American Savings Bank Reports Second Quarter 2013 Earnings Net Income of $15.9 Million

Bank Continues to Deliver Solid Results

HONOLULU, July 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 second quarter of 2013 of $15.9 million, compared to $14.2 million in both the first (or linked) quarter of 2013 and in the second quarter of 2012. 

"American delivered solid results in the second quarter as good loan growth helped us offset the continued pressure of the low interest rate environment.  We experienced very low credit costs in the quarter thanks to good risk management systems and the positive trends in the Hawaii economy.  We also achieved another strategic objective, reaching agreement for the sale of our credit card portfolio coupled with the introduction of a new, more competitive offering for our customers," said Richard Wacker, president and chief executive officer of American. 

Second quarter 2013 net income was $1.8 million higher than the linked quarter primarily driven by (after-tax):

  • $2 million lower provision for loan losses, $1 million of which related to the planned third quarter sale of American's credit card portfolio; and
  • $1 million higher gains on sales of investment securities.

These were largely offset by (after-tax):

  • $1 million lower mortgage banking income as a larger proportion of new residential mortgages were added to the portfolio rather than sold; and
  • $1 million higher noninterest expense. 

Compared to the same quarter of 2012, the $1.7 million net income increase was primarily driven by (after-tax):

  • $2 million lower provision for loan losses (as discussed above); and
  • $1 million higher gains on sales of investment securities.

These were offset by $1 million (after-tax) higher noninterest expense primarily due to targeted staffing and information technology (IT) expense increases.

Net interest margin (NIM) was 3.79% in the second quarter of 2013 compared to 3.78% in the linked quarter and 3.97% in the second quarter of 2012.  Loan growth, particularly in residential mortgages, and higher fees associated with the prepayment of some large commercial loans in the quarter offset the continued decline in stated rates that totaled five basis points compared to the linked quarter.  The decline in net interest margin compared to the prior year quarter was primarily attributable to lower yields on interest-earning assets as loans continued to re-price down in the low interest rate environment. 

Provision for loan losses (pretax) was a net credit of $1.0 million in the second quarter of 2013 compared to net charges of $1.9 million in the linked quarter and $2.4 million in the second quarter of 2012.  In the second quarter of 2013, American released $1 million (pretax) of reserves in connection with the agreement to sell its credit card portfolio, a transaction that is expected to close in the third quarter.  No additional provision expense was incurred:  increases in the reserve for loan growth and charge-offs were offset by approximately $3 million (pretax) of reversals associated with specific commercial loan paydowns, recoveries of previously charged off consumer loans, and the ongoing improvement in the quality of the bank's loan portfolio.  The second quarter 2013 net charge-off ratio improved to 0.08% from 0.12% in the linked quarter and 0.19% in the prior year quarter.

Non-interest expense (pretax) was $39.8 million in the second quarter of 2013 compared to $38.7 million in the linked quarter and $37.6 million in the second quarter of 2012.  The increase from the linked quarter is primarily attributable to the timing of marketing expenses and additional reserves on unfunded commercial lines of credit.  The increase from the prior year quarter is largely due to the targeted staffing increases to support increased business volumes, IT and risk management capabilities, as well as increasing employee benefit expenses.    

In the second quarter and year-to-date 2013, loans grew by $108 million and $173 million, respectively.  This quarter's loan growth was primarily driven by residential mortgages as American allocated more of its continued strong production to the portfolio.  Year-to-date annualized loan growth was 9.1%.

Total deposits were $4.3 billion at June 30, 2013, down $36 million from March 31, 2013, primarily due to the decreases in commercial deposits and certificates of deposit.  Average cost of funds remained low at 0.22% for the second quarter 2013, consistent with the linked quarter and down 5 basis points from the same period last year.             

Overall, return on average equity and return on average assets were strong at 12.6% and 1.25%, respectively, in the quarter.  American's solid results enabled it to pay dividends of $10 million to HEI in the quarter while maintaining healthy capital levels -- leverage ratio of 9.3% and total risk-based capital ratio of 12.5% at June 30, 2013.

HEI EARNINGS RELEASE, WEBCAST AND TELECONFERENCE

Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its second quarter 2013 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 2013.

HEI plans to announce its second quarter 2013 consolidated financial results on Thursday, August 8, 2013 and will conduct a webcast and teleconference call to review second quarter 2013 consolidated earnings, including American's earnings, on Thursday, August 8, 2013, at 11:00 a.m. Hawaii time (5:00 p.m. Eastern time).  The event can be accessed through HEI's website at www.hei.com or by dialing (877) 415-3186, passcode:  97287517 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 material information, as well as other important 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.  Also, at the Investor Relations section of HEI's website, investors may sign up to receive e-mail alerts (based on each investor's selected preferences).  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.  Replays of the teleconference call will also be available approximately two hours after the event through August 22, 2013, by dialing (888) 286-8010, passcode: 60955453.

