American Savings Bank Reports 2012 And Fourth Quarter Earnings 2012 Net Income of $58.6 Million

Fourth Quarter 2012 Net Income of $14.4 Million

Bank Continues to Deliver Solid Results

HONOLULU, Jan. 30, 2013 /PRNewswire/ -- American Savings Bank, F.S.B. (American), a wholly-owned indirect subsidiary of Hawaiian Electric Industries, Inc. (HEI) (NYSE - HE) today reported net income for the full year of 2012 was $58.6 million compared with $59.8 million in 2011.  Net income for the fourth quarter of 2012 was $14.4 million, compared with $14.2 million in the third, or linked, quarter of 2012 and $15.3 million in the fourth quarter of 2011.           

"American delivered solid financial performance in 2012 and continued to execute well on our strategic plan to safely grow the bank in the low interest rate environment.  We maintained good profitability levels with return on average equity of 11.7% and continued to provide reliable dividends to our parent.  Our loans to customers increased 2.6% in 2012, with growth in each of our strategic segments of commercial lending, commercial real estate, home equity lending, and consumer lending.  Our residential mortgage teams originated nearly $1 billion of new long-term residential mortgages, nearly double the level of the prior year, bringing new customer relationships to the bank.  To control interest rate risk, we sold the investment associated with more than half of those loans and generated gains on sale that helped fund spending on the bank's strategic priorities. Some are visible, such as our new mobile banking application that makes American the only bank in our market offering customers the ability to deposit checks from anywhere using their smartphone.  Less visible but critically important, our new analytical tools and data warehouse further strengthen our risk management and marketing segmentation capabilities," said Richard Wacker, president and chief executive officer of American.

Full Year Net Income:
2012 net income of $58.6 million was $1.2 million lower than 2011 net income, reflecting the challenging low interest rate environment.  The primary drivers impacting net income for the year were (on an after-tax basis):

  • $4 million lower net interest income primarily due to declining asset yields, partially offset by the favorable effect of asset growth; and
  • $5 million higher noninterest expense primarily attributable to supporting higher transaction volumes and spending on the bank's strategic projects and priorities, as well as increasing employee benefit expenses.

These were largely offset by (after-tax):

  • $6 million higher noninterest income primarily due to higher gains on sales of new residential mortgages; and
  • $1 million lower provision for loan losses.

Fourth Quarter Net Income:
Fourth quarter 2012 net income of $14.4 million was essentially flat with the linked quarter as higher noninterest income driven mainly by higher gains on sales of newly originated residential real estate loans was offset by higher noninterest expense and lower net interest income.

Compared to the same quarter of 2011, net income declined by $1.0 million primarily driven by (on an after-tax basis):

  • $2 million lower net interest income from declining asset yields due to the persistent low rate environment; and
  • $3 million higher noninterest expense as previously discussed.

These were offset by $4 million higher noninterest income primarily due to higher gains on sale of new residential mortgages and higher fee income.

Financial Highlights:
Net interest margin was 3.93% in 2012 compared to 4.12% in 2011.  Net interest margin was 3.81% in the fourth quarter of 2012 compared to 3.92% in the linked quarter and 4.16% in the fourth quarter of 2011.  The decline in net interest margin was primarily attributable to lower yields on interest-earning assets as loans continued to reprice down due to the low interest rate environment.

The provision for loan losses (pretax) was $12.9 million in 2012 compared to $15.0 million in 2011.  The $2.1 million decline in the provision from the prior year was driven by lower net charge-offs consistent with the ongoing improvement in the bank's loan portfolio and the Hawaii economy.  The 2012 net charge-off ratio improved to 0.24% from 0.49% in 2011.  The fourth quarter of 2012 provision for loan losses was $3.4 million, $0.2 million lower than the linked quarter and $0.7 million lower than fourth quarter of 2011.  Similarly, the fourth quarter 2012 net charge-off ratio improved to 0.13% from 0.35% in the linked quarter and 0.48% in the prior year quarter. 

