American Savings Bank Reports Fourth Quarter and Full Year 2023 Financial Results
- Strong liquidity position and support of a loyal, long-tenured deposit base
- Net interest income of $252.0 million in 2023
- Total earning assets were $9.2 billion as of December 31, 2023, up 0.50% from December 31, 2022
- Net income decreased from $80.0 million in 2022 to $53.4 million in 2023
- Noninterest income decreased from $57.0 million in 2022 to $45.4 million in 2023
- Net interest margin decreased from 2.89% in 2022 to 2.74% in 2023
Insights
The reported full year net income of $53.4 million for American Savings Bank (ASB) reflects a decrease from the previous year's $80.0 million, indicating a contraction in profitability. This contraction is partially attributed to the $11.0 million after-tax loss from a balance sheet repositioning strategy and $8.3 million of after-tax expenses related to the Maui wildfires. The balance sheet repositioning, which involved selling low-yielding securities to reduce high-cost deposits, is a strategic move to improve the bank's net interest margin and future profitability. However, this resulted in immediate losses that impacted the year's financials.
The reported net interest margin (NIM) decline from 2.89% in 2022 to 2.74% in 2023 suggests a tightening of the spread between interest income generated and the interest paid to lenders, which can affect the bank's income from core banking operations. Moreover, the increase in the provision for credit losses, from $2.0 million in 2022 to $10.4 million in 2023, reflects a more cautious stance on potential credit risks, likely exacerbated by the economic disruption caused by the Maui wildfires.
The shift in deposit composition, with a significant increase in certificates of deposit, which typically carry higher interest rates than core deposits, could further impact funding costs. However, the bank's strong liquidity position and capital ratios, such as the Tier 1 leverage ratio of 7.7%, are positive indicators of financial stability.
ASB's performance and strategic decisions must be analyzed within the broader context of the current banking industry and economic environment. The higher funding costs and lower net interest income are consistent with a rising interest rate environment that banks have been navigating through 2023. The strategic sale of low-yielding securities to improve net interest margins is a response to this challenge, aiming to optimize the asset mix in favor of more profitable investments.
It is worth noting that the bank's focus on maintaining strong credit quality and ample liquidity amidst economic challenges, such as those posed by the Maui wildfires, demonstrates a commitment to risk management. Such prudence is likely to be viewed favorably by investors who are increasingly concerned about the impact of external economic shocks on financial institutions. Additionally, the bank's decision not to pay a dividend to its parent company, HEI, in the fourth quarter is a conservative approach to preserve capital, which could be a strategic move to bolster resilience against potential future economic downturns.
The reported financial results of ASB must be contextualized within the macroeconomic climate of 2023, particularly the impact of inflationary pressures and rising interest rates on the banking sector. The increased cost of funds, up 77 basis points for the full year and 80 basis points for the fourth quarter compared to the previous year, is indicative of the broader rate hikes implemented by the Federal Reserve to combat inflation. This environment has led to increased funding costs for banks, squeezing margins and necessitating strategic adjustments like those undertaken by ASB.
ASB's proactive measures to strengthen its balance sheet and position itself for improved net interest margins are critical in an environment where managing interest rate risk is paramount for banking profitability. The bank's ability to maintain a loyal deposit base while navigating economic disruptions, such as the Maui wildfires, suggests resilience in its customer relationships, an important factor for stability in the face of economic uncertainty.
