HONOLULU, July 30, 2020 /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 second quarter of 2020 of $14.0 million. This compares to $15.8 million in the first, or linked, quarter of 2020, and $17.0 million in the second quarter of 2019.

«I’m extremely proud of the performance of our teammates for our customers, our bank and our community through a quarter filled with challenges,» said Rich Wacker, president and chief executive officer of American. «Our results reflect the impact of the crisis in the compression of our lending margins and higher provision for potential credit losses. We were able to partially offset these pressures through strong mortgage production, good cost control and a gain on sale of securities, while strong deposit growth reinforced our healthy liquidity position. As the uncertain environment unfolds, we will continue to work closely with our customers to manage our risk and serve as a source of stability.»

Financial Highlights

Net interest income was $56.7 million in the second quarter of 2020 compared to $61.1 million in the linked quarter, and $61.5 million in the second quarter of 2019. The decrease compared to the linked and prior year quarters was primarily due to lower asset yields within the loan and investment portfolios as a result of the lower interest rate environment. The investment portfolio yield was reduced by higher amortization of premiums within the mortgage backed securities portfolio in the second quarter. Net interest margin for the second quarter of 2020 was 3.21%, compared to 3.72% in the linked quarter and 3.82% in the second quarter of 2019.

The provision for credit losses was $15.1 million in the second quarter of 2020 compared to $10.4 million in the linked quarter and $7.7 million in the second quarter of 2019. The higher provision for the quarter was primarily due to $7 million in additional credit reserves related to COVID-19, as well as $4 million in provisioning for unfunded commitments.

The net charge-off ratio for the second quarter of 2020 was 0.49%, compared to 0.44% in the linked quarter and 0.29% in the second quarter of 2019. Nonaccrual loans as a percent of total loans receivable held for investment was 0.86% in the second quarter of 2020, compared to 0.90% in the linked quarter and 0.79% in the prior year quarter.

Noninterest income was $24.2 million in the second quarter of 2020, compared to $14.8 million in the linked quarter and $15.5 million in the second quarter of 2019. The increase in noninterest income from the linked and prior year quarters was primarily due to a $7.1 million gain related to the sale of 34,680 Visa Class B restricted shares and a $2.2 million gain on the sale of investment securities as we sold some legacy positions to reduce credit risk and yield volatility in our investment portfolio.

Noninterest expense was $48.4 million in the second quarter of 2020, compared to $46.5 million in the linked quarter and $48.0 million in the second quarter of 2019. During the quarter, American incurred $3.7 million in COVID-19 related expenses, which consisted of additional pay to frontline employees who continued serving customers during the pandemic, the repurchase of excess vacation days for employees unable to use vacation while working through the pandemic, purchases of personal protective equipment and sanitation supplies, and employee meals purchased to promote employee safety and support small business restaurants. The higher COVID-19 related expenses were partially offset by lower travel, business development and marketing expenses.  

Total loans were $5.5 billion as of June 30, 2020, up 6.45%1 from December 31, 2019, driven mainly by the addition of $370 million in Paycheck Protection Program (PPP) loans, as well as increases in the commercial real estate and commercial and industrial portfolios, offset by decreases in the retail portfolio.    

Total deposits were $7.0 billion as of June 30, 2020, an increase of 12.1%2 from December 31, 2019. The average cost of funds was 0.18% for the quarter, down six basis points versus the linked quarter and down twelve basis points versus the prior year quarter.

Overall, American’s return on average equity for the second quarter of 2020 was 8.00%, compared to 9.15% in the linked quarter and 10.46% in the second quarter of 2019. Return on average assets was 0.72% for the second quarter of 2020, compared to 0.87% in the linked quarter and 0.96% in the same quarter last year. 

_______________

1

Annualized from December 31, 2019, total loans as of June 30, 2020 increased 12.9%.

2

Annualized from December 31, 2019, total deposits as of June 30, 2020 increased 24.2%.

In the second quarter of 2020, American retained capital and did not pay a dividend to HEI to support its commitment to PPP lending to the community while maintaining healthy capital levels. American had a leverage ratio of 8.4% at June 30, 2020.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2020 GUIDANCE

Concurrent with American’s regulatory filing 30 days after the end of the quarter, American announced its second quarter 2020 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 second quarter 2020.

HEI plans to announce its second quarter 2020 consolidated financial results on Thursday, August 6, 2020 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 2020 guidance. 

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 — Events and Presentations.»

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 August 6, 2020 webcast will be available on HEI’s website beginning about two hours after the event. Audio replays of the conference call will also be available approximately two hours after the event through August 20, 2020 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode 10146073.

HEI supplies power to approximately 95% of Hawaii’s population through its electric utility, Hawaiian Electric; 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.