Noninterest expense (pretax) for 2012 was $152.3 million, up from $143.4 million in 2011.  The higher gain on sale revenue enabled management to strategically increase spending to support higher transaction volumes and to build capabilities for future growth.  2012 expenses were also impacted by higher employee benefit expenses including lower discount rates on pension expenses.  In the fourth quarter 2012, non-interest expense (pretax) was $40.9 million, up from $38.6 million in the linked quarter and $36.6 million in the fourth quarter of 2011.     

Loan growth was 2.6% in 2012, in line with the bank's target of low to mid-single digit loan growth.  Consistent with American's strategy to control interest rate risk, loan growth was primarily driven by shorter-duration and variable rate loans.  For the year, American ranked #1 in Hawaii for home equity line of credit loan production, growing that portfolio by 18%.  This growth was offset by a controlled decline in the level of  long-term fixed rate residential mortgages held on the balance sheet and lower land loans.

Total deposits were $4.2 billion at December 31, 2012, up $103 million from September 30, 2012 and up $160 million from December 31, 2011.  Low-cost core deposits increased $130 million from September 30, 2012 and $230 million from December 31, 2011.  The average cost of funds was 0.26% for the full year 2012, down 8 basis points from the prior year.  For the fourth quarter 2012, average cost of funds was a very low 0.23%, down 2 basis points from the linked quarter and down 6 basis points from the prior year quarter.     

Overall, American's return on average equity for the full year remained solid at 11.7% in 2012 compared to 12.0% in 2011 and the return on average assets for the full year was 1.18% in 2012 compared to 1.23% in 2011.  For the fourth quarter 2012, the return on average equity was 11.3%, up slightly from 11.2% in the linked quarter but down from 12.2% in the same quarter last year.  Return on average assets was 1.15% for the fourth quarter of 2012, unchanged from the linked quarter and down from 1.26% in the same quarter last year. 

In 2012, American paid dividends of $45 million to HEI while maintaining healthy capital levels -- leverage ratio of 9.1% and total risk-based capital ratio of 12.8% at December 31, 2012.

HEI EARNINGS RELEASE, WEBCAST AND CONFERENCE CALL
Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its fourth quarter 2012 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 2012.

HEI plans to announce its fourth quarter and 2012 consolidated financial results on Friday, February 15, 2013 and will conduct a webcast and conference call to review its consolidated earnings, including American's earnings, and management's outlook for 2013, on Friday, February 15, 2013, at 12:00 noon Hawaii time (5:00 p.m. Eastern time).  The event can be accessed through HEI's website at www.hei.com or by dialing (866) 202-3048, passcode:  97355196 for the teleconference call.  The presentation for the webcast will be on HEI's website under the headings "Investor Relations," "News & Events" and "Presentations & Webcasts."  HEI and Hawaiian Electric Company, Inc. (HECO) 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, in addition to following HEI's, HECO's and American's press releases, HEI's and HECO'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 HECO'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 HECO's SEC filings.

An online replay of the webcast will be available at the same website beginning about two hours after the event and will remain on HEI's website for 12 months.  Replays of the conference call will also be available approximately two hours after the event through March 1, 2013, by dialing (888) 286-8010, passcode: 47992097.

HEI supplies power to approximately 450,000 customers or 95% of Hawaii's population through its electric utilities, HECO, Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited and provides a wide array of banking and other financial services to consumers and businesses through American, one of Hawaii's largest financial institutions.

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 "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 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 "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, 2012 and HEI's future 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, HECO, 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








December 31, 

September 30, 

December 31, 


Years ended

December 31,

(in thousands)