-
Full Year Net Income of
$53.4 Million -
2023 Results Include an
$11.0 Million $8.3 Million - Balance Sheet Repositioning Strategy Strengthens Balance Sheet and Positions Bank for Improved Net Interest Margin and Profitability
- Bank Maintains a Strong Liquidity Position and the Support of a Loyal, Long-tenured Deposit Base
- Continued Strong Credit Quality and Capital Position
“American Savings Bank continued to provide excellent service to our customers despite a year filled with unprecedented challenges. Our business proved resilient through the economic impacts of the
___________________
1 Core net income is a non-GAAP measure which excludes
Financial Highlights
Net interest income was
The provision for credit losses for 2023 was
The 2023 net charge-off ratio was
Noninterest income for 2023 was
Noninterest expense for 2023 was
Total earning assets as of December 31, 2023 were
Total loans were
Total deposits were
Wholesale funding totaled
ASB’s return on average equity for the full year 2023 was
In the fourth quarter of 2023, ASB did not pay a dividend to HEI, supporting its commitment towards helping our
HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS
Concurrent with ASB’s regulatory filing 30 days after the end of the quarter, ASB announced its fourth quarter and full year 2023 financial results today. Please note that these reported results relate only to ASB and are not necessarily indicative of HEI’s consolidated financial results for the fourth quarter and full year 2023.
HEI plans to announce its fourth quarter and full year 2023 consolidated financial results on Tuesday, February 13, 2024 and will also conduct a webcast and conference call at 11:30 a.m.
To listen to the conference call, dial 1-888-660-6377 (
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 February 27, 2024. To access the audio replay, dial 1-800-770-2030 (
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 ASB's press releases, HEI’s and Hawaiian Electric’s Securities and Exchange Commission (SEC) filings and HEI’s public conference calls and webcasts. Investors may sign up to receive e-mail alerts via the Investor Relations section of the website. 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
The HEI family of companies provides the energy and financial services that empower much of the economic and community activity of
___________________
2 Core returns on average equity and average assets are non-GAAP measures which exclude
NON-GAAP MEASURES
Core net income is a non-GAAP measure which excludes
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, 2022 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, ASB 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 |
|
Years ended December 31 |
|||||||||||||||
(in thousands) |
|
December 31,
|
|
September 30,
|
|
December 31,
|
|
|
2023 |
|
|
|
2022 |
|
|||||
Interest and dividend income |
|
|
|
|
|
|
|
|
|
|
|||||||||
Interest and fees on loans |
|
$ |
72,340 |
|
|
$ |
71,540 |
|
|
$ |
60,331 |
|
$ |
276,688 |
|
|
$ |
207,830 |
|
Interest and dividends on investment securities |
|
|
15,587 |
|
|
|
14,096 |
|
|
|
14,315 |
|
|
58,095 |
|
