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HONOLULU, July 30, 2021 /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 2021 of $30.3 million, compared to $29.6 million in the first, or linked quarter of 2021 and $14.0 million in the second quarter of 2020.
"We're pleased with our financial results in the second quarter, which reflect the strengthening local economy, solid execution and our continuing efforts to work closely with our customers. Our results benefited from another reduction of reserves for credit losses, driven by the improving economy and credit quality," said Ann Teranishi, president and chief executive officer of American. "We remain focused on sound management of our core business as we transform our operating model to provide excellent customer experience in an increasingly digital world," said Teranishi.
Financial Highlights
Second quarter 2021 net interest income was $60.8 million compared to $57.1 million in the linked quarter and $56.7 million in the second quarter of 2020. The higher net interest income versus the linked and prior year quarters was primarily due to the recognition of fee income associated with the ASB CARES (Paycheck Protection Program) portfolio, lower amortization of investment premiums, growth in earning assets and a record low cost of funds at 0.07%. Net interest margin for the second quarter of 2021 was 2.98% compared to 2.95% in the linked quarter and 3.21% in the second quarter of 2020.
The results for the second quarter of 2021 included a credit-driven reserve release resulting in a negative provision for credit losses of $12.2 million, reflecting improvement in the local economy, credit upgrades in the commercial loan portfolio, lower net charge offs, and lower reserve requirements for the consumer unsecured loan portfolio. This compares to a negative provision for credit losses of $8.4 million in the linked quarter and a provision for credit losses of $15.1 million in the second quarter of 2020. As of June 30, 2021, American's allowance for credit losses to outstanding loans was 1.51%.
The net charge-off ratio for the second quarter of 2021 was 0.04%, compared to 0.18% in the linked quarter and 0.49% in the second quarter of 2020. Nonaccrual loans as a percent of total loans receivable held for investment were 1.03% in the second quarter of 2021, compared to 1.00% in the linked quarter and 0.86% in the prior year quarter.
Noninterest income was $15.2 million in the second quarter of 2021, compared to $19.0 million in the linked quarter and $24.2 million in the second quarter of 2020. The decrease in noninterest income from the linked quarter was primarily due to lower mortgage banking income and lower income from bank-owned life insurance in the second quarter. The decrease in noninterest income from the prior year quarter was primarily due to higher gains on sales of securities, including a $7.1 million gain related to the sale of Visa Class B restricted shares, and higher mortgage banking income in the second quarter of 2020.
Second quarter of 2021 noninterest expense was $48.2 million, compared to $47.5 million in the linked quarter and $48.4 million in the second quarter of 2020. The decrease in noninterest expense compared to the second quarter of 2020 was primarily due to lower COVID-19 related expenses, partially offset by higher compensation and benefit costs, including one-time settlement costs related to an executive transition.
Total loans were $5.2 billion as of June 30, 2021, down 2.7% from December 31, 2020. The reduction in the loan portfolio included approximately $228 million in forgiven ASB CARES loans, in addition to declines in the home equity line of credit and consumer portfolios. The decrease in these portfolios was partially offset by growth in the commercial real estate portfolio.
Total deposits were $7.9 billion as of June 30, 2021, an increase of 6.6% from December 31, 2020. For the second quarter of 2021, the average cost of funds was 0.07%, down one basis point versus the linked quarter and down eleven basis points versus the prior year quarter.
For the second quarter of 2021 return on average equity was 16.8%, compared to 16.0% in the linked quarter and 8.0% in the second quarter of 2020. Return on average assets was 1.38% for the second quarter of 2021, compared to 1.40% in the linked quarter and 0.72% in the same quarter last year.
In the second quarter of 2021, American paid dividends of $23.0 million to HEI. American had a Tier 1 leverage ratio of 8.0% at June 30, 2021.
HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2021 GUIDANCE
Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its second quarter 2021 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 second quarter of 2021.
HEI plans to announce its second quarter 2021 consolidated financial results on Monday, August 9, 2021 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 2021 guidance.
