American Savings Bank Reports Third Quarter 2012 Earnings Net Income of $14.2 Million

Bank Continues to Deliver Solid Results

HONOLULU, Oct. 30, 2012 /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 third quarter of 2012 of $14.2 million, compared with $14.2 million in the second, or linked, quarter of 2012 and $15.5 million in the third quarter of 2011. 

"In this prolonged low interest rate environment, American Savings Bank's stable results reflect our continued disciplined approach to control interest rate and credit risk and to position ourselves for future growth.  Our loan portfolio grew by $83 million over the prior year and revenues benefited from strong market share gains in our residential mortgage activities," said Richard Wacker, president and chief executive officer of American. 

Third quarter 2012 net income of $14.2 million was consistent with the linked quarter as higher revenue, primarily driven by gains on sales of loans, was offset by a slightly higher provision for loan losses and noninterest expense.

Compared to the same quarter of 2011, net income declined by $1.2 million.  The decline was largely driven by (on an after-tax basis):

  • $2 million higher noninterest expense primarily attributable to spending for new products and projects aimed at longer-term growth; and
  • $1 million lower net interest income from declining yields on assets which were partially offset by loan growth. 

These were partially offset by $2 million (after-tax) higher revenue from gains on sale of new residential mortgages originated in the quarter.  Residential mortgage production totaled $272 million in the quarter, compared to $123 million in the same quarter of the prior year, outperforming the overall Hawaii market growth.

Net interest margin was 3.92% in the third quarter of 2012 compared to 3.97% in the linked quarter and 4.11% in the third quarter of 2011.  The decline in net interest margin was attributable to lower yields on interest-earning assets due to the low interest rate environment. 

Provision for loan losses (pretax) was $3.6 million in the third quarter of 2012 compared to $2.4 million in the linked quarter and $3.8 million in the third quarter of 2011.  Year-to-date provision expense was $9.5 million, down from $10.9 million in the same period last year and consistent with overall credit quality trends and the improvement in the Hawaii economy.

Non-interest expense (pretax) was $38.6 million in the third quarter of 2012, up from $37.6 million in the linked quarter and $35.6 million in the third quarter of 2011 due primarily to spending on new products and projects for future growth.   

Loan growth continued in the third quarter of 2012 with a year-to-date annualized growth rate of 2.3%, in line with the bank's target of low to mid-single digit loan growth for the year. Consistent with American's strategy to control interest rate risk, year-to-date loan growth was primarily driven by shorter-duration and variable rate loans, offset by a controlled decline in the proportion of  long-term fixed rate residential mortgages and land loans.        

Total deposits were $4.1 billion at September 30, 2012, down $10 million from June 30, 2012 primarily due to the strategic decline of higher costing certificates of deposit of $23 million.  Low-cost core deposits increased $13 million during the quarter to $3.6 billion at September 30, 2012.  Average cost of funds was a very low 0.25% for third quarter 2012, down 2 basis points from the linked quarter. 

Overall, return on average equity and return on average assets were 11.2% and 1.15%, 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 12.9% at September 30, 2012.

HEI EARNINGS RELEASE, WEBCAST AND TELECONFERENCE

Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its third 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 third quarter of 2012.

HEI plans to announce its third quarter 2012 consolidated financial results on Wednesday, November 7, 2012 and will conduct a webcast and teleconference call to review third quarter 2012 consolidated earnings, including American's earnings, on Thursday, November 8, 2012, at 8:00 a.m. Hawaii time (1:00 p.m. Eastern time).  The event can be accessed through HEI's website at www.hei.com or by dialing (866) 383-8008, passcode:  56693947 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.  Replays of the teleconference call will also be available approximately two hours after the event through November 22, 2012, by dialing (888) 286-8010, passcode: 43247040.

