December 5, 2021

American Savings Bank Reports Third Quarter 2021 Financial Results

HONOLULU, Oct. 29, 2021 /PRNewswire/ — American Savings Bank, F.S.B. (American), a wholly-owned subsidiary of Hawaiian Electric Industries, Inc. (NYSE -…

HONOLULU, Oct. 29, 2021 /PRNewswire/ — American Savings Bank, F.S.B. (American), a wholly-owned subsidiary of Hawaiian Electric Industries, Inc. (NYSE – HE), today reported net income of $19.3 million for the third quarter of 2021, compared to $30.3 million in the second quarter of 2021 and $12.2 million in the third quarter of 2020.

“We’re pleased with our financial results for the third quarter, which reflect continued solid performance and good credit quality, the latter of which drove an additional release of reserves. The governor’s recent announcement encouraging visitors to return is a positive sign for our local economy and community,” said Ann Teranishi, president and chief executive officer of American. “We continue to build our capabilities to provide even more value to our customers through digital banking services and customized financial solutions, while delivering the superior customer experience we’re known for,” said Teranishi.

Financial Highlights

Third quarter 2021 net interest income was $60.3 million compared to $60.8 million in the linked quarter and $57.3 million in the third quarter of 2020. The relatively flat net interest income versus the linked quarter reflected the impact of lower yields and lower recognition of fees associated with the Paycheck Protection Program (PPP) loan portfolio, partially offset by higher earning assets driven by increased liquidity from continued deposit growth. The increase in net interest income versus the third quarter of 2020 was primarily due to growth in earning assets, lower cost of funds and higher fee income associated with the PPP loan portfolio. Net interest margin for the third quarter of 2021 was 2.90% compared to 2.98% in the linked quarter and 3.12% in the third quarter of 2020. Net interest margin for the first nine months of 2021 was 2.94% compared to 3.34% for the same period in 2020.

The results for the third quarter of 2021 included a negative provision for credit losses of $1.7 million, reflecting credit upgrades in the commercial and commercial real estate loan portfolios and consumer loan paydowns. This compares to a negative provision for credit losses of $12.2 million in the linked quarter and a provision for credit losses of $14.0 million in the third quarter of 2020. As of September 30, 2021, American’s allowance for credit losses to outstanding loans was 1.48% compared to 1.51% as of June 30, 2021 and 1.67% as of September 30, 2020.

The net charge-off ratio for the third quarter of 2021 was 0.03%, compared to 0.04% in the linked quarter and 0.32% in the third quarter of 2020. Nonaccrual loans as a percent of total loans receivable held for investment were 0.97% in the third quarter of 2021, compared to 1.03% in the linked quarter and 0.77% in the prior year quarter.

Noninterest income was $14.8 million in the third quarter of 2021, compared to $15.2 million in the linked quarter and $19.0 million in the third quarter of 2020. The decrease in noninterest income from the linked quarter was primarily due to lower fee income from financial services and lower mortgage banking income, partially offset by higher bank-owned life insurance income and fee income on deposit liabilities. The decrease in noninterest income from the prior year quarter was primarily due to lower mortgage banking income.

Third quarter of 2021 noninterest expense was $51.5 million, compared to $48.2 million in the linked quarter and $47.3 million in the third quarter of 2020. The increase in noninterest expense compared to the linked and prior year quarters was primarily due to higher incentive compensation costs reflecting the bank’s strong performance for the first nine months of the year. The third quarter of 2021 also included higher data processing expense as the bank upgrades its technology and data analytic capabilities, partially offset by lower occupancy costs as the bank continues to optimize its branch footprint in connection with its digital transformation.

Total earning assets as of September 30, 2021 were $8.4 billion, up 9.3% from December 31, 2020.

Total loans were $5.1 billion as of September 30, 2021, down 1.3% compared to June 30, 2021 and down 4.0% from December 31, 2020. The reduction in the loan portfolio during the quarter included approximately $111 million in forgiven PPP loans, as well as declines in the home equity line of credit and consumer portfolios. The decrease in these portfolios was partially offset by growth in the residential, commercial and commercial real estate loan portfolios. Excluding PPP loan forgiveness, the loan portfolio grew by $46 million or 0.9% compared to June 30, 2021.    

