AMERICAN SAVINGS BANK REPORTS THIRD QUARTER 2022 FINANCIAL RESULTS

Rhea-AI Summary

American Savings Bank (ASB), a subsidiary of Hawaiian Electric Industries (HE), reported a net income of $20.8 million in Q3 2022, up from $17.5 million in Q2 2022 and $19.3 million in Q3 2021. Key highlights include net interest income rising to $65.7 million and a net interest margin of 2.96%. Total loans increased by 9.3% to $5.7 billion year-to-date. Despite higher noninterest expenses, ASB maintained strong credit trends, reflected in a 0.03% net charge-off ratio and a return on average equity of 15.1%.

Positive

• Q3 2022 net income increased by 18.8% quarter-over-quarter and 7.8% year-over-year.
• Net interest income rose to $65.7 million, showing solid growth across loan and investment portfolios.
• Net interest margin improved to 2.96%, benefiting from higher yields despite increasing funding costs.

Negative

• Noninterest expenses increased to $51.6 million, raising concerns about cost management.
• Lower fee income associated with the PPP program impacts overall noninterest income.

3Q 2022 Net Income of $20.8 million

Continued Net Interest Margin Expansion, Strong Loan Growth and

Favorable Credit Trends

HONOLULU, Oct. 28, 2022 /PRNewswire/ -- American Savings Bank, F.S.B. (ASB), a wholly owned subsidiary of Hawaiian Electric Industries, Inc. (NYSE: HE), today reported third quarter 2022 net income of $20.8 million, compared to $17.5 million in the second, or linked quarter of 2022 and $19.3 million in the third quarter of 2021.  

"We are pleased with the bank's solid results for the third quarter and year to date," said Ann Teranishi, president and chief executive officer of ASB. "We again saw broad-based loan growth during the quarter, reflecting great work by our team along with the Hawaii economy's ongoing recovery from the pandemic. We continued to see positive credit trends despite the inflationary environment, and the rising interest rate environment continued to benefit our net interest margin and overall profitability," said Teranishi.

Financial Highlights

Third quarter 2022 net interest income of $65.7 million was up from $61.8 million in the linked quarter, and $60.3 million in the third quarter of 2021. The increase versus the linked quarter reflected higher yields and balances across nearly the entire loan portfolio and higher yields in the investment securities portfolio, partially offset by higher funding costs and lower fee income associated with the Paycheck Protection Program (PPP) portfolio as PPP loans continued to pay down. The increase versus the prior year quarter reflected higher average earning assets balances and higher yields, partially offset by lower PPP fee income. Net interest margin was 2.96% compared to 2.85% in the linked quarter, and 2.90% in the third quarter last year.

In the third quarter ASB recorded a negative provision for credit losses of $0.2 million compared to a provision for credit losses of $2.8 million in the linked quarter and a negative provision for credit losses of $1.7 million in the third quarter of 2021. The quarter's negative provision reflected continued favorable credit trends that led to the release of reserves, more than offsetting additional provisioning for loan growth. As of September 30, 2022, ASB's allowance for credit losses to outstanding loans was 1.24% compared to 1.28% as of June 30, 2022 and 1.48% as of September 30, 2021.

The net charge-off ratio for the third quarter of 2022 was 0.03%, compared to nil in the linked quarter and 0.03% in the third quarter of 2021. Nonaccrual loans as a percent of total loans receivable held for investment were 0.35% in the third quarter of 2022, compared to 0.40% in the linked quarter and 0.97% in the prior year quarter.

Noninterest income was $13.0 million in the third quarter of 2022 compared to $12.5 million in the linked quarter and $14.8 million in the third quarter of 2021. The increase compared to the linked quarter was primarily due to an increase in fee income on deposit liabilities and higher bank-owned life insurance income. The decrease compared to the prior year quarter was primarily due to lower bank-owned life insurance income and lower mortgage banking income.  

Noninterest expense was $51.6 million compared to $49.4 million in the linked quarter and $51.5 million in the third quarter of 2021. The increase in noninterest expense versus the linked quarter was primarily due to increased compensation and benefits expenses and higher services and occupancy costs. The increase in noninterest expense versus the same quarter last year was primarily due to higher services expenses and occupancy costs, with offsets from lower compensation and benefits expenses due to higher incentive compensation in 2021.

Total earning assets as of September 30, 2022 were $8.9 billion, up 4.7% from December 31, 2021.

Total loans were $5.7 billion as of September 30, 2022, up 9.3% from December 31, 2021, reflecting growth across nearly the entire portfolio year-to-date.     

Total deposits were $8.3 billion as of September 30, 2022, an increase of 1.1% from December 31, 2021. For the third quarter of 2022, the average cost of funds was 0.13%, up 0.08% versus the linked quarter and up 0.07% versus the same quarter last year.

For the third quarter of 2022 return on average equity was 15.1% compared to 12.2% in the linked quarter and 10.3% in the third quarter of 2021. Return on average assets was 0.89% for the third quarter of 2022, compared to 0.76% in the linked quarter and 0.86% in the same quarter last year.

In the third quarter of 2022, ASB paid dividends of $5.0 million to HEI. ASB had a Tier 1 leverage ratio of 7.75% as of September 30, 2022.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2022 GUIDANCE

Concurrent with ASB's regulatory filing 30 days after the end of the quarter, ASB announced its third quarter 2022 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 third quarter of 2022.

HEI plans to announce its third quarter 2022 consolidated financial results on Monday, November 7, 2022 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 ASB's earnings, and 2022 guidance. 