Parties in the U.S. may listen to the conference call by dialing (844) 834-0652. International parties may listen to the conference call by dialing (412) 317-5198. Parties may also access presentation materials and/or listen to the conference call by visiting the conference call/webcast link on HEI's website at www.hei.com under the "Investor Relations" section, 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 August 23, 2021. To access the audio replay, dial (877) 344-7529 (U.S.) or (412) 317-0088 (international) and enter passcode 10157240.
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'sSecurities 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'sSEC 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 in this document or in HEI's and Hawaiian Electric'sSEC filings.
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.
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, 2020 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, 2021 | March 31, 2021 | June 30, 2020 | 2021 | 2020 | |||||||||||||||
Interest and dividend income | ||||||||||||||||||||
Interest and fees on loans | $ | 51,026 | $ | 49,947 | $ | 53,541 | $ | 100,973 | $ | 109,086 | ||||||||||
Interest and dividends on investment securities | 11,040 | 8,673 | 6,288 | 19,713 | 15,718 | |||||||||||||||
Total interest and dividend income | 62,066 | 58,620 | 59,829 | 120,686 | 124,804 | |||||||||||||||
Interest expense | ||||||||||||||||||||
Interest on deposit liabilities | 1,281 | 1,462 | 3,071 | 2,743 | 6,658 | |||||||||||||||
Interest on other borrowings | 23 | 27 | 75 | 50 | 388 | |||||||||||||||
Total interest expense | 1,304 | 1,489 | 3,146 | 2,793 | 7,046 | |||||||||||||||
Net interest income | 60,762 | 57,131 | 56,683 | 117,893 | 117,758 | |||||||||||||||
Provision for credit losses | (12,207) | (8,435) | 15,133 | (20,642) | 25,534 | |||||||||||||||
Net interest income after provision for credit losses | 72,969 | 65,566 | 41,550 | 138,535 | 92,224 | |||||||||||||||
Noninterest income | ||||||||||||||||||||
Fees from other financial services | 5,464 | 5,073 | 3,102 | 10,537 | 7,673 | |||||||||||||||
Fee income on deposit liabilities | 3,904 | 3,863 | 2,897 | 7,767 | 8,010 | |||||||||||||||
Fee income on other financial products | 2,201 | 2,442 | 1,212 | 4,643 | 3,084 | |||||||||||||||
Bank-owned life insurance | 1,624 | 2,561 | 1,673 | 4,185 | 2,467 | |||||||||||||||
Mortgage banking income | 1,925 | 4,300 | 6,252 | 6,225 | 8,252 | |||||||||||||||
Gain on sale of investment securities, net | — | 528 | 9,275 | 528 | 9,275 | |||||||||||||||
Other income, net | 76 | 272 | (251) | 348 | 162 | |||||||||||||||
Total noninterest income | 15,194 | 19,039 | 24,160 | 34,233 | 38,923 | |||||||||||||||
Noninterest expense | ||||||||||||||||||||
Compensation and employee benefits | 27,670 | 28,037 | 25,079 | 55,707 | 50,856 | |||||||||||||||
Occupancy | 5,100 | 4,969 | 5,442 | 10,069 | 10,709 | |||||||||||||||
Data processing | 4,533 | 4,351 | 3,849 | 8,884 | 7,686 | |||||||||||||||
Services | 2,475 | 2,862 | 2,474 | 5,337 | 5,283 | |||||||||||||||
Equipment | 2,394 | 2,222 | 2,290 | 4,616 | 4,629 | |||||||||||||||
Office supplies, printing and postage | 978 | 1,044 | 1,049 | 2,022 | 2,390 | |||||||||||||||
Marketing | 665 | 648 | 379 | 1,313 | 1,181 | |||||||||||||||
FDIC insurance | 788 | 816 | 751 | 1,604 | 853 | |||||||||||||||
Other expense1 | 3,568 | 2,554 | 7,063 | 6,122 | 11,257 | |||||||||||||||
Total noninterest expense | 48,171 | 47,503 | 48,376 | 95,674 | 94,844 | |||||||||||||||
