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American Savings Bank Reports Third Quarter 2018 Earnings

HONOLULU, Oct. 30, 2018 /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 third quarter of 2018 of $21.2 million compared to $20.6 million in the second, or linked, quarter of 2018 and $17.6 million in the third quarter of 2017.  Key measures of profitability continued to strengthen, with return on average equity rising to 13.80%, up 0.24% and 2.16% compared to the linked and prior year quarters, respectively.

"We are pleased to report another quarter of strong earnings, driven by expanding net interest margin, improving operational efficiency and bottom line benefits of tax reform," said Richard Wacker, president and chief executive officer.  "We expect to complete our new campus and consolidate our teammates into this new collaborative environment beginning around the end of this year.  We are excited about the possibilities it represents to further improve the ways we make banking easy for our customers and deliver sustained high performance for them and our shareholders." 

Financial Highlights

Net interest income was $61.1 million in the third quarter of 2018 compared to $59.6 million in the linked quarter and $56.1 million in the third quarter of 2017.  Net interest margin for the third quarter of 2018 was 3.81%, compared to 3.76% in the linked quarter and 3.69% in the prior year quarter of 2017.  Yield on earning assets increased 7 basis points compared to the linked quarter and 18 basis points compared to the prior year quarter.  Cost of funds was 26 basis points for the third quarter of 2018, compared to 24 basis points in the linked quarter, and 20 basis points in the prior year quarter of 2017.  

The provision for loan losses was $6.0 million in the third quarter of 2018 compared to $2.8 million in the linked quarter and $0.5 million in the third quarter of 2017.  The higher third quarter of 2018 provision was primarily due to additional loan loss reserves for the consumer loan portfolio.  In addition, the prior year quarter provision reflected the release of reserves attributed to the strategic reduction in the commercial loan portfolio, including the $53 million decrease in exposure to national syndicated credits.  The net charge-off ratio was 0.40% in the third quarter of 2018 compared to 0.32% in both the linked and prior year quarters.  Nonaccrual loans as a percent of total loans receivable held for investment was 0.59% compared to 0.57% in the linked quarter and 0.50% in the prior year quarter.  

Noninterest income was $15.3 million in the third quarter of 2018 compared to $13.8 million in the linked quarter and $15.2 million in the third quarter of 2017.  The increase in noninterest income in the third quarter of 2018 compared to the linked quarter was due to an increase in bank-owned life insurance income of $1.5 million.  The increase in noninterest income compared to the prior year quarter was due to a $1.4 million increase in bank-owned life insurance income substantially offset by lower debit card interchange fees relating to a new accounting standard that reclassified $1.1 million of debit card expenses in 2018 to noninterest income.

Noninterest expense was $43.6 million in the third quarter of 2018 compared to $44.2 million in the linked quarter and $44.1 million in the third quarter of 2017. 

Tax expense was approximately $3.6 million lower in the third quarter of 2018 compared to the third quarter of 2017, primarily driven by the benefits of the lower federal corporate tax rate from the Tax Cuts and Jobs Act of 2017.  

Total loans were $4.8 billion at September 30, 2018, up $83 million or 2.4% annualized from December 31, 2017, driven mainly by increases in home equity lines of credit, commercial and consumer loans of $90 million.   

Total deposits were $6.1 billion at September 30, 2018, an increase of $240 million or 5.4% annualized from December 31, 2017 including $100 million in repurchase agreements that were transferred into deposit accounts. Excluding such transfer, total deposits increased by 3.1% annualized.

Overall, American's return on average equity was 13.80% in the third quarter of 2018 compared to 13.56% in the second quarter of 2018 and 11.64% in the prior year quarter.  Return on average assets was 1.22% in the third quarter of 2018 compared to 1.20% in the second quarter of 2018 and 1.07% in the same quarter last year.  American's solid results enabled it to pay dividends of $14.0 million to HEI while maintaining healthy capital levels -- leverage ratio of 8.6% and total capital ratio of 13.8% at September 30, 2018.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2018 EPS GUIDANCE

Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its third quarter 2018 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 2018.

HEI plans to announce its third quarter 2018 consolidated financial results on Wednesday, November 7, 2018 and will also conduct a webcast and conference call at 11:00 a.m. Hawaii time (4:00 p.m. Eastern time) that same day to discuss its consolidated earnings, including American's earnings, and 2018 EPS 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."  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 such portions 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 online replay of the November 7, 2018 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 November 21, 2018 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode:  10125059.

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.

American Savings Bank, F.S.B.