|
|
58,044 |
|
Total interest and dividend income |
|
|
87,927 |
|
|
|
85,636 |
|
|
|
74,646 |
|
|
334,783 |
|
|
|
265,874 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|||||||||
Interest on deposit liabilities |
|
|
17,961 |
|
|
|
14,446 |
|
|
|
3,755 |
|
|
48,905 |
|
|
|
7,327 |
|
Interest on other borrowings |
|
|
8,721 |
|
|
|
8,598 |
|
|
|
4,775 |
|
|
33,892 |
|
|
|
5,974 |
|
Total interest expense |
|
|
26,682 |
|
|
|
23,044 |
|
|
|
8,530 |
|
|
82,797 |
|
|
|
13,301 |
|
Net interest income |
|
|
61,245 |
|
|
|
62,592 |
|
|
|
66,116 |
|
|
251,986 |
|
|
|
252,573 |
|
Provision for credit losses |
|
|
304 |
|
|
|
8,835 |
|
|
|
2,729 |
|
|
10,357 |
|
|
|
2,037 |
|
Net interest income after provision for credit losses |
|
|
60,941 |
|
|
|
53,757 |
|
|
|
63,387 |
|
|
241,629 |
|
|
|
250,536 |
|
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|||||||||
Fees from other financial services |
|
|
4,643 |
|
|
|
4,703 |
|
|
|
4,764 |
|
|
19,034 |
|
|
|
19,830 |
|
Fee income on deposit liabilities |
|
|
5,104 |
|
|
|
4,924 |
|
|
|
4,640 |
|
|
19,131 |
|
|
|
18,762 |
|
Fee income on other financial products |
|
|
2,664 |
|
|
|
2,440 |
|
|
|
2,628 |
|
|
10,616 |
|
|
|
10,291 |
|
Bank-owned life insurance |
|
|
1,707 |
|
|
|
2,303 |
|
|
|
1,872 |
|
|
7,390 |
|
|
|
2,533 |
|
Mortgage banking income |
|
|
209 |
|
|
|
341 |
|
|
|
62 |
|
|
910 |
|
|
|
1,692 |
|
Gain on sale of real estate |
|
|
— |
|
|
|
— |
|
|
|
776 |
|
|
495 |
|
|
|
1,778 |
|
Loss on sale of investment securities |
|
|
(14,965 |
) |
|
|
— |
|
|
|
— |
|
|
(14,965 |
) |
|
|
— |
|
Other income, net |
|
|
693 |
|
|
|
627 |
|
|
|
606 |
|
|
2,799 |
|
|
|
2,086 |
|
Total noninterest income |
|
|
55 |
|
|
|
15,338 |
|
|
|
15,348 |
|
|
45,410 |
|
|
|
56,972 |
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|||||||||
Compensation and employee benefits |
|
|
28,797 |
|
|
|
29,902 |
|
|
|
30,361 |
|
|
118,297 |
|
|
|
113,839 |
|
Occupancy |
|
|
5,422 |
|
|
|
5,154 |
|
|
|
7,030 |
|
|
21,703 |
|
|
|
24,026 |
|
Data processing |
|
|
5,305 |
|
|
|
5,133 |
|
|
|
4,537 |
|
|
20,545 |
|
|
|
17,681 |
|
Services |
|
|
5,032 |
|
|
|
3,627 |
|
|
|
2,967 |
|
|
13,943 |
|
|
|
10,679 |
|
Equipment |
|
|
3,114 |
|
|
|
3,125 |
|
|
|
2,937 |
|
|
11,842 |
|
|
|
10,100 |
|
Office supplies, printing and postage |
|
|
1,019 |
|
|
|
1,022 |
|
|
|
1,142 |
|
|
4,315 |
|
|
|
4,398 |
|
Marketing |
|
|
1,167 |
|
|
|
984 |
|
|
|
1,091 |
|
|
4,001 |
|
|
|
3,968 |
|
Other expense |
|
|
9,250 |
|
|
|
7,399 |
|
|
|
6,034 |
|
|
28,992 |
|
|
|
20,576 |
|
Total noninterest expense |
|
|
59,106 |
|
|
|
56,346 |
|
|
|
56,099 |
|
|
223,638 |
|
|
|
205,267 |
|
Income before income taxes |
|
|
1,890 |
|
|
|
12,749 |
|
|
|
22,636 |
|
|
63,401 |
|
|
|
102,241 |
|
Income taxes |
|
|
(1,341 |
) |
|
|
1,384 |
|
|
|
4,739 |
|
|
10,039 |
|
|
|
22,252 |
|
Net income |
|
$ |
3,231 |
|
|
$ |
11,365 |
|
|
$ |
17,897 |
|
$ |
53,362 |
|
|
$ |
79,989 |
|
Comprehensive income (loss) |
|
$ |
70,585 |
|
|
$ |
(22,866 |
) |
|
$ |
29,282 |
|
$ |
97,705 |
|
|
$ |
(218,844 |
) |
OTHER BANK INFORMATION (annualized %, except as of period end) |
|
|
|
|
|
|
|
|
|||||||||||
Return on average assets |