Income before income taxes | 39,992 | 37,102 | 17,334 | 77,094 | 36,303 | |||||||||||||||
Income taxes | 9,708 | 7,546 | 3,320 | 17,254 | 6,528 | |||||||||||||||
Net income | $ | 30,284 | $ | 29,556 | $ | 14,014 | $ | 59,840 | $ | 29,775 | ||||||||||
Comprehensive income (loss) | $ | 47,283 | $ | (16,198) | $ | 13,734 | $ | 31,085 | $ | 49,342 | ||||||||||
OTHER BANK INFORMATION (annualized %, except as of period end) | ||||||||||||||||||||
Return on average assets | 1.38 | 1.40 | 0.72 | 1.39 | 0.79 | |||||||||||||||
Return on average equity | 16.76 | 16.04 | 8.00 | 16.40 | 8.57 | |||||||||||||||
Return on average tangible common equity | 18.92 | 18.06 | 9.07 | 18.48 | 9.72 | |||||||||||||||
Net interest margin | 2.98 | 2.95 | 3.21 | 2.97 | 3.46 | |||||||||||||||
Efficiency ratio | 63.42 | 62.36 | 59.84 | 62.89 | 60.53 | |||||||||||||||
Net charge-offs to average loans outstanding | 0.04 | 0.18 | 0.49 | 0.11 | 0.46 | |||||||||||||||
As of period end | ||||||||||||||||||||
Nonaccrual loans to loans receivable held for investment | 1.03 | 1.00 | 0.86 | |||||||||||||||||
Allowance for credit losses to loans outstanding | 1.51 | 1.73 | 1.50 | |||||||||||||||||
Tangible common equity to tangible assets | 7.5 | 7.3 | 7.9 | |||||||||||||||||
Tier-1 leverage ratio | 8.0 | 8.3 | 8.4 | |||||||||||||||||
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions) | $ | 23.0 | $ | 5.0 | $ | — | $ | 28.0 | $ | 28.0 | ||||||||||
1 The three- and six-month periods ended June 30, 2021 include approximately $0.1 million and $0.4 million, respectively, of certain direct and incremental COVID-19 related costs. 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 for the first six months of 2020, 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, 2021 | December 31, 2020 | ||||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 115,567 | $ | 178,422 | ||||||||
Interest-bearing deposits | 105,800 | 114,304 | ||||||||||
Cash and cash equivalents | 221,367 | 292,726 | ||||||||||
Investment securities | ||||||||||||
Available-for-sale, at fair value | 2,509,906 | 1,970,417 | ||||||||||
Held-to-maturity, at amortized cost | 375,655 | 226,947 | ||||||||||
Stock in Federal Home Loan Bank, at cost | 10,000 | 8,680 | ||||||||||
Loans held for investment | 5,184,459 | 5,333,843 | ||||||||||
Allowance for credit losses | (78,252) | (101,201) | ||||||||||
Net loans | 5,106,207 | 5,232,642 | ||||||||||
Loans held for sale, at lower of cost or fair value | 50,877 | 28,275 | ||||||||||
Other | 553,702 | 554,656 | ||||||||||
Goodwill | 82,190 | 82,190 | ||||||||||
Total assets | $ | 8,909,904 | $ | 8,396,533 | ||||||||
Liabilities and shareholder's equity | ||||||||||||
Deposit liabilities–noninterest-bearing | $ | 2,868,770 | $ | 2,598,500 | ||||||||
Deposit liabilities–interest-bearing | 5,004,660 | 4,788,457 | ||||||||||
Other borrowings | 129,665 | 89,670 | ||||||||||
Other | 166,419 | 183,731 | ||||||||||
Total liabilities | 8,169,514 | 7,660,358 | ||||||||||
Common stock | 1 | 1 | ||||||||||
Additional paid-in capital | 352,888 | 351,758 | ||||||||||
Retained earnings | 401,310 | 369,470 | ||||||||||
Accumulated other comprehensive income (loss), net of taxes | ||||||||||||
Net unrealized gains (losses) on securities | $ | (8,815) | $ | 19,986 | ||||||||
Retirement benefit plans | (4,994) | (13,809) | (5,040) | 14,946 | ||||||||
Total shareholder's equity | 740,390 | 736,175 | ||||||||||
Total liabilities and shareholder's equity | $ | 8,909,904 | $ | 8,396,533 | ||||||||
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 American Savings Bank