To listen to the conference call, dial 1-844-200-6205 (U.S.) or +1-929-526-1599 (international) and enter passcode 162868. 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 "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 21, 2022. To access the audio replay, dial 1-866-813-9403 (U.S.) or +44-204-525-0658 (international) and enter passcode 881525.

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 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, ASB, 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, 2021 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						Nine months ended September 30
(in thousands)		September 30, 2022		June 30, 2022		September 30, 2021		2022		2021
Interest and dividend income
Interest and fees on loans		$        53,365		$        48,129		$        49,445		$    147,499		$    150,418
Interest and dividends on investment securities		15,052		14,693		11,996		43,729		31,709
Total interest and dividend income		68,417		62,822		61,441		191,228		182,127
Interest expense
Interest on deposit liabilities		1,704		921		1,176		3,572		3,919
Interest on other borrowings		1,055		139		5		1,199		55
Total interest expense		2,759		1,060		1,181		4,771		3,974
Net interest income		65,658		61,762		60,260		186,457		178,153
Provision for credit losses		(186)		2,757		(1,725)		(692)		(22,367)
Net interest income after provision for credit losses		65,844		59,005		61,985		187,149		200,520
Noninterest income
Fees from other financial services		4,763		4,716		4,800		15,066		15,337
Fee income on deposit liabilities		4,879		4,552		4,262		14,122		12,029
Fee income on other financial products		2,416		2,529		2,124		7,663		6,767
Bank-owned life insurance		122		(142)		2,026		661		6,211
Mortgage banking income		181		372		1,272		1,630		7,497
Gain on sale of real estate		—		—		—		1,002		—
Gain on sale of investment securities, net		—		—		—		—		528
Other income, net		633		475		283		1,480		631
Total noninterest income		12,994		12,502		14,767		41,624		49,000
Noninterest expense
Compensation and employee benefits		28,597		27,666		30,888		83,478		86,595
Occupancy		5,577		5,467		5,157		16,996		15,226
Data processing		4,509		4,484		4,278		13,144		13,162
Services		2,751		2,522		2,272		7,712		7,609
Equipment		2,432		2,402		2,373		7,163		6,989
Office supplies, printing and postage		1,123		1,073		1,072		3,256		3,094
Marketing		925		934		995		2,877		2,308
FDIC insurance		914		891		808		2,613		2,412
Other expense		4,729		3,959		3,668		11,929		9,790
Total noninterest expense		51,557		49,398		51,511		149,168		147,185
Income before income taxes		27,281		22,109		25,241		79,605		102,335
Income taxes		6,525		4,643		5,976		17,513		23,230
Net income		$        20,756		$        17,466		$        19,265		$      62,092		$      79,105
Comprehensive income (loss)		$       (78,186)		$       (71,369)		$          7,581		$   (248,126)		$      38,666
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets		0.89		0.76		0.86		0.90		1.21
Return on average equity		15.11		12.17		10.26		13.65		14.31
Return on average tangible common equity		17.77		14.20		11.52		15.79		16.11
Net interest margin		2.96		2.85		2.90		2.87		2.94
Efficiency ratio		65.55		66.52		68.66		65.40		64.80
Net charge-offs to average loans outstanding		0.03		0.00		0.03		0.01		0.08
As of period end
Nonaccrual loans to loans receivable held for investment		0.35		0.40		0.97
Allowance for credit losses to loans outstanding		1.24		1.28		1.48
Tangible common equity to tangible assets		4.0		4.9		7.3
Tier-1 leverage ratio		7.7		7.7		8.0
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)		$              5.0		$            12.0		$            12.0		$          32.0		$          40.0

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, 2022		December 31, 2021
Assets
Cash and due from banks		$            143,618		$            100,051
Interest-bearing deposits		6,179		151,189
Cash and cash equivalents		149,797		251,240
Investment securities
Available-for-sale, at fair value		2,232,336		2,574,618
Held-to-maturity, at amortized cost		510,879		522,270
Stock in Federal Home Loan Bank, at cost		15,000		10,000
Loans held for investment		5,687,390		5,211,114
Allowance for credit losses		(70,406)		(71,130)
Net loans		5,616,984		5,139,984
Loans held for sale, at lower of cost or fair value		3,101		10,404
Other		705,324		590,897
Goodwill		82,190		82,190
Total assets		$         9,315,611		$         9,181,603
Liabilities and shareholder's equity
Deposit liabilities–noninterest-bearing		$         2,921,857		$         2,976,632
Deposit liabilities–interest-bearing		5,337,028		5,195,580
Other borrowings		409,040		88,305
Other		198,596		193,268
Total liabilities		8,866,521		8,453,785
Common stock		1		1
Additional paid-in capital		355,293		353,895
Retained earnings		441,796		411,704
Accumulated other comprehensive loss, net of tax benefits
Net unrealized losses on securities	$     (340,266)		$        (32,037)
Retirement benefit plans	(7,734)	(348,000)	(5,745)	(37,782)
Total shareholder's equity		449,090		727,818
Total liabilities and shareholder's equity		$         9,315,611		$         9,181,603

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

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SOURCE Hawaiian Electric Industries, Inc.

FAQ

What was American Savings Bank's net income for Q3 2022?

American Savings Bank reported a net income of $20.8 million for Q3 2022.

How did ASB's net interest margin perform in Q3 2022?

ASB's net interest margin was 2.96% in Q3 2022, up from 2.85% in the linked quarter.

What were the total loans for ASB as of September 30, 2022?

Total loans reached $5.7 billion as of September 30, 2022, reflecting a 9.3% increase from December 31, 2021.

When will HEI announce its consolidated financial results?

Hawaiian Electric Industries plans to announce its consolidated financial results on November 7, 2022.