American Savings Bank Reports Third Quarter 2020 Financial Results

Rhea-AI Summary

American Savings Bank reported a net income of $12.2 million for Q3 2020, down from $14.0 million in Q2 2020 and $22.9 million in Q3 2019. The net interest income rose to $57.3 million but was below the $62.1 million of the previous year. The provision for credit losses reached $14.0 million, including $12.3 million for pandemic-related reserves. Total loans increased by 7.3% YoY to $5.5 billion, and total deposits rose 12.2% to $7.0 billion.

Positive

• Net interest income at $57.3 million, up from $56.7 million in Q2 2020.
• Total loans increased 7.3% YoY, largely due to Paycheck Protection Program loans.
• Total deposits grew 12.2% YoY, indicating strong customer retention.

Negative

• Net income decreased from $14.0 million in Q2 2020 and $22.9 million in Q3 2019.
• Provision for credit losses significantly increased to $14.0 million, demonstrating ongoing credit risk.
• Return on average equity dropped to 6.75%, down from 8.00% in Q2 2020.

HONOLULU, Oct. 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 third quarter of 2020 of $12.2 million. This compares to $14.0 million in the second, or linked, quarter of 2020, and $22.9 million in the third quarter of 2019.

"I continue to be impressed by the resilience of our customers as they adapt to the ongoing challenges of Hawaii's still-suppressed economy. Even so, because the timing of a sustained reopening of our tourism sector remains uncertain, our results again reflect elevated provision for potential credit losses," said Rich Wacker, president and chief executive officer of American. "While low interest rates continue to compress lending margins, in the third quarter we were able to reduce expenses and improve noninterest income from core activities, including strong mortgage banking income from our residential lending activity, replacing most of the prior quarter's gains on sales of securities."

Financial Highlights

Net interest income was $57.3 million in the third quarter of 2020 compared to $56.7 million in the linked quarter, and $62.1 million in the third quarter of 2019. Net interest income increased over the linked quarter as the bank deployed excess liquidity into the investment portfolio and lowered its funding costs during the quarter by increasing its low cost core deposit funding. Yield on earning assets continued to be impacted by the lower interest rate environment. Net interest margin for the third quarter of 2020 was 3.12%, compared to 3.21% in the linked quarter and 3.82% in the third quarter of 2019. Year to date net interest margin was 3.34%.

The provision for credit losses was $14.0 million in the third quarter of 2020 compared to $15.1 million in the linked quarter and $3.3 million in the third quarter of 2019. The provision for the third quarter of 2020 included approximately $12.3 million in additional reserves related to economic impacts from the pandemic. Total COVID-19 related reserves added year to date totaled $23.4 million.

The net charge-off ratio for the third quarter of 2020 was 0.32%, compared to 0.49% in the linked quarter and 0.69% in the third quarter of 2019. The lower net charge-off ratio in the third quarter of 2020 reflected improvement in credit quality of the personal unsecured loan portfolio. Nonaccrual loans as a percent of total loans receivable held for investment was 0.77% in the third quarter of 2020, compared to 0.86% in the linked quarter and 0.63% in the prior year quarter.

Noninterest income was $19.0 million in the third quarter of 2020, compared to $24.2 million in the linked quarter and $16.3 million in the third quarter of 2019. The decrease in noninterest income from the linked quarter was primarily due to higher second quarter gains on sales of securities of $9.3 million. Noninterest income in the third quarter of 2020 included the reinstatement of certain fees that had been temporarily suspended to support customers during the initial impact of COVID-19. Noninterest income was positively impacted in the third quarter by higher loan sales from increased mortgage banking originations due to the lower interest rate environment.

Noninterest expense was $47.3 million in the third quarter of 2020, compared to $48.4 million in the linked quarter and $45.9 million in the third quarter of 2019. Compared to the linked quarter, compensation and employee benefit expense was $1.4 million higher, reflecting increased mortgage banking activity, and was more than offset by $3.1 million lower COVID-19 related expenses.  

Total loans were $5.5 billion as of September 30, 2020, up 7.3%¹ from December 31, 2019, driven mainly by the addition of $370 million in Paycheck Protection Program loans, as well as increases in the commercial real estate and residential loan portfolios, offset by reductions in the home equity line of credit and consumer loan portfolios.    

Total deposits were $7.0 billion as of September 30, 2020, an increase of 12.2%² from December 31, 2019. The average cost of funds was 0.13% for the quarter, down five basis points versus the linked quarter and down seventeen basis points versus the prior year quarter.

Overall, American's return on average equity for the third quarter of 2020 was 6.75%, compared to 8.00% in the linked quarter and 13.75% in the third quarter of 2019. Return on average assets was 0.61% for the third quarter of 2020, compared to 0.72% in the linked quarter and 1.29% in the same quarter last year.

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¹     Annualized from December 31, 2019, total loans as of September 30, 2020 increased 9.7%.

²     Annualized from December 31, 2019, total deposits as of September 30, 2020 increased 16.3%.

In the third quarter of 2020, American retained capital and did not pay a dividend to HEI. American had a leverage ratio of 8.3% at September 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 third 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 third quarter 2020.

HEI plans to announce its third quarter 2020 consolidated financial results on Friday, November 6, 2020 and will also conduct a webcast and conference call at 11:15 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 November 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 November 20, 2020 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode 10148946.

