HONOLULU, April 29, 2016 /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 of $12.7 million for the first quarter of 2016 compared to $15.0 million in the fourth (or linked) quarter of 2015 and $13.5 million in the first quarter of 2015.
"American delivered solid results this quarter with strong deposit growth, higher net interest income and margins, and a better efficiency ratio. Our bottom line reflected the effect of higher loss provisioning due to loan growth as well as higher provisioning during the construction phase of several commercial real estate projects, and we remain encouraged about the outlook for Hawaii's economy this year," said Rich Wacker, president and chief executive officer of American. "We have advanced our preparations for the planned spin-off of ASB Hawaii and recently filed our updated Form 10 registration statement with the Securities and Exchange Commission."
First quarter 2016 net income was $2.3 million lower than the linked quarter primarily driven by the following on an after-tax basis:
$2 million higher provision for loan losses mainly due to growth in lending in commercial real estate and a commercial credit charge-off in the first quarter of 2016 compared to lower provisioning during the fourth quarter of 2015 attributable to net recoveries on previously charged-off loans; and
$1 million lower noninterest income compared to the fourth quarter of 2015, which included gains from the sale of mortgage serving rights.
These were partially offset by $1 million (after-tax) higher net interest income primarily attributable to loan and investment portfolio growth and higher yields on interest-earning assets in the first quarter of 2016.
Note: Amounts indicated as "after-tax" in this earnings release are based upon adjusting items for the composite statutory tax rate of 40% for American.
Compared to the first quarter of 2015, net income declined by $0.8 million primarily driven by the following on an after-tax basis:
$2 million higher provision for loan losses mainly driven by commercial real estate loan growth and a commercial credit charge-off in the first quarter of 2016; and
$1 million higher noninterest expense primarily due to investment in our electronic banking platform and higher compensation expense.
These were offset by $3 million (after-tax) higher net interest income in the first quarter of 2016 due to loan and investment portfolio growth and higher yields on interest-earning assets.
Net interest income (pretax) was $50.4 million in the first quarter of 2016 compared to $48.7 million in the linked quarter of 2015 and $45.5 million in the prior year quarter. The increase was primarily attributable to growth in the commercial real estate loans and the investment portfolios along with higher yields on interest-earning assets. Net interest margin was 3.62% compared to 3.55% in the linked quarter and 3.52% in the first quarter of 2015.
Provision for loan losses (pretax) was $4.8 million in the first quarter of 2016 compared to $0.8 million in the linked quarter of 2015 and $0.6 million in the first quarter of 2015. The increase in provision as discussed above was mainly due to commercial real estate loan growth and a commercial credit charge-off in the first quarter of 2016. During the construction phase of commercial real estate projects, the bank provides at a higher coverage rate compared to the period after construction completion, and lending to construction projects increased $30 million and $53 million compared to the linked and prior year quarters, respectively. The net charge-off ratio was 0.21%, primarily attributable to the aforementioned charge-off related to one commercial borrower, compared to the net recovery in the linked quarter of 0.08% and 0.04% net charge-off ratio in the prior year quarter. Credit quality and trends continue to be stable, reflecting prudent credit risk management and a strong Hawaii economy.
Noninterest income (pretax) was $15.4 million in the first quarter of 2016, compared to $16.8 million in the linked quarter and $16.1 million in the first quarter of 2015. The $1.4 million lower noninterest income compared to the linked quarter was primarily due to the gain on the sale of mortgage servicing rights in the fourth quarter of 2015. The $0.7 million decline compared to the first quarter of 2015 was primarily driven by lower mortgage banking income due to a decline in mortgage loan sales driven by lower origination volume.
Noninterest expense (pretax) was $41.4 million in the first quarter of 2016, compared to $42.0 million in the linked quarter and $40.4 million in the first quarter of 2015. Noninterest expense was $0.6 million lower compared to the linked quarter primarily due to higher performance-based incentive compensation expense in the fourth quarter of 2015. Noninterest expense was $1.0 million greater compared to the prior year quarter primarily due to higher compensation and electronic banking platform expenses.
Loan growth was 2.2% annualized in the first quarter of 2016 driven largely by increases in commercial real estate and consumer loans. American continues to expect to meet its target of mid-single digit loan growth for the full year.
Total deposits were $5.1 billion at March 31, 2016, up $115 million or 9.1% annualized from December 31, 2015, primarily driven by the 6.5% annualized increase in low-cost core deposits. Average cost of funds remained low at 0.23% for the first quarter of 2016, 1 basis point higher than the linked quarter and the prior year quarter.
American's return on average equity was 8.9%, compared to 10.7% in the linked quarter and 10.0% in the first quarter of last year. Return on average assets was 0.84% for the first quarter of 2016, compared to 1.01% in the linked quarter and 0.96% in the same quarter last year. American's solid results enabled it to pay dividends of $9.0 million to HEI in the quarter while maintaining healthy capital levels – leverage ratio of 8.7% and total capital ratio of 13.2% at March 31, 2016.
HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2016 EPS GUIDANCE
Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its first quarter 2016 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 first quarter of 2016.
HEI plans to announce its first quarter and 2016 consolidated financial results on Wednesday, May 4, 2016 and will conduct a webcast and conference call to discuss its consolidated earnings, including American's earnings, and 2016 EPS guidance on Wednesday, May 4, 2016, at 8:00 a.m.Hawaii time (2:00 p.m. Eastern time).
Interested parties within the United States may listen to the conference by calling (888) 311-8190 and entering passcode: 70436517. International parties may listen to the conference by calling (330) 863-3378 and entering passcode: 70436517 or by accessing the webcast on HEI's website at www.hei.com under the heading "Investor Relations." HEI and Hawaiian Electric Company 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, Hawaiian Electric Company's and American's press releases, HEI's and Hawaiian Electric Company'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 Company'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 Company'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 conference call will also be available approximately two hours after the event through May 18, 2016, by dialing (855) 859-2056 or (404) 537-3406 and entering passcode: 70436517.
HEI supplies power to approximately 95% of Hawaii's population through its electric utilities, Hawaiian Electric Company, Inc., 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.
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 Annual Report on Form 10-K for the year ended December 31, 2015 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, Hawaiian Electric Company, 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
Three months ended
March 31, 2016
December 31, 2015
March 31, 2015
Interest and dividend income
Interest and fees on loans
Interest and dividends on investment securities
Total interest and dividend income
Interest on deposit liabilities
Interest on other borrowings
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Fees from other financial services
Fee income on deposit liabilities
Fee income on other financial products
Bank-owned life insurance
Mortgage banking income
Other income, net
Total noninterest income
Compensation and employee benefits
Office supplies, printing and postage
Total noninterest expense
Income before income taxes
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets
Return on average equity
Return on average tangible common equity
Net interest margin
Net charge-offs to average loans outstanding
As of period end
Nonperforming assets to loans outstanding and real estate owned
Allowance for loan losses to loans outstanding
Tangible common equity to tangible assets
Tier-1 leverage ratio
Total capital ratio
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI and ASB Hawaii, Inc. 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
March 31, 2016
December 31, 2015
Cash and due from banks
Available-for-sale investment securities, at fair value
Stock in Federal Home Loan Bank, at cost
Loans receivable held for investment
Allowance for loan losses
Loans held for sale, at lower of cost or fair value
Liabilities and shareholder's equity
Additional paid in capital
Accumulated other comprehensive loss, net of tax benefits
Net unrealized gains (losses) on securities
Retirement benefit plans
Total shareholder's equity
Total liabilities and shareholder's equity
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI and ASB Hawaii, Inc. filings with the SEC.