American Savings Bank Reports Third Quarter 2019 Earnings

HONOLULU, Oct. 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 third quarter of 2019 of $22.9 million compared to $17.0 million in the second, or linked, quarter of 2019 and $21.2 million in the third quarter of 2018. Key measures of profitability remained healthy, with return on average equity of 13.7% and return on assets of 1.29%.

"Our results and earnings growth reflect good performance in a volatile market environment. We continued to deliver strong loan growth with steady net interest margins despite the continued challenges of the lower interest rate environment," said Richard Wacker, president and chief executive officer. "In October, we completed the sale of our former headquarters, achieving another important milestone from the transition to our new campus," said Wacker.

Financial Highlights

Net interest income was $62.1 million in the third quarter of 2019 compared to $61.5 million in the linked quarter and $61.1 million in the third quarter of 2018. The increase in net interest income compared to the linked quarter was primarily due to lower amortization of premiums in the investment securities portfolio as well as higher loan volume. The increase in net interest income compared to the prior year quarter was primarily due to higher loan volumes and yields. Net interest margin for the third quarter of 2019 was 3.82%, equivalent to net interest margin in the linked quarter and slightly above the prior year quarter's 3.81%. Year to date, net interest margin was 3.87%.

The provision for loan losses was $3.3 million in the third quarter of 2019 compared to $7.7 million in the linked quarter and $6.0 million in the third quarter of 2018. The lower provision versus the linked quarter was due to the release of reserves from the payoff of a nonperforming commercial credit and the partial charge-off of a commercial credit that had contributed to elevated provision in the linked quarter. The decrease in provision versus the prior year quarter was primarily due to higher provision in the third quarter of 2018 resulting from increased reserves for the consumer and credit scored loan portfolios.

The net charge-off ratio was 0.69% in the third quarter of 2019 compared to 0.29% in the linked quarter and 0.40% in the prior year quarter. The higher net charge-off ratio in the third quarter of 2019 reflects a partial charge-off of the above mentioned commercial credit that impacted provision in the first half of 2019. Nonaccrual loans as a percent of total loans receivable held for investment was 0.63% compared to 0.79% in the linked quarter and 0.59% in the prior year quarter.

Noninterest income was $16.3 million in the third quarter of 2019 compared to $15.5 million in the linked quarter and $15.3 million in the third quarter of 2018. The increase in noninterest income compared to the linked and prior year quarters was primarily due to increases in mortgage banking income, as stronger residential loan production bolstered by the declining interest rate environment resulted in an increase in loan sales. American also recognized a gain on sale of securities during the quarter.

Noninterest expense was $45.9 million in the third quarter of 2019 compared to $48.0 million in the linked quarter and $43.6 million in the third quarter of 2018. The improvement in noninterest expense over the linked quarter was partially driven by an assessment credit received for the insurance premium charged by the Federal Deposit Insurance Corporation. As was the case in the first and second quarters of 2019, noninterest expense for the quarter also included depreciation and occupancy costs related to the new campus building while still including the costs of properties being vacated. In October 2019, American sold one of the properties it vacated with the move to the new campus building. The gain on sale will be recognized in the fourth quarter.

Total loans were $5.1 billion as of September 30, 2019, up $240.0 million or 6.6% annualized from December 31, 2018, driven mainly by increases in the home equity lines of credit, commercial, and commercial real estate portfolios.

Total deposits were $6.2 billion at September 30, 2019, an increase of $37.4 million or 0.8% annualized from December 31, 2018. Low-cost core deposits were $5.4 billion as of September 30, 2019.

Overall, American's return on average equity was 13.7% in the third quarter of 2019 compared to 10.5% in the second quarter of 2019 and 13.8% in the prior year quarter. Return on average assets was 1.29% in the third quarter of 2019 compared to 0.96% in the linked quarter and 1.22% in the third quarter of last year. American paid dividends of $14.0 million to HEI during the quarter while maintaining healthy capital levels--leverage ratio of 8.8% and total capital ratio of 14.0% at September 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 third 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 third quarter of 2019.

HEI plans to announce its third quarter 2019 consolidated financial results on Friday, November 1, 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 November 1, 2019 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 November 15, 2019 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10134898.

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                                              
     Nine months ended September 30



       (in thousands)                                             September 30,                     June 30,              September 30,                   2019               2018
                                                                            2019                          2019                        2018

    ---

                   Interest and dividend income



       Interest and fees on loans                                                   $
       59,260                                               $
       58,620                                       $
       55,885             $
        175,740    $
        163,318


        Interest and dividends on
         investment securities                                             7,599                                     7,535                                  9,300                                      25,762  27,130


        Total interest and dividend income                                66,859                                    66,155                                 65,185                                     201,502 190,448

    ---

                   Interest expense


        Interest on deposit liabilities                                    4,384                                     4,287                                  3,635                                      12,923   9,876


        Interest on other borrowings                                         422                                       411                                    404                                       1,361   1,293



       Total interest expense                                             4,806                                     4,698                                  4,039                                      14,284  11,169

    ---

                   Net interest income                                    62,053                                    61,457                                 61,146                                     187,218 179,279



       Provision for loan losses                                          3,315                                     7,688                                  6,033                                      17,873  12,337



                   Net interest income after provision
                    for loan losses                                       58,738                                    53,769                                 55,113                                     169,345 166,942