|
|
0.13 |
|
|
|
0.47 |
|
|
|
0.76 |
|
|
0.55 |
|
|
|
0.86 |
|
Return on average equity |
|
|
2.74 |
|
|
|
9.19 |
|
|
|
15.73 |
|
|
10.98 |
|
|
|
14.08 |
|
Return on average tangible common equity |
|
|
3.32 |
|
|
|
11.02 |
|
|
|
19.20 |
|
|
13.22 |
|
|
|
16.46 |
|
Net interest margin |
|
|
2.63 |
|
|
|
2.70 |
|
|
|
2.91 |
|
|
2.74 |
|
|
|
2.89 |
|
Efficiency ratio |
|
|
96.42 |
|
|
|
72.30 |
|
|
|
68.86 |
|
|
75.20 |
|
|
|
66.31 |
|
Net charge-offs to average loans outstanding |
|
|
0.15 |
|
|
|
0.07 |
|
|
|
0.06 |
|
|
0.12 |
|
|
|
0.03 |
|
As of period end |
|
|
|
|
|
|
|
|
|
|
|||||||||
Nonaccrual loans to loans receivable held for investment |
|
|
0.46 |
|
|
|
0.16 |
|
|
|
0.28 |
|
|
|
|
||||
Allowance for credit losses to loans outstanding |
|
|
1.20 |
|
|
|
1.23 |
|
|
|
1.21 |
|
|
|
|
||||
Tangible common equity to tangible assets |
|
|
4.7 |
|
|
|
3.9 |
|
|
|
4.1 |
|
|
|
|
||||
Tier-1 leverage ratio |
|
|
7.7 |
|
|
|
7.7 |
|
|
|
7.8 |
|
|
|
|
||||
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions) |
|
$ |
— |
|
|
$ |
14.0 |
|
|
$ |
10.0 |
|
$ |
39.0 |
|
|
$ |
42.0 |
|
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) |
December 31, 2023 |
December 31, 2022 |
||||||||||
Assets |
|
|
|
|
||||||||
Cash and due from banks |
|
$ |
184,383 |
|
|
$ |
153,042 |
|
||||
Interest-bearing deposits |
|
|
251,072 |
|
|
|
3,107 |
|
||||
Cash and cash equivalents |
|
|
435,455 |
|
|
|
156,149 |
|
||||
Investment securities |
|
|
|
|
||||||||
Available-for-sale, at fair value |
|
|
1,136,439 |
|
|
|
1,429,667 |
|
||||
Held-to-maturity, at amortized cost |
|
|
1,201,314 |
|
|
|
1,251,747 |
|
||||
Stock in Federal Home Loan Bank, at cost |
|
|
14,728 |
|
|
|
26,560 |
|
||||
Loans held for investment |
|
|
6,180,810 |
|
|
|
5,978,906 |
|
||||
Allowance for credit losses |
|
|
(74,372 |
) |
|
|
(72,216 |
) |
||||
Net loans |
|
|
6,106,438 |
|
|
|
5,906,690 |
|
||||
Loans held for sale, at lower of cost or fair value |
|
|
15,168 |
|
|
|
824 |
|
||||
Other |
|
|
681,460 |
|
|
|
692,143 |
|
||||
Goodwill |
|
|
82,190 |
|
|
|
82,190 |
|
||||
Total assets |
|
$ |
9,673,192 |
|
|
$ |
9,545,970 |
|
||||
Liabilities and shareholder’s equity |
|
|
|
|
||||||||
Deposit liabilities–noninterest-bearing |
|
$ |
2,599,762 |
|
|
$ |
2,811,077 |
|
||||
Deposit liabilities–interest-bearing |
|
|
5,546,016 |
|
|
|
5,358,619 |
|
||||
Other borrowings |
|
|
750,000 |
|
|
|
695,120 |
|
||||
Other |
|
|
247,563 |
|
|
|
212,269 |
|
||||
Total liabilities |
|
|
9,143,341 |
|
|
|
9,077,085 |
|
||||
Common stock |
|
|
1 |
|
|
|
1 |
|
||||
Additional paid-in capital |
|
|
358,067 |
|
|
|
355,806 |
|
||||
Retained earnings |
|
|
464,055 |
|
|
|
449,693 |
|
||||
Accumulated other comprehensive loss, net of tax benefits |
|
|
|
|
||||||||
Net unrealized losses on securities |
$ |
(282,963 |
) |
|
$ |
(328,904 |
) |
|
||||
Retirement benefit plans |
|
(9,309 |
) |
|
(292,272 |
) |
|
(7,711 |
) |
|
(336,615 |
) |
Total shareholder’s equity |
|
|
529,851 |
|
|
|
468,885 |
|
||||
Total liabilities and shareholder’s equity |
|
$ |
9,673,192 |
|
|
$ |
9,545,970 |
|
||||
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.