The investment securities portfolio was $3.1 billion as of September 30, 2021, up 39.8% from December 31, 2020 as growth in deposits continued to outpace loan growth. The portfolio is primarily comprised of securities issued or guaranteed by U.S. government agencies or U.S. government sponsored agencies.

Total deposits were $8.0 billion as of September 30, 2021, an increase of 1.3% compared to June 30, 2021 and an increase of 8.0% from December 31, 2020. For the third quarter of 2021, the average cost of funds was 0.06%, down one basis point versus the linked quarter and down seven basis points versus the prior year quarter.

For the third quarter of 2021 return on average equity was 10.3%, compared to 16.8% in the linked quarter and 6.8% in the third quarter of 2020. Return on average assets was 0.86% for the third quarter of 2021, compared to 1.38% in the linked quarter and 0.61% in the same quarter last year.

In the third quarter of 2021, American paid dividends of $12.0 million to HEI. American had a Tier 1 leverage ratio of 8.0% as of September 30, 2021.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2021 GUIDANCE

Concurrent with American’s regulatory filing 30 days after the end of the quarter, American announced its third quarter 2021 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 2021.

HEI plans to announce its third quarter 2021 consolidated financial results on Friday, November 5, 2021 and will also conduct a webcast and conference call at 10:15 a.m. Hawaii time (4:15 p.m. Eastern time) that same day to discuss its consolidated earnings, including American’s earnings, and 2021 guidance. 

To listen to the conference call, dial 1-844-200-6205 (U.S.) or 1-929-526-1599 (international) and enter passcode 181692. Parties may also access presentation materials and/or listen to the conference call by visiting the conference call link on HEI’s website at www.hei.com under the “Investor Relations,” sub-heading “News and Events — Events and Presentations.”

A replay will be available online and via phone. The online replay will be available on HEI’s website about two hours after the event. An audio replay will also be available about two hours after the event through November 19, 2021. To access the audio replay, dial 1-866-813-9403 (U.S.) or 44-204-525-0658 (international) and enter passcode 965360.

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 in the Investor Relations section of the website. Accordingly, investors should routinely monitor the Investor Relations section of HEI’s website, 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 into this document or into 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 to review documents filed with, and issued by, the PUC. No information on the PUC website is incorporated by reference into this document or into HEI’s and Hawaiian Electric’s SEC filings.

The HEI family of companies provides the energy and financial services that empower much of the economic and community activity of Hawaii. HEI’s electric utility, Hawaiian Electric, supplies power to approximately 95% of Hawaii’s population and is undertaking an ambitious effort to decarbonize its operations and the broader state economy. Its banking subsidiary, American Savings Bank, is one of Hawaii’s largest financial institutions, providing a wide array of banking and other financial services and working to advance economic growth, affordability and financial fitness. HEI also helps advance Hawaii’s sustainability goals through investments by its non-regulated subsidiary, Pacific Current. For more information, visit www.hei.com.

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 “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, 2020 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

(Unaudited)




Three months ended 


Nine months ended September 30

(in thousands)


September 30,

2021


June 30,

2021


September 30,

2020


2021


2020

Interest and dividend income











Interest and fees on loans


$

49,445



$

51,026



$

52,419



$

150,418



$

161,505


Interest and dividends on investment securities


11,996



11,040



7,221



31,709



22,939


Total interest and dividend income


61,441



62,066



59,640



182,127



184,444


Interest expense











Interest on deposit liabilities


1,176



1,281



2,287



3,919



8,945


Interest on other borrowings


5



23



61



55



449


Total interest expense


1,181



1,304



2,348



3,974



9,394


Net interest income


60,260



60,762



57,292



178,153



175,050


Provision for credit losses


(1,725)



(12,207)



13,970



(22,367)



39,504


Net interest income after provision for credit losses


61,985



72,969



43,322



200,520



135,546


Noninterest income











Fees from other financial services


4,800



5,464



4,233



15,337



11,906


Fee income on deposit liabilities


4,262



3,904



3,832



12,029



11,842


Fee income on other financial products


2,124



2,201



1,524



6,767



4,608


Bank-owned life insurance


2,026



1,624



1,965



6,211



4,432


Mortgage banking income


1,272



1,925



7,681



7,497



15,933


Gain on sale of investment securities, net








528



9,275


Other income, net


283



76



(231)



