AMERICAN SAVINGS BANK REPORTS SECOND QUARTER 2022 FINANