American Savings Bank Reports Third Quarter 2018 Earnings
HONOLULU, Oct. 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 third quarter of 2018 of $21.2 million compared to $20.6 million in the second, or linked, quarter of 2018 and $17.6 million in the third quarter of 2017. Key measures of profitability continued to strengthen, with return on average equity rising to 13.80%, up 0.24% and 2.16% compared to the linked and prior year quarters, respectively.
"We are pleased to report another quarter of strong earnings, driven by expanding net interest margin, improving operational efficiency and bottom line benefits of tax reform," said Richard Wacker, president and chief executive officer. "We expect to complete our new campus and consolidate our teammates into this new collaborative environment beginning around the end of this year. We are excited about the possibilities it represents to further improve the ways we make banking easy for our customers and deliver sustained high performance for them and our shareholders."
Financial Highlights
Net interest income was $61.1 million in the third quarter of 2018 compared to $59.6 million in the linked quarter and $56.1 million in the third quarter of 2017. Net interest margin for the third quarter of 2018 was 3.81%, compared to 3.76% in the linked quarter and 3.69% in the prior year quarter of 2017. Yield on earning assets increased 7 basis points compared to the linked quarter and 18 basis points compared to the prior year quarter. Cost of funds was 26 basis points for the third quarter of 2018, compared to 24 basis points in the linked quarter, and 20 basis points in the prior year quarter of 2017.
The provision for loan losses was $6.0 million in the third quarter of 2018 compared to $2.8 million in the linked quarter and $0.5 million in the third quarter of 2017. The higher third quarter of 2018 provision was primarily due to additional loan loss reserves for the consumer loan portfolio. In addition, the prior year quarter provision reflected the release of reserves attributed to the strategic reduction in the commercial loan portfolio, including the $53 million decrease in exposure to national syndicated credits. The net charge-off ratio was 0.40% in the third quarter of 2018 compared to 0.32% in both the linked and prior year quarters. Nonaccrual loans as a percent of total loans receivable held for investment was 0.59% compared to 0.57% in the linked quarter and 0.50% in the prior year quarter.
Noninterest income was $15.3 million in the third quarter of 2018 compared to $13.8 million in the linked quarter and $15.2 million in the third quarter of 2017. The increase in noninterest income in the third quarter of 2018 compared to the linked quarter was due to an increase in bank-owned life insurance income of $1.5 million. The increase in noninterest income compared to the prior year quarter was due to a $1.4 million increase in bank-owned life insurance income substantially offset by lower debit card interchange fees relating to a new accounting standard that reclassified $1.1 million of debit card expenses in 2018 to noninterest income.
Noninterest expense was $43.6 million in the third quarter of 2018 compared to $44.2 million in the linked quarter and $44.1 million in the third quarter of 2017.
Tax expense was approximately $3.6 million lower in the third quarter of 2018 compared to the third quarter of 2017, primarily driven by the benefits of the lower federal corporate tax rate from the Tax Cuts and Jobs Act of 2017.
Total loans were $4.8 billion at September 30, 2018, up $83 million or 2.4% annualized from December 31, 2017, driven mainly by increases in home equity lines of credit, commercial and consumer loans of $90 million.
Total deposits were $6.1 billion at September 30, 2018, an increase of $240 million or 5.4% annualized from December 31, 2017 including $100 million in repurchase agreements that were transferred into deposit accounts. Excluding such transfer, total deposits increased by 3.1% annualized.
Overall, American's return on average equity was 13.80% in the third quarter of 2018 compared to 13.56% in the second quarter of 2018 and 11.64% in the prior year quarter. Return on average assets was 1.22% in the third quarter of 2018 compared to 1.20% in the second quarter of 2018 and 1.07% in the same quarter last year. American's solid results enabled it to pay dividends of $14.0 million to HEI while maintaining healthy capital levels -- leverage ratio of 8.6% and total capital ratio of 13.8% at September 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 third 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 third quarter of 2018.
HEI plans to announce its third quarter 2018 consolidated financial results on Wednesday, November 7, 2018 and will also conduct a webcast and conference call at 11:00 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 online replay of the November 7, 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 November 21, 2018 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10125059.
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 Nine months ended September 30
(in thousands) September 30, June 30, September 30, 2018 2017
2018 2018 2017
---
Interest and dividend income
Interest and fees on loans $
55,885 $
54,633 $
52,210 $
163,318 $
155,269
Interest and dividends on
investment securities 9,300 8,628 6,850 27,130 20,593
Total interest and dividend income 65,185 63,261 59,060 190,448 175,862
---
Interest expense
Interest on deposit liabilities 3,635 3,284 2,444 9,876 6,858
Interest on other borrowings 404 393 470 1,293 2,110
Total interest expense 4,039 3,677 2,914 11,169 8,968
---
Net interest income 61,146 59,584 56,146 179,279 166,894
Provision for loan losses 6,033 2,763 490 12,337 7,231
Net interest income after
provision for loan losses 55,113 56,821 55,656 166,942 159,663
---
Noninterest income
Fees from other financial services 4,543 4,744 5,635 13,941 17,055
Fee income on deposit liabilities 5,454 5,138 5,533 15,781 16,526
Fee income on other financial
products 1,746 1,675 1,904 5,075 5,741
Bank-owned life insurance 2,663 1,133 1,257 4,667 4,165
Mortgage banking income 169 617 520 1,399 1,896
Other income, net 736 536 380 1,708 1,229
Total noninterest income 15,311 13,843 15,229 42,571 46,612
---
Noninterest expense
Compensation and employee benefits 23,952 23,655 23,512 72,047 71,095
Occupancy 4,363 4,194 4,284 12,837 12,623
Data processing 3,583 3,540 3,262 10,587 9,749
Services 2,485 3,028 2,863 8,560 7,989
Equipment 1,783 1,874 1,814 5,385 5,333
Office supplies, printing and
postage 1,556 1,491 1,444 4,554 4,506
Marketing 993 1,085 934 2,723 2,290
FDIC insurance 638 727 746 2,078 2,296
Other expense 4,240 4,556 5,262 12,897 14,674
Total noninterest expense 43,593 44,150 44,121 131,668 130,555
---
Income before income taxes 26,831 26,514 26,764 77,845 75,720
Income taxes 5,610 5,953 9,172 17,103 25,582
Net income $
21,221 $
20,561 $
17,592 $
60,742 $
50,138
===
Comprehensive income $
16,480 $
16,579 $
18,009 $
39,944 $
53,613
===
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets 1.22 1.20 1.07 1.18 1.02
Return on average equity 13.80 13.56 11.64 13.32 11.24
Return on average tangible common
equity 15.93 15.68 13.47 15.40 13.04
Net interest margin 3.81 3.76 3.69 3.78 3.68
Efficiency ratio 57.02 60.13 61.82 59.35 61.15
Net charge-offs to average loans
outstanding 0.40 0.32 0.32 0.33 0.27
As of period end
Nonaccrual loans to loans
receivable held for investment 0.59 0.57 0.50
Allowance for loan losses to loans
outstanding 1.14 1.11 1.13
Tangible common equity to tangible
assets 7.75 7.64 8.01
Tier-1 leverage ratio 8.6 8.6 8.7
Total capital ratio 13.8 13.9 13.9
Dividend paid to HEI (via ASB
Hawaii, Inc.) ($ in millions) $
14.0 $
11.1 $
9.4 $
36.0 $
28.1
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)
(in thousands) September 30, 2018 December 31, 2017
---
Assets
Cash and due from banks $
119,453 $
140,934
Interest-bearing deposits 39,575 93,165
Investment securities
Available-for-sale, at fair value 1,387,571 1,401,198
Held-to-maturity, at amortized cost 102,498 44,515
Stock in Federal Home Loan Bank, at cost 8,158 9,706
Loans held for investment 4,754,359 4,670,768
Allowance for loan losses (54,127) (53,637)
---
Net loans 4,700,232 4,617,131
---
Loans held for sale, at lower of cost or fair
value 1,036 11,250
Other 488,743 398,570
Goodwill 82,190 82,190
Total assets $
6,929,456 $
6,798,659
===
Liabilities and shareholder's equity
Deposit liabilities-noninterest-bearing $
1,789,351 $
1,760,233
Deposit liabilities-interest-bearing 4,341,064 4,130,364
Other borrowings 71,110 190,859
Other 115,401 110,356
Total liabilities 6,316,926 6,191,812
---
Common stock 1 1
Additional paid in capital 346,757 345,018
Retained earnings 317,519 292,957
Accumulated other comprehensive loss, net of
tax benefits
Net unrealized losses on
securities $
(37,719) $
(14,951)
Retirement benefit plans (14,028) (51,747) (16,178) (31,129)
Total shareholder's equity 612,530 606,847
---
Total liabilities and shareholder's equity $
6,929,456 $
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
Director, Investor
Relations
E-mail: ir@hei.com
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SOURCE Hawaiian Electric Industries, Inc.