2012



2012



2011



2012


2011

Interest income













Interest and fees on loans

$      42,816



$     43,880



$      46,500



$176,057


$     184,485

Interest on investment and mortgage-related securities

3,288



3,432



3,352



13,822


14,568

     Total interest income

46,104



47,312



49,852



189,879


199,053

Interest expense













Interest on deposit liabilities

1,408



1,540



1,837



6,423


8,983

Interest on other borrowings

1,193



1,201



1,362



4,869


5,486

     Total interest expense

2,601



2,741



3,199



11,292


14,469

Net interest income

43,503



44,571



46,653



178,587


184,584

Provision for loan losses

3,379



3,580



4,082



12,883


15,009

Net interest income after provision for loan losses

40,124



40,991



42,571



165,704


169,575

Noninterest income













Fees from other financial services

8,887



7,674



7,476



31,361


28,881

Fee income on deposit liabilities

4,648



4,527



4,486



17,775


18,026

Fee income on other financial products

1,836



1,660



1,364



6,577


6,704

Gain on sale of loans

6,331



4,077



2,760



14,628


5,028

Other income

1,164



1,346



738



5,319


6,715

     Total noninterest income

22,866



19,284



16,824



75,660


65,354

Noninterest expense













Compensation and employee benefits

19,953



18,684



17,820



75,979


71,137

Occupancy

4,313



4,400



4,313



17,179


17,154

Data processing

2,854



2,644



1,676



10,098


8,155

Services

2,800



3,062



1,990



9,866


7,396

Equipment

1,806



1,762



1,762



7,105


6,903

Other expense

9,207



8,096



8,997



32,116


32,648

     Total noninterest expense

40,933



38,648



36,558



152,343


143,393

Income before income taxes

22,057



21,627



22,837



89,021


91,536

Income taxes 

7,694



7,419



7,497



30,384


31,693

Net income

$      14,363



$     14,208



$      15,340



$  58,637


$      59,843

Comprehensive income

$        5,740



$     15,517



$        7,400



$  52,612


$      56,760














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













Return on average assets 

1.15



1.15



1.26



1.18


1.23

Return on average equity  

11.29



11.24



12.24



11.68


11.99

Return on average tangible common equity

13.47



13.41



14.65



13.97


14.35

Net interest margin

3.81



3.92



4.16



3.93


4.12

Net charge-offs to average loans outstanding 

0.13



0.35



0.48



0.24


0.49

Efficiency ratio

61



60



57



59


57

As of period end













Nonperforming assets to loans outstanding and real estate owned **

1.87



1.73



2.01






Allowance for loan losses to loans outstanding 

1.11



1.06



1.03






Leverage ratio *

9.1



9.3



9.0






Total risk-based capital ratio *

12.8



12.9



12.9






Tangible common equity to total assets

8.39



8.72



8.42






Dividend paid to HEI (via ASHI) ($ in millions) **

15



10



20



45


63

*  Regulatory basis













** Fourth quarter 2011 includes noncash dividends of $5 million.










This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2012 (when filed) and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012, as updated by SEC Forms 8-K.

 

American Savings Bank, F.S.B. 




BALANCE SHEETS DATA




(Unaudited)








December 31

2012

2011


(in thousands)




Assets




Cash and cash equivalents

$      184,430

$      219,678


Available-for-sale investment and mortgage-related securities

671,358

624,331


Investment in stock of Federal Home Loan Bank of Seattle

96,022

97,764


Loans receivable held for investment

3,779,218

3,680,724


   Allowance for loan losses

(41,985)

(37,906)


      Loans receivable held for investment, net

3,737,233

3,642,818


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

26,005

9,601


Other

244,435

233,592


Goodwill

82,190

82,190


     Total assets

$    5,041,673

$    4,909,974






Liabilities and shareholder's equity




Deposit liabilities–noninterest-bearing

$    1,164,308

$      993,828


Deposit liabilities–interest-bearing

3,065,608

3,076,204


Other borrowings

195,926

233,229


Other

117,752

118,078


     Total liabilities

4,543,594

4,421,339






Common stock

333,712

331,880


Retained earnings

179,763

166,126


Accumulated other comprehensive loss, net of tax benefits

(15,396)

(9,371)


     Total shareholder's equity

498,079

488,635


     Total liabilities and shareholder's equity

$    5,041,673

$    4,909,974






This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2012 (when filed) and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012, as updated by SEC Forms 8-K.




 

Contact: 

Shelee M.T. Kimura



Manager, Investor Relations &            

Telephone: (808) 543-7384


Strategic Planning          

E-mail: skimura@hei.com

(Logo:  http://photos.prnewswire.com/prnh/20110411/LA80136LOGO)

SOURCE Hawaiian Electric Industries, Inc.



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