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												Nine months ended September 30,
(in thousands)		September 30, 2020				June 30, 2020				September 30, 2019				2020				2019
Interest and dividend income
Interest and fees on loans		$	52,419			$	53,541			$	59,260			$	161,505			$	175,740
Interest and dividends on investment securities		7,221				6,288				7,599				22,939				25,762
Total interest and dividend income		59,640				59,829				66,859				184,444				201,502
Interest expense
Interest on deposit liabilities		2,287				3,071				4,384				8,945				12,923
Interest on other borrowings		61				75				422				449				1,361
Total interest expense		2,348				3,146				4,806				9,394				14,284
Net interest income		57,292				56,683				62,053				175,050				187,218
Provision for credit losses		13,970				15,133				3,315				39,504				17,873
Net interest income after provision for credit losses		43,322				41,550				58,738				135,546				169,345
Noninterest income
Fees from other financial services		4,233				3,102				5,085				11,906				14,445
Fee income on deposit liabilities		3,832				2,897				5,320				11,842				15,402
Fee income on other financial products		1,524				1,212				1,706				4,608				5,129
Bank-owned life insurance		1,965				1,673				1,660				4,432				6,309
Mortgage banking income		7,681				6,252				1,490				15,933				3,080
Gain on sale of securities, net		—				9,275				653				9,275				653
Other income, net		(231)				(251)				428				(69)				1,420
Total noninterest income		19,004				24,160				16,342				57,927				46,438
Noninterest expense
Compensation and employee benefits		26,431				25,079				25,364				77,287				76,626
Occupancy		5,693				5,442				5,694				16,402				15,843
Data processing		3,366				3,849				3,763				11,052				11,353
Services		2,624				2,474				2,829				7,907				7,861
Equipment		2,001				2,290				2,163				6,630				6,416
Office supplies, printing and postage		1,187				1,049				1,297				3,577				4,320
Marketing		727				379				1,142				1,908				3,455
FDIC insurance		714				751				(5)				1,567				1,249
Other expense1		4,556				7,063				3,676				15,813				12,049
Total noninterest expense		47,299				48,376				45,923				142,143				139,172
Income before income taxes		15,027				17,334				29,157				51,330				76,611
Income taxes		2,877				3,320				6,269				9,405				15,868
Net income		$	12,150			$	14,014			$	22,888			$	41,925			$	60,743
Comprehensive income		$	13,543			$	13,734			$	26,697			$	62,885			$	85,079
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets		0.61				0.72				1.29				0.73				1.14
Return on average equity		6.75				8.00				13.75				7.95				12.44
Return on average tangible common equity		7.62				9.07				15.68				9.00				14.23
Net interest margin		3.12				3.21				3.82				3.34				3.87
Efficiency ratio		61.99				59.84				58.58				61.01				59.56
Net charge-offs to average loans outstanding		0.32				0.49				0.69				0.41				0.46
As of period end
Nonaccrual loans to loans receivable held for investment		0.77				0.86				0.63
Allowance for credit losses to loans outstanding		1.67				1.50				1.04
Tangible common equity to tangible assets		8.0				7.9				8.4
Tier-1 leverage ratio		8.3				8.4				8.8
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)		$	—			$	—			$	14.0			$	28.0			$	47.0

1	The three and nine-month periods ended September 30, 2020 include approximately $0.7 million and $4.5 million, respectively, of certain direct and incremental COVID-19 related costs. For the nine months ended September 30, 2020, these costs, 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, 2020						December 31, 2019
Assets
Cash and due from banks				$	150,087					$	129,770
Interest-bearing deposits				10,918						48,628
Investment securities
Available-for-sale, at fair value				1,747,658						1,232,826
Held-to-maturity, at amortized cost				133,858						139,451
Stock in Federal Home Loan Bank, at cost				10,920						8,434
Loans held for investment				5,480,902						5,121,176
Allowance for credit losses				(91,459)						(53,355)
Net loans				5,389,443						5,067,821
Loans held for sale, at lower of cost or fair value				16,806						12,286
Other				533,865						511,611
Goodwill				82,190						82,190
Total assets				$	8,075,745					$	7,233,017
Liabilities and shareholder's equity
Deposit liabilities–noninterest-bearing				$	2,424,539					$	1,909,682
Deposit liabilities–interest-bearing				4,613,598						4,362,220
Other borrowings				151,875						115,110
Other				165,300						146,954
Total liabilities				7,355,312						6,533,966
Common stock				1						1
Additional paid-in capital				351,322						349,453
Retained earnings				356,812						358,259
Accumulated other comprehensive income (loss), net of taxes
Net unrealized gains on securities	$	22,248					$	2,481
Retirement benefit plans	(9,950)			12,298			(11,143)			(8,662)
Total shareholder's equity				720,433						699,051
Total liabilities and shareholder's equity				$	8,075,745					$	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:  ir@hei.com

 

 

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SOURCE Hawaiian Electric Industries, Inc.

FAQ

What were American Savings Bank's earnings for Q3 2020?

American Savings Bank reported net income of $12.2 million for Q3 2020.

How did net interest income change in Q3 2020?

Net interest income rose to $57.3 million in Q3 2020, compared to $56.7 million in the previous quarter.

What was the provision for credit losses in Q3 2020?

The provision for credit losses in Q3 2020 was $14.0 million.

What are the total loan and deposit figures for American Savings Bank as of September 30, 2020?

Total loans were $5.5 billion and total deposits were $7.0 billion as of September 30, 2020.

When will HEI announce its consolidated financial results for Q3 2020?

HEI plans to announce its consolidated financial results on November 6, 2020.