Explanation of ASB’s Use of Certain Unaudited Non-GAAP Measures
HEI and ASB management use certain non-GAAP measures to evaluate the performance of HEI and the bank.
Management believes these non-GAAP measures provide useful information and are a better indicator of the companies’ core operating activities. Core earnings and other financial measures as presented here may not be comparable to similarly titled measures used by other companies. The accompanying tables provide a reconciliation of reported GAAP1 earnings to non-GAAP core earnings and returns on average equity and average assets for the bank.
The reconciling adjustments from GAAP earnings to core earnings are limited to the costs related to the recent
Reconciliation of GAAP1 to non-GAAP Measures American Savings Bank F.S.B. Unaudited |
||||||||
(in thousands) |
|
Three months ended
|
|
Year ended
|
||||
|
|
|
|
|
||||
Pretax expenses: |
|
|
|
|
||||
Provision for credit losses |
|
$ |
— |
|
|
$ |
5,900 |
|
Professional services expense |
|
|
2,405 |
|
|
|
3,705 |
|
Other expenses |
|
|
309 |
|
|
|
1,666 |
|
Pretax Maui wildfire related costs |
|
|
2,714 |
|
|
|
11,271 |
|
Pretax loss on sale of investment securities |
|
|
14,965 |
|
|
|
14,965 |
|
Income tax benefits |
|
|
(4,738 |
) |
|
|
(7,031 |
) |
After-tax expenses |
|
$ |
12,941 |
|
|
$ |
19,205 |
|
|
|
|
|
|
||||
ASB net income |
|
|
|
|
||||
GAAP (as reported) |
|
$ |
3,231 |
|
|
$ |
53,362 |
|
Excluding expense related to |
|
|
|
|
||||
Provision for credit losses |
|
|
— |
|
|
|
4,319 |
|
Professional services expense |
|
|
1,760 |
|
|
|
2,712 |
|
Other expenses |
|
|
227 |
|
|
|
1,220 |
|
Loss on sale of investment securities |
|
|
10,954 |
|
|
|
10,954 |
|
|
|
|
12,941 |
|
|
|
19,205 |
|
Non-GAAP (core) net income |
|
$ |
16,172 |
|
|
$ |
72,567 |
|
|
|
Three months ended
|
|
Year ended
|
||||
Ratios (annualized %) |
|
|
|
|
||||
Based on GAAP1 |
|
|
|
|
||||
Return on average assets |
|
0.13 |
|
0.55 |
||||
Return on average equity |
|
2.74 |
|
10.98 |
||||
Return on average tangible common equity |
|
3.32 |
|
13.22 |
||||
Efficiency ratio |
|
96.42 |
|
75.20 |
||||
Based on Non-GAAP (core) |
|
|
|
|
||||
Return on average assets |
|
0.67 |
|
0.75 |
||||
Return on average equity |
|
13.73 |
|
14.94 |
||||
Return on average tangible common equity |
|
16.63 |
|
17.98 |
||||
Efficiency ratio |
|
73.94 |
|
69.88 |
1 Accounting principles generally accepted in
View source version on businesswire.com: https://www.businesswire.com/news/home/20240130061296/en/
Mateo Garcia
Director, Investor Relations
Telephone: (808) 543-7300
E-mail: ir@hei.com
Source: American Savings Bank
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