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 June 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.  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


Nine months ended



September 30, 


June 30, 


September 30, 


September 30,

(in thousands)


2012


2012


2011


2012


2011

Interest income











Interest and fees on loans


$   43,880


$  44,473


$   46,240


$ 133,241


$ 137,985

Interest on investment and mortgage-related securities


3,432


3,297


3,654


10,534


11,216

     Total interest income


47,312


47,770


49,894


143,775


149,201

Interest expense











Interest on deposit liabilities


1,540


1,696


2,166


5,015


7,146

Interest on other borrowings


1,201


1,214


1,375


3,676


4,124

     Total interest expense


2,741


2,910


3,541


8,691


11,270

Net interest income


44,571


44,860


46,353


135,084


137,931

Provision for loan losses


3,580


2,378


3,822


9,504


10,927

Net interest income after provision for loan losses


40,991


42,482


42,531


125,580


127,004

Noninterest income











Fees from other financial services


7,674


7,463


7,219


22,474


21,405

Fee income on deposit liabilities


4,527


4,322


4,492


13,127


13,540

Fee income on other financial products


1,660


1,532


1,806


4,741


5,340

Gain on sale of loans


4,077


2,185


1,092


8,297


2,268

Other income


1,346


1,449


1,597


4,155


5,977

     Total noninterest income


19,284


16,951


16,206


52,794


48,530

Noninterest expense











Compensation and employee benefits


18,684


18,696


17,646


56,026


53,317

Occupancy


4,400


4,241


4,313


12,866


12,841

Data processing


2,644


2,489


2,451


7,244


6,479

Services


3,062


2,221


1,686


7,066


5,406

Equipment


1,762


1,807


1,712


5,299


5,141

Other expense


8,096


8,106


7,763


22,909


23,651

     Total noninterest expense


38,648


37,560


35,571


111,410


106,835

Income before income taxes


21,627


21,873


23,166


66,964


68,699

Income taxes 


7,419


7,684


7,709


22,690


24,196

Net income


$   14,208


$  14,189


$   15,457


$  44,274


$  44,503

Comprehensive income


$   15,517


$  15,456


$   18,335


$  46,872


$  49,360












OTHER BANK INFORMATION (%)











Return on average assets 


1.15


1.15


1.26


1.19


1.22

Return on average equity  


11.24


11.35


12.32


11.81


11.91

Return on average tangible common equity


13.41


13.58


14.73


14.14


14.26

Net interest margin


3.92


3.97


4.11


3.98


4.11

Net charge-offs to average loans outstanding (annualized) 


0.35


0.19


0.54


0.27


0.50

Efficiency ratio


60


60


56


59


57

As of period end











Nonperforming assets to loans outstanding and real estate owned **


1.73


1.84


1.94





Allowance for loan losses to loans outstanding 


1.06


1.06


1.04





Leverage ratio **


9.3


9.2


9.1





Total risk-based capital ratio **


12.9


12.8


13.0





Tangible common equity to total assets


8.72


8.58


8.69

















**  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, 2011 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012 (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)


September 30,

December 31,

(in thousands)

2012

2011




Assets



Cash and cash equivalents

$       152,474

$      219,678

Available-for-sale investment and mortgage-related securities

664,051

624,331

Investment in stock of Federal Home Loan Bank of Seattle

96,893

97,764

Loans receivable held for investment

3,745,558

3,680,724

   Allowance for loan losses

(39,810)

(37,906)

      Loans receivable held for investment, net

3,705,748

3,642,818

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

16,495

9,601

Other

234,999

233,592

Goodwill

82,190

82,190

     Total assets

$     4,952,850

$    4,909,974




Liabilities and shareholder's equity



Deposit liabilities–noninterest-bearing

$     1,097,809

$      993,828

Deposit liabilities–interest-bearing

3,028,979

3,076,204

Other borrowings

211,219

233,229

Other

107,960

118,078

     Total liabilities

4,445,967

4,421,339




Common stock

333,256

331,880

Retained earnings

180,400

166,126

Accumulated other comprehensive loss, net of tax benefits

(6,773)

(9,371)

     Total shareholder's equity

506,883

488,635

     Total liabilities and shareholder's equity

$     4,952,850

$    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, 2011 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012 (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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