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American Savings Bank Reports Second Quarter 2018 Earnings

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American Savings Bank Reports Second Quarter 2018 Earnings

2Q2018 Net Income of $20.6 Million

Return on Assets of 1.20% and Return on Equity of 13.56%

Good Loan and Deposit Growth; Strong Capital

PR Newswire

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


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)


 

(in thousands)


June 30, 2018


December 31, 2017

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

 

Hawaiian Electric Industries, Inc. (PRNewsFoto/Hawaiian Electric Industries, Inc.)

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/american-savings-bank-reports-second-quarter-2018-earnings-300688838.html

SOURCE Hawaiian Electric Industries, Inc.

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