American Savings Bank Reports Second Quarter 2018 Earnings
HONOLULU, July 30, 2018 /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 2018 of $20.6 million compared to $19.0 million in the first, or linked, quarter of 2018 and $16.7 million in the second quarter of 2017. Key measures of profitability improved, with return on average equity rising to 13.56%, up 0.98% and 2.31% compared to the linked and prior year quarters, respectively.
"We are pleased to report another quarter of record earnings, reflecting a healthy Hawaii economic environment, good operating execution, and the bottom line benefits of tax reform," said Richard Wacker, president and chief executive officer. "We are seeing the benefits of our efforts to make banking easy for customers and build deeper relationships with them."
Tax expense was approximately $2 million lower in the second quarter of 2018 compared to the second quarter of 2017, primarily driven by the benefits of the lower federal corporate tax rate from the Tax Cuts and Jobs Act of 2017.
Financial Highlights
Net interest income was $59.6 million in the second quarter of 2018 compared to $58.5 million in the linked quarter and $55.9 million in the second quarter of 2017. The increase in net interest income compared to the linked quarter was primarily due to good deposit growth that funded commercial and home equity lines of credit loan portfolio growth. Net interest margin for the second quarter of 2018 was 3.76%, unchanged from the linked quarter, compared to 3.68% in the prior year quarter of 2017. Yield on earning assets remained relatively unchanged during the quarter, as yield on loans and leases increased 6 basis points from the previous quarter, offsetting an increase in amortization of premium within the investment portfolio. Cost of funds was 0.24% for the second quarter of 2018, relatively unchanged from the linked quarter, and compared to 0.21% in the prior year quarter of 2017.
The provision for loan losses was $2.8 million in the second quarter of 2018 compared to $3.5 million in the linked quarter and $2.8 million in the second quarter of 2017. The net charge-off ratio was 0.32% in the second quarter of 2018 compared to 0.28% in the linked quarter and 0.21% in the prior year quarter. Nonaccrual loans as a percent of total loans receivable held for investment was 0.57% compared to 0.53% in the linked quarter and 0.44% in the prior year quarter.
Noninterest income was $13.8 million in the second quarter of 2018 compared to $13.4 million in the linked quarter and $16.2 million in the second quarter of 2017. The decrease in noninterest income in the second quarter of 2018 compared to the second quarter of 2017 was primarily due to lower net debit card interchange fees of $1.0 million, resulting primarily from a reclassification of $1.1 million in expenses relating to a new accounting standard discussed last quarter and lower income from bank-owned life insurance.
Noninterest expense was $44.2 million in the second quarter of 2018 compared to $43.9 million in the linked quarter and $44.6 million in the second quarter of 2017.
Total loans were $4.8 billion at June 30, 2018, up $104 million or 4.4% annualized from December 31, 2017, driven mainly by increases in commercial and commercial real estate loans of $91 million.
Total deposits were $6.1 billion at June 30, 2018, an increase of $226 million or 7.7% annualized from December 31, 2017 including $100 million in repurchase agreements that were transferred into deposit accounts. Excluding such transfer, total deposits increased by 4.2% annualized.
Overall, American's return on average equity was 13.56% in the second quarter of 2018 compared to 12.58% in the first quarter of 2018 and 11.25% in the prior year quarter. Return on average assets was 1.20% in the second quarter of 2018 compared to 1.12% in the first quarter of 2018 and 1.02% in the same quarter last year. American's solid results enabled it to pay dividends of $11.1 million to HEI while maintaining healthy capital levels -- leverage ratio of 8.6% and total capital ratio of 13.9% at June 30, 2018.
HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2018 EPS GUIDANCE
Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its second quarter 2018 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 2018.
HEI plans to announce its second quarter 2018 consolidated financial results on Friday, August 3, 2018 and will also conduct a webcast and conference call at 10:00 a.m. Hawaii time (4:00 p.m. Eastern time) that same day to discuss its consolidated earnings, including American's earnings, and 2018 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 such portions 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 3, 2018 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, 2018 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10121450.
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.