631



(69)


Total noninterest income


14,767



15,194



19,004



49,000



57,927


Noninterest expense











Compensation and employee benefits


30,888



27,670



26,431



86,595



77,287


Occupancy


5,157



5,100



5,693



15,226



16,402


Data processing


4,278



4,533



3,366



13,162



11,052


Services


2,272



2,475



2,624



7,609



7,907


Equipment


2,373



2,394



2,001



6,989



6,630


Office supplies, printing and postage


1,072



978



1,187



3,094



3,577


Marketing


995



665



727



2,308



1,908


FDIC insurance


808



788



714



2,412



1,567


Other expense1


3,668



3,568



4,556



9,790



15,813


Total noninterest expense


51,511



48,171



47,299



147,185



142,143


Income before income taxes


25,241



39,992



15,027



102,335



51,330


Income taxes


5,976



9,708



2,877



23,230



9,405


Net income


$

19,265



$

30,284



$

12,150



$

79,105



$

41,925


Comprehensive income (loss)


$

7,581



$

47,283



$

13,543



$

38,666



$

62,885


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









Return on average assets


0.86



1.38



0.61



1.21



0.73


Return on average equity


10.26



16.76



6.75



14.31



7.95


Return on average tangible common equity


11.52



18.92



7.62



16.11



9.00


Net interest margin


2.90



2.98



3.12



2.94



3.34


Efficiency ratio


68.66



63.42



61.99



64.80



61.01


Net charge-offs to average loans outstanding


0.03



0.04



0.32



0.08



0.41


As of period end











Nonaccrual loans to loans receivable held for investment


0.97



1.03



0.77






Allowance for credit losses to loans outstanding


1.48



1.51



1.67






Tangible common equity to tangible assets


7.3



7.5



8.0






Tier-1 leverage ratio


8.0



8.0



8.3






Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)


$

12.0



$

23.0



$



$

40.0



$

28.0




The three- and nine-month periods ended September 30, 2021 include approximately $0.1 million and $0.5 million, respectively, of certain direct and incremental COVID-19 related costs. The three- and nine-month periods ended September 30, 2020 include approximately $0.7 million and $4.5 million, respectively, of certain significant direct and incremental COVID-19 related costs. These costs for the first nine months of 2020, which have been recorded in Other expense, include $2.4 million of compensation expense and $1.7 million of enhanced cleaning and sanitation costs.




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

(Unaudited)


(in thousands)

September 30, 2021

December 31, 2020

Assets





Cash and due from banks


$

109,942



$

178,422


Interest-bearing deposits


80,007



114,304


Cash and cash equivalents


189,949



292,726


Investment securities





Available-for-sale, at fair value


2,580,830



1,970,417


Held-to-maturity, at amortized cost


491,871



226,947


Stock in Federal Home Loan Bank, at cost


10,000



8,680


Loans held for investment


5,122,124



5,333,843


Allowance for credit losses


(75,944)



(101,201)


Net loans


5,046,180



5,232,642


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


53,998



28,275


Other


555,401



554,656


Goodwill


82,190



82,190


Total assets


$

9,010,419



$

8,396,533


Liabilities and shareholder’s equity





Deposit liabilities–noninterest-bearing


$

2,931,394



$

2,598,500


Deposit liabilities–interest-bearing


5,045,144



4,788,457


Other borrowings


129,305



89,670


Other


168,064



183,731


Total liabilities


8,273,907



7,660,358


Common stock


1



1


Additional paid-in capital


353,429



351,758


Retained earnings


408,575



369,470


Accumulated other comprehensive income (loss), net of taxes





     Net unrealized gains (losses) on securities

$

(20,322)



$

19,986



     Retirement benefit plans

(5,171)


(25,493)


(5,040)


14,946


Total shareholder’s equity


736,512



736,175


Total liabilities and shareholder’s equity


$

9,010,419



$

8,396,533



This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

 

Contact:

Julie R. Smolinski

Telephone: (808) 543-7300


Vice President, Investor Relations & Corporate Sustainability

E-mail:  ir@hei.com

 

American Savings Bank Logo (PRNewsfoto/American Savings Bank)

 

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SOURCE Hawaiian Electric Industries, Inc.