    ---

                   Noninterest income


        Fees from other financial services                                 5,085                                     4,798                                  4,543                                      14,445  13,941


        Fee income on deposit liabilities                                  5,320                                     5,004                                  5,454                                      15,402  15,781


        Fee income on other financial
         products                                                          1,706                                     1,830                                  1,746                                       5,129   5,075



       Bank-owned life insurance                                          1,660                                     2,390                                  2,663                                       6,309   4,667



       Mortgage banking income                                            1,490                                       976                                    169                                       3,080   1,399


        Gains on sale of investment
         securities, net                                                     653                                                                                                                        653



       Other income, net                                                    428                                       534                                    736                                       1,420   1,708



       Total noninterest income                                          16,342                                    15,532                                 15,311                                      46,438  42,571

    ---

                   Noninterest expense


        Compensation and employee benefits                                25,364                                    25,750                                 23,952                                      76,626  72,047



       Occupancy                                                          5,694                                     5,479                                  4,363                                      15,843  12,837



       Data processing                                                    3,763                                     3,852                                  3,583                                      11,353  10,587



       Services                                                           2,829                                     2,606                                  2,485                                       7,861   8,560



       Equipment                                                          2,163                                     2,189                                  1,783                                       6,416   5,385


        Office supplies, printing and
         postage                                                           1,297                                     1,663                                  1,556                                       4,320   4,554



       Marketing                                                          1,142                                     1,323                                    993                                       3,455   2,723



       FDIC insurance                                                       (5)                                      628                                    638                                       1,249   2,078



       Other expense                                                      3,676                                     4,519                                  4,240                                      12,049  12,897



       Total noninterest expense                                         45,923                                    48,009                                 43,593                                     139,172 131,668

    ---

                   Income before income taxes                             29,157                                    21,292                                 26,831                                      76,611  77,845



       Income taxes                                                       6,269                                     4,276                                  5,610                                      15,868  17,103



       
              Net income                                                    $
     
         22,888                                           $
     
         17,016                            $
            
         21,221          $
     
          60,743 $
     
          60,742

    ===

                   Comprehensive income                                          $
     
         26,697                                           $
     
         31,291                            $
            
         16,480          $
     
          85,079 $
     
          39,944

    ===


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



       Return on average assets                                            1.29                                      0.96                                   1.22                                        1.14    1.18



       Return on average equity                                           13.75                                     10.46                                  13.80                                       12.44   13.32


        Return on average tangible common
         equity                                                            15.68                                     11.97                                  15.93                                       14.23   15.40



       Net interest margin                                                 3.82                                      3.82                                   3.81                                        3.87    3.78



       Efficiency ratio                                                   58.58                                     62.36                                  57.02                                       59.56   59.35


        Net charge-offs to average loans
         outstanding                                                        0.69                                      0.29                                   0.40                                        0.46    0.33



       As of period end


        Nonaccrual loans to loans
         receivable held for investment                                     0.63                                      0.79                                   0.59


        Allowance for loan losses to loans
         outstanding                                                        1.04                                      1.17                                   1.14


        Tangible common equity to tangible
         assets                                                              8.4                                       8.2                                    7.7



       Tier-1 leverage ratio                                                8.8                                       8.7                                    8.6



       Total capital ratio                                                 14.0                                      14.0                                   13.8


        Dividend paid to HEI (via ASB
         Hawaii, Inc.) ($ in millions)                                                 $
       14.0                                                 $
       15.0                                         $
       14.0                $
        47.0       $
        36.0



               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)                                                     September 30, 2019              December 31, 2018

    ---


       
                Assets



       Cash and due from banks                                       $
          135,813                                          $
       122,059



       Interest-bearing deposits                             1,315                               4,225



       Investment securities


        Available-for-sale, at fair value                 1,210,748                           1,388,533


        Held-to-maturity, at amortized cost                 132,704                             141,875


        Stock in Federal Home Loan Bank, at cost              9,953                               9,958



       Loans held for investment                         5,084,336                           4,843,021



       Allowance for loan losses                          (53,040)                           (52,119)

    ---


       Net loans                                         5,031,296                           4,790,902

    ---

        Loans held for sale, at lower of cost or
         fair value                                          17,115                               1,805



       Other                                               514,116                             486,347



       Goodwill                                             82,190                              82,190



       
                Total assets                                   $
          7,135,250                                        $
       7,027,894

    ===

                     Liabilities and shareholder's equity


        Deposit liabilities-noninterest-bearing                     $
          1,885,028                                        $
       1,800,727


        Deposit liabilities-interest-bearing              4,311,195                           4,358,125



       Other borrowings                                    129,190                             110,040



       Other                                               135,606                             124,613



       
                Total liabilities                    6,461,019                           6,393,505

    ---


       Common stock                                              1                                   1



       Additional paid-in capital                          348,933                             347,170



       Retained earnings                                   339,029                             325,286


        Accumulated other comprehensive loss, net
         of tax benefits


        Net unrealized gains (losses)
         on securities                                                  $
          2,945                   $
              (24,423)


        Retirement benefit plans                           (16,677)          (13,732)         (13,645)             (38,068)



                     Total shareholder's equity             674,231                             634,389

    ---

                     Total liabilities and shareholder's
                      equity                                        $
          7,135,250                                        $
       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

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SOURCE Hawaiian Electric Industries, Inc.