American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)
Three months ended Six months ended June 30
(in thousands) June 30, 2018 March 31, 2018 June 30, 2017 2018 2017
------------- ------------- -------------- ------------- ---- ----
Interest and dividend income
Interest and fees on loans $54,633 $52,800 $52,317 $107,433 $103,059
Interest and dividends on
investment securities 8,628 9,202 6,763 17,830 13,743
Total interest and dividend
income 63,261 62,002 59,080 125,263 116,802
--------------------------- ------ ------ ------ ------- -------
Interest expense
Interest on deposit liabilities 3,284 2,957 2,311 6,241 4,414
Interest on other borrowings 393 496 824 889 1,640
Total interest expense 3,677 3,453 3,135 7,130 6,054
---------------------- ----- ----- ----- ----- -----
Net interest income 59,584 58,549 55,945 118,133 110,748
Provision for loan losses 2,763 3,541 2,834 6,304 6,741
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Net interest income after
provision for loan losses 56,821 55,008 53,111 111,829 104,007
-------------------------- ------ ------ ------ ------- -------
Noninterest income
Fees from other financial
services 4,744 4,654 5,810 9,398 11,420
Fee income on deposit liabilities 5,138 5,189 5,565 10,327 10,993
Fee income on other financial
products 1,675 1,654 1,971 3,329 3,837
Bank-owned life insurance 1,133 871 1,925 2,004 2,908
Mortgage banking income 617 613 587 1,230 1,376
Other income, net 536 436 391 972 849
Total noninterest income 13,843 13,417 16,249 27,260 31,383
------------------------ ------ ------ ------ ------ ------
Noninterest expense
Compensation and employee
benefits 23,655 24,440 24,541 48,095 47,583
Occupancy 4,194 4,280 4,185 8,474 8,339
Data processing 3,540 3,464 3,207 7,004 6,487
Services 3,028 3,047 2,766 6,075 5,126
Equipment 1,874 1,728 1,771 3,602 3,519
Office supplies, printing and
postage 1,491 1,507 1,527 2,998 3,062
Marketing 1,085 645 839 1,730 1,356
FDIC insurance 727 713 822 1,440 1,550
Other expense 4,556 4,101 4,906 8,657 9,412
Total noninterest expense 44,150 43,925 44,564 88,075 86,434
------------------------- ------ ------ ------ ------ ------
Income before income taxes 26,514 24,500 24,796 51,014 48,956
Income taxes 5,953 5,540 8,063 11,493 16,410
Net income $20,561 $18,960 $16,733 $39,521 $32,546
========== ======= ======= ======= ======= =======
Comprehensive income $16,579 $6,885 $18,956 $23,464 $35,604
==================== ======= ====== ======= ======= =======
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets 1.20 1.12 1.02 1.16 1.00
Return on average equity 13.56 12.58 11.25 13.07 11.04
Return on average tangible common
equity 15.68 14.57 13.06 15.13 12.82
Net interest margin 3.76 3.76 3.68 3.76 3.68
Efficiency ratio 60.13 61.04 61.73 60.58 60.81
Net charge-offs to average loans
outstanding 0.32 0.28 0.21 0.30 0.25
As of period end
Nonaccrual loans to loans
receivable held for investment 0.57 0.53 0.44
Allowance for loan losses to
loans outstanding 1.11 1.14 1.19
Tangible common equity to
tangible assets 7.64 7.66 7.88
Tier-1 leverage ratio 8.6 8.6 8.5
Total capital ratio 13.9 14.0 13.7
Dividend paid to HEI (via ASB
Hawaii, Inc.) ($ in millions) $11.1 $10.9 $9.4 $22.0 $18.8
The Statements of Income Data reflects the retrospective application of ASU No. 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," which was adopted in first quarter 2018. Nonservice cost was reclassified from "Compensation and employee benefits" to "Other expense."
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)
June 30, 2018 December 31, 2017
(in thousands)
-------------
Assets
Cash and due from banks $120,189 $140,934
Interest-bearing deposits 109,230 93,165
Investment securities
Available-for-sale, at fair value 1,409,528 1,401,198
Held-to-maturity, at amortized cost 62,630 44,515
Stock in Federal Home Loan Bank, at cost 10,158 9,706
Loans held for investment 4,774,744 4,670,768
Allowance for loan losses (52,803) (53,637)
------------------------- ------- -------
Net loans 4,721,941 4,617,131
--------- --------- ---------
Loans held for sale, at lower of cost or fair
value 5,248 11,250
Other 462,469 398,570
Goodwill 82,190 82,190
Total assets $6,983,583 $6,798,659
============ ========== ==========
Liabilities and shareholder's equity
Deposit liabilities-noninterest-bearing $1,812,348 $1,760,233
Deposit liabilities-interest-bearing 4,303,761 4,130,364
Other borrowings 126,930 190,859
Other 131,063 110,356
Total liabilities 6,374,102 6,191,812
----------------- --------- ---------
Common stock 1 1
Additional paid in capital 346,188 345,018
Retained earnings 310,298 292,957
Accumulated other comprehensive loss, net of
tax benefits
Net unrealized losses on
securities $(32,596) $(14,951)
Retirement benefit plans (14,410) (47,006) (16,178) (31,129)
Total shareholder's equity 609,481 606,847
-------------------------- ------- -------
Total liabilities and shareholder's equity $6,983,583 $6,798,659
========================================== ========== ==========
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
Manager, Investor Relations E-mail: ir@hei.com
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SOURCE Hawaiian Electric Industries, Inc.
