full year 2019.

HEI plans to announce its fourth quarter and full year 2019 consolidated financial results on Thursday, February 13, 2020 and will also conduct a webcast and conference call at 11:15 a.m.Hawaii time (4:15 p.m. Eastern time) that same day to discuss its consolidated earnings, including American's earnings, and 2020 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'sSecurities 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'sSEC 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'sSEC filings.

An on-line replay of the February 13, 2020 webcast will be available on HEI's website beginning about two hours after the event.  Audio replays of the conference call will also be available approximately two hours after the event through February 27, 2020 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode:  10136945.

HEI supplies power to approximately 95% of Hawaii's population through its electric utility, Hawaiian Electric; 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 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


Years ended December 31

(in thousands)


December 31,
2019


September 30,
 2019


December 31,
2018


2019


2018

Interest and dividend income











Interest and fees on loans


$

57,892



$

59,260



$

57,145



$

233,632



$

220,463


Interest and dividends on investment securities


7,160



7,599



10,632



32,922



37,762


Total interest and dividend income


65,052



66,859



67,777



266,554



258,225


Interest expense











Interest on deposit liabilities


3,907



4,384



4,115



16,830



13,991


Interest on other borrowings


249



422



255



1,610



1,548


Total interest expense


4,156



4,806



4,370



18,440



15,539


Net interest income


60,896



62,053



63,407



248,114



242,686


Provision for loan losses


5,607



3,315



2,408



23,480



14,745


Net interest income after provision for loan losses


55,289



58,738



60,999



224,634



227,941


Noninterest income











Fees from other financial services


4,830



5,085



4,996



19,275



18,937


Fee income on deposit liabilities


5,475



5,320



5,530



20,877



21,311


Fee income on other financial products


1,378



1,706



1,977



6,507



7,052


Bank-owned life insurance


1,378



1,660



390



7,687



5,057


Mortgage banking income


1,863



1,490



94



4,943



1,493


Gain on sale of real estate


10,762







10,762




Gains on sale of investment securities, net




653





653




Other income, net


654



428



492



2,074



2,200


Total noninterest income


26,340



16,342



13,479



72,778



56,050


Noninterest expense











Compensation and employee benefits


26,383



25,364



26,340



103,009



98,387


Occupancy


5,429



5,694



4,236



21,272



17,073


Data processing


3,953



3,763



3,681



15,306



14,268


Services


2,378



2,829



2,287



10,239



10,847


Equipment


2,344



2,163



1,801



8,760



7,186


Office supplies, printing and postage


1,192



1,297



1,580



5,512



6,134


Marketing


1,035



1,142



844



4,490



3,567


FDIC insurance


(45)



(5)



635



1,204



2,713


Other expense


3,537



3,676



4,341



15,586



17,238


Total noninterest expense


46,206



45,923



45,745



185,378



177,413


Income before income taxes


35,423



29,157



28,733



112,034



106,578


Income taxes


7,193



6,269



6,966



23,061



24,069


Net income


$

28,230



$

22,888



$

21,767



$

88,973



$

82,509


Comprehensive income


$

33,300



$

26,697



$

35,446



$

118,379



$

75,390


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











Return on average assets


1.58



1.29



1.25



1.25



1.20


Return on average equity


16.45



13.75



14.08



13.48



13.51


Return on average tangible common equity


18.69



15.68



16.23



15.39



15.61


Net interest margin


3.74



3.82



3.95



3.85



3.83


Efficiency ratio


52.97



58.58



59.50



57.77



59.39


Net charge-offs to average loans outstanding


0.41



0.69



0.37



0.45



0.34


As of period end











Nonaccrual loans to loans receivable held for investment


0.58



0.63



0.56






Allowance for loan losses to loans outstanding


1.04



1.04



1.08






Tangible common equity to tangible assets


8.6



8.4



8.0






Tier-1 leverage ratio


9.1



8.8



8.7






Total capital ratio


14.3



14.0



13.9






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


$

9.0



$

14.0



$

14.0



$

56.0



$

50.0



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

 

American Savings Bank, F.S.B.

BALANCE SHEETS DATA

(Unaudited)


(in thousands)

December 31, 2019

December 31, 2018

Assets





Cash and due from banks


$

129,770



$

122,059


Interest-bearing deposits


48,628



4,225


Investment securities





Available-for-sale, at fair value


1,232,826



1,388,533


Held-to-maturity, at amortized cost


139,451



141,875


Stock in Federal Home Loan Bank, at cost


8,434



9,958


Loans held for investment


5,121,176



4,843,021


Allowance for loan losses


(53,355)



(52,119)


Net loans


5,067,821



4,790,902


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


12,286



1,805


Other


511,611



486,347


Goodwill


82,190



82,190


Total assets


$

7,233,017



$

7,027,894


Liabilities and shareholder's equity





Deposit liabilities–noninterest-bearing


$

1,909,682



$

1,800,727


Deposit liabilities–interest-bearing


4,362,220



4,358,125


Other borrowings


115,110



110,040


Other


146,954



124,613


Total liabilities


6,533,966



6,393,505


Common stock


1



1


Additional paid-in capital


349,453



347,170


Retained earnings


358,259



325,286


Accumulated other comprehensive loss, net of tax benefits





     Net unrealized gains (losses) on securities

$

2,481



$

(24,423)



     Retirement benefit plans

(11,143)


(8,662)


(13,645)


(38,068)


   Total shareholder's equity


699,051



634,389


   Total liabilities and shareholder's equity


$

7,233,017



$

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)

 

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SOURCE Hawaiian Electric Industries, Inc.