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, 2019 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 

Six months ended June 30,

(in thousands)

June 30, 2020

March 31, 2020

June 30, 2019

2020

2019

Interest and dividend income

Interest and fees on loans

$

53,541

$

55,545

$

58,620

$

109,086

$

116,480

Interest and dividends on investment securities

6,288

9,430

7,535

15,718

18,163

Total interest and dividend income

59,829

64,975

66,155

124,804

134,643

Interest expense

Interest on deposit liabilities

3,071

3,587

4,287

6,658

8,539

Interest on other borrowings

75

313

411

388

939

Total interest expense

3,146

3,900

4,698

7,046

9,478

Net interest income

56,683

61,075

61,457

117,758

125,165

Provision for credit losses

15,133

10,401

7,688

25,534

14,558

Net interest income after provision for credit losses

41,550

50,674

53,769

92,224

110,607

Noninterest income

Fees from other financial services

3,102

4,571

4,798

7,673

9,360

Fee income on deposit liabilities

2,897

5,113

5,004

8,010

10,082

Fee income on other financial products

1,212

1,872

1,830

3,084

3,423

Bank-owned life insurance

1,673

794

2,390

2,467

4,649

Mortgage banking income

6,252

2,000

976

8,252

1,590

Gain on sale of securities, net

9,275

9,275

Other income, net

(251)

413

534

162

992

Total noninterest income

24,160

14,763

15,532

38,923

30,096

Noninterest expense

Compensation and employee benefits

25,079

25,777

25,750

50,856

51,262

Occupancy

5,442

5,267

5,479

10,709

10,149

Data processing

3,849

3,837

3,852

7,686

7,590

Services

2,474

2,809

2,606

5,283

5,032

Equipment

2,290

2,339

2,189

4,629

4,253

Office supplies, printing and postage

1,049

1,341

1,663

2,390

3,023

Marketing

379

802

1,323

1,181

2,313

FDIC insurance

751

102

628

853

1,254

Other expense1

7,063

4,194

4,519

11,257

8,373

Total noninterest expense

48,376

46,468

48,009

94,844

93,249

Income before income taxes

17,334

18,969

21,292

36,303

47,454

Income taxes

3,320

3,208

4,276

6,528

9,599

Net income

$

14,014

$

15,761

$

17,016

$

29,775

$

37,855

Comprehensive income

$

13,734

$

35,608

$

31,291

$

49,342

$

58,382

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

Return on average assets

0.72

0.87

0.96

0.79

1.07

Return on average equity

8.00

9.15

10.46

8.57

11.76

Return on average tangible common equity

9.07

10.39

11.97

9.72

13.48

Net interest margin

3.21

3.72

3.82

3.46

3.90

Efficiency ratio

59.84

61.27

62.36

60.53

60.06

Net charge-offs to average loans outstanding

0.49

0.44

0.29

0.46

0.34

As of period end

Nonaccrual loans to loans receivable held for investment

0.86

0.90

0.79

Allowance for credit losses to loans outstanding

1.50

1.49

1.17

Tangible common equity to tangible assets

7.9

8.3

8.2

Tier-1 leverage ratio

8.4

8.8

8.7

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

$

$

28.0

$

15.0

$

28.0

$

33.0

1

The three- and six-month periods ended June 30, 2020 include approximately $3.7 million and $3.8 million, respectively, of certain significant direct and incremental COVID-19 related costs. These costs, which have been recorded in Other expense, include $2.3 million of compensation expense and $1.1 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)

June 30, 2020

December 31, 2019

Assets

Cash and due from banks

$

140,968

$

129,770

Interest-bearing deposits

365,996

48,628

Investment securities

Available-for-sale, at fair value

1,389,633

1,232,826

Held-to-maturity, at amortized cost

124,623

139,451

Stock in Federal Home Loan Bank, at cost

9,880

8,434

Loans held for investment

5,437,817

5,121,176

Allowance for credit losses

(81,307)

(53,355)

Net loans

5,356,510

5,067,821

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

37,143

12,286

Other

512,722

511,611

Goodwill

82,190

82,190

Total assets

$

8,019,665

$

7,233,017

Liabilities and shareholder’s equity

Deposit liabilities–noninterest-bearing

$

2,422,042

$

1,909,682

Deposit liabilities–interest-bearing

4,607,910

4,362,220

Other borrowings

124,975

115,110

Other

158,344

146,954

Total liabilities

7,313,271

6,533,966

Common stock

1

1

Additional paid-in capital

350,826

349,453

Retained earnings

344,662

358,259

Accumulated other comprehensive loss, net of tax benefits

     Net unrealized gains on securities

$

21,264

$

2,481

     Retirement benefit plans

(10,359)

10,905

(11,143)

(8,662)

Total shareholder’s equity

706,394

699,051

Total liabilities and shareholder’s equity

$

8,019,665

$

7,233,017

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

Director, Investor Relations

E-mail:  [email protected]

 

American Savings Bank Logo (PRNewsfoto/American Savings Bank)

 

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SOURCE American Savings Bank