STATEMENTS OF INCOME DATA

(Unaudited)




Three months ended


Nine months ended September 30

(in thousands)


September 30,
2018


June 30,
2018


September 30,
2017


2018


2017

Interest and dividend income











Interest and fees on loans


$

55,885



$

54,633



$

52,210



$

163,318



$

155,269


Interest and dividends on investment securities


9,300



8,628



6,850



27,130



20,593


Total interest and dividend income


65,185



63,261



59,060



190,448



175,862


Interest expense











Interest on deposit liabilities


3,635



3,284



2,444



9,876



6,858


Interest on other borrowings


404



393



470



1,293



2,110


Total interest expense


4,039



3,677



2,914



11,169



8,968


Net interest income


61,146



59,584



56,146



179,279



166,894


Provision for loan losses


6,033



2,763



490



12,337



7,231


Net interest income after provision for loan losses


55,113



56,821



55,656



166,942



159,663


Noninterest income











Fees from other financial services


4,543



4,744



5,635



13,941



17,055


Fee income on deposit liabilities


5,454



5,138



5,533



15,781



16,526


Fee income on other financial products


1,746



1,675



1,904



5,075



5,741


Bank-owned life insurance


2,663



1,133



1,257



4,667



4,165


Mortgage banking income


169



617



520



1,399



1,896


Other income, net


736



536



380



1,708



1,229


Total noninterest income


15,311



13,843



15,229



42,571



46,612


Noninterest expense











Compensation and employee benefits


23,952



23,655



23,512



72,047



71,095


Occupancy


4,363



4,194



4,284



12,837



12,623


Data processing


3,583



3,540



3,262



10,587



9,749


Services


2,485



3,028



2,863



8,560



7,989


Equipment


1,783



1,874



1,814



5,385



5,333


Office supplies, printing and postage


1,556



1,491



1,444



4,554



4,506


Marketing


993



1,085



934



2,723



2,290


FDIC insurance


638



727



746



2,078



2,296


Other expense


4,240



4,556



5,262



12,897



14,674


Total noninterest expense


43,593



44,150



44,121



131,668



130,555


Income before income taxes


26,831



26,514



26,764



77,845



75,720


Income taxes


5,610



5,953



9,172



17,103



25,582


Net income


$

21,221



$

20,561



$

17,592



$

60,742



$

50,138


Comprehensive income


$

16,480



$

16,579



$

18,009



$

39,944



$

53,613


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









Return on average assets


1.22



1.20



1.07



1.18



1.02


Return on average equity


13.80



13.56



11.64



13.32



11.24


Return on average tangible common equity


15.93



15.68



13.47



15.40



13.04


Net interest margin


3.81



3.76



3.69



3.78



3.68


Efficiency ratio


57.02



60.13



61.82



59.35



61.15


Net charge-offs to average loans outstanding


0.40



0.32



0.32



0.33



0.27


As of period end











Nonaccrual loans to loans receivable held for investment


0.59



0.57



0.50






Allowance for loan losses to loans outstanding


1.14



1.11



1.13






Tangible common equity to tangible assets


7.75



7.64



8.01






Tier-1 leverage ratio


8.6



8.6



8.7






Total capital ratio


13.8



13.9



13.9






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


$

14.0



$

11.1



$

9.4



$

36.0



$

28.1


The Statements of Income Data reflects the retrospective application of ASU No. 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," which was adopted in first quarter 2018. Nonservice cost was reclassified from "Compensation and employee benefits" to "Other expense."

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

American Savings Bank, F.S.B.

BALANCE SHEETS DATA

(Unaudited)


(in thousands)

September 30, 2018

December 31, 2017

Assets





Cash and due from banks


$

119,453



$

140,934


Interest-bearing deposits


39,575



93,165


Investment securities





Available-for-sale, at fair value


1,387,571



1,401,198


Held-to-maturity, at amortized cost


102,498



44,515


Stock in Federal Home Loan Bank, at cost


8,158



9,706


Loans held for investment


4,754,359



4,670,768


Allowance for loan losses


(54,127)



(53,637)


   Net loans


4,700,232



4,617,131


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


1,036



11,250


Other


488,743



398,570


Goodwill


82,190



82,190


    Total assets


$

6,929,456



$

6,798,659


Liabilities and shareholder's equity





Deposit liabilities–noninterest-bearing


$

1,789,351



$

1,760,233


Deposit liabilities–interest-bearing


4,341,064



4,130,364


Other borrowings


71,110



190,859


Other


115,401



110,356


    Total liabilities


6,316,926



6,191,812


Common stock


1



1


Additional paid in capital


346,757



345,018


Retained earnings


317,519



292,957


Accumulated other comprehensive loss, net of tax benefits





     Net unrealized losses on securities

$

(37,719)



$

(14,951)



     Retirement benefit plans

(14,028)


(51,747)


(16,178)


(31,129)


    Total shareholder's equity


612,530



606,847


    Total liabilities and shareholder's equity


$

6,929,456



$

6,798,659



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:  ir@hei.com

 

Hawaiian Electric Industries, Inc. (PRNewsFoto/Hawaiian Electric Industries, Inc.)

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/american-savings-bank-reports-third-quarter-2018-earnings-300740952.html

SOURCE Hawaiian Electric Industries, Inc.

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