HONOLULU, April 30, 2019 /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 first quarter of 2019 of $20.8 million compared to $21.8 million in the fourth, or linked, quarter of 2018 and $19.0 million in the first quarter of 2018. Key measures of profitability remained strong, with return on average equity of 13.1%, versus 14.1% in the linked quarter and 12.6% in the prior year quarter.
"In addition to continued healthy financial performance in the first quarter, our most important accomplishment so far this year is the completion of and consolidation of our team into our new ASB Campus," said Rich Wacker, president and chief executive officer. "We are excited about all the possibilities the new campus offers us to work better together for customers and to realize operational effectiveness and cost efficiencies."
Net interest income was $63.7 million in the first quarter of 2019 compared to $63.4 million in the linked quarter and $58.5 million in the first quarter of 2018. Net interest margin was 3.99% in the first quarter of 2019 compared to 3.95% in the linked quarter and 3.76% in the first quarter of 2018. Consistent improvement in net interest margin throughout 2018 and into 2019 was primarily driven by higher yields on earning assets as a result of the higher interest rate environment, combined with our continued low cost of core deposits.
The provision for loan losses was $6.9 million in the first quarter of 2019 compared to $2.4 million in the linked quarter and $3.5 million in the first quarter of 2018. The increase in the provision over the linked quarter was primarily due to favorable credit events that reduced the provision in the fourth quarter of 2018 and additional reserves required for two loans in the commercial and commercial real estate portfolios. The higher provision over the prior year quarter was primarily due to the additional reserves for the two aforementioned loans. Nonaccrual loans as a percent of total loans receivable held for investment was 0.83% in the first quarter of 2019 compared to 0.56% in the linked quarter and 0.53% in the prior year quarter, with the increase driven by the same commercial exposures impacting provision expense. The annualized net charge-off rate was 0.39% in the first quarter of 2019 compared to 0.37% in the linked quarter and 0.28% in the prior year quarter.
Noninterest income was $14.6 million in the first quarter of 2019 compared to $13.5 million in the linked quarter and $13.4 million in the first quarter of 2018. The increase in noninterest income in the first quarter of 2019 compared to the linked quarter and first quarter of 2018 was primarily due to bank-owned life insurance proceeds received during the quarter.
Noninterest expense was $45.2 million in the first quarter of 2019 compared to $45.7 million in the linked quarter and $43.9 million in the first quarter of 2018. Noninterest expense in the first quarter of 2019 included new depreciation and occupancy costs of $1.3 million related to the new campus building while still including the costs of four properties being vacated. Of the four properties, two are owned by American and have been listed for sale and lease obligations for the remaining two properties end in the second quarter of 2019. The quarter also included higher compensation and employee benefits expense of $1.1 million compared to the first quarter of 2018 primarily due to annual merit increases and the 2018 increases to the entry-level employee wages.
Total loans were $4.9 billion at March 31, 2019, up $14.6 million or 1.2% annualized from December 31, 2018. The increase in total loans was driven mainly by increases in residential loans of $16.5 million, and increases in home equity loans of $17.4 million, partly offset by declines within the commercial and commercial real estate portfolios of $11.7 million and $4.4 million, respectively.
Total deposits were $6.2 billion at March 31, 2019, an increase of $46.8 million or 3.04% annualized from December 31, 2018. Low-cost core deposits increased $94 million or 7.1% annualized from December 31, 2018. The average cost of funds was 0.31% for the first quarter of 2019, up 3 basis points from the linked quarter and up 8 basis points from the prior year quarter.
Overall, American's return on average equity was 13.1% in the first quarter of 2019 compared to 14.1% in the fourth quarter of 2018 and 12.6% in the prior year quarter. Return on average assets was 1.18% in the first quarter of 2019 compared to 1.25% in the fourth quarter of 2018 and 1.12% in the same quarter last year. American's solid results enabled it to pay dividends to HEI of $18 million in the first quarter of 2019 while maintaining healthy capital levels—leverage ratio of 8.7% and total capital ratio of 13.9% at March 31, 2019.
HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2019 EPS GUIDANCE
Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its first quarter 2019 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 2019.
HEI plans to announce its first quarter 2019 consolidated financial results on Tuesday, May 7, 2019 and will conduct a webcast and conference call to discuss its consolidated earnings, including American's earnings, and 2019 EPS guidance on Tuesday, May 7, 2019, at 7:30 a.m.Hawaii time (1:30 p.m. Eastern time).
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 the Investor Relations section 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 May 7, 2019 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 May 21, 2019 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10129956.
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.
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 "will," "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, political 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 "Cautionary Note Regarding 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, 2018 and HEI's other 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, 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, 2019
December 31, 2018
March 31, 2018
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
Nonaccrual loans to loans receivable held for investment
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 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, 2019
December 31, 2018
Cash and due from banks
Available-for-sale, at fair value
Held-to-maturity, at amortized cost
Stock in Federal Home Loan Bank, at cost
Loans held for investment
Allowance for loan losses
Loans held for sale, at lower of cost or fair value
Liabilities and shareholder's equity
Commitments and contingencies
Additional paid in capital
Accumulated other comprehensive loss, net of tax benefits
Net unrealized 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 filings with the SEC.