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 March 31, 2013 and HEI's subsequent 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


Six months ended



June 30, 


March 31, 


June 30, 


June 30

(in thousands)


2013


2013


2012


2013


2012

Interest income











Interest and fees on loans


$   43,624


$   42,603


$   44,473


$ 86,227


$ 89,361

Interest on investment and mortgage-related securities


3,234


3,464


3,297


6,698


7,102

     Total interest income


46,858


46,067


47,770


92,925


96,463

Interest expense











Interest on deposit liabilities


1,296


1,312


1,696


2,608


3,475

Interest on other borrowings


1,178


1,164


1,214


2,342


2,475

     Total interest expense


2,474


2,476


2,910


4,950


5,950

Net interest income


44,384


43,591


44,860


87,975


90,513

Provision (credit) for loan losses


(959)


1,858


2,378


899


5,924

Net interest income after provision (credit) for loan losses


45,343


41,733


42,482


87,076


84,589

Noninterest income











Fees from other financial services


7,996


7,643


7,463


15,639


14,800

Fee income on deposit liabilities


4,433


4,314


4,322


8,747


8,600

Fee income on other financial products


1,780


1,794


1,532


3,574


3,081

Mortgage banking income


2,003


3,346


2,185


5,349


4,220

Gain on sale of securities


1,226


-


134


1,226


134

Other income


1,731


1,592


1,315


3,323


2,675

     Total noninterest income


19,169


18,689


16,951


37,858


33,510

Noninterest expense











Compensation and employee benefits


20,063


20,088


18,696


40,151


37,342

Occupancy


4,219


4,123


4,241


8,342


8,466

Data processing


2,827


2,987


2,489


5,814


4,600

Services


2,328


2,103


2,221


4,431


4,004

Equipment


1,870


1,774


1,807


3,644


3,537

Other expense


8,500


7,595


8,106


16,095


14,813

     Total noninterest expense


39,807


38,670


37,560


78,477


72,762

Income before income taxes


24,705


21,752


21,873


46,457


45,337

Income taxes 


8,786


7,597


7,684


16,383


15,271

Net income


$   15,919


$   14,155


$   14,189


$ 30,074


$ 30,066

Comprehensive income


$     7,340


$   15,484


$   15,456


$ 22,824


$ 31,355












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





Return on average assets 


1.25


1.12


1.15


1.19


1.22

Return on average equity  


12.56


11.28


11.35


11.93


12.11

Return on average tangible common equity


15.00


13.49


13.58


14.25


14.50

Net interest margin


3.79


3.78


3.97


3.79


4.01

Net charge-offs to average loans outstanding


0.08


0.12


0.19


0.10


0.24

Efficiency ratio


62


61


60


62


58

As of period end











Nonperforming assets to loans outstanding and real estate owned *

1.56


1.89


1.84





Allowance for loan losses to loans outstanding 


1.04


1.11


1.06





Tier-1 leverage ratio *


9.3


9.1


9.2





Total risk-based capital ratio *


12.5


12.8


12.8





Tangible common equity to total assets


8.42


8.38


8.58





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


10


10


10


20


20

*  Regulatory basis






















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 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013 (when filed), as updated by SEC Forms 8-K. 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)




June 30,

December 31,

(in thousands)

2013

2012

Assets



Cash and cash equivalents

$      143,912

$      184,430

Available-for-sale investment and mortgage-related securities

560,172

671,358

Investment in stock of Federal Home Loan Bank of Seattle

94,281

96,022

Loans receivable held for investment

3,953,634

3,779,218

   Allowance for loan losses

(41,004)

(41,985)

      Loans receivable held for investment, net

3,912,630

3,737,233

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

34,073

26,005

Other

241,513

244,435

Goodwill

82,190

82,190

     Total assets

$    5,068,771

$    5,041,673




Liabilities and shareholder's equity



Deposit liabilities–noninterest-bearing

$    1,168,937

$    1,164,308

Deposit liabilities–interest-bearing

3,107,306

3,065,608

Other borrowings

187,884

195,926

Other

102,516

117,752

     Total liabilities

4,566,643

4,543,594




Common stock

334,937

333,712

Retained earnings

189,837

179,763

Accumulated other comprehensive loss, net of tax benefits

(22,646)

(15,396)

     Total shareholder's equity

502,128

498,079

     Total liabilities and shareholder's equity

$    5,068,771

$    5,041,673


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 and HEI's Quarterly Reports on SEC Form
10-Q for the quarters ended
March 31, 2013 and June 30, 2013 (when filed), as updated by SEC Forms 8-K. Results of
operations for interim periods are not necessarily indicative of results to be expected for
future interim periods or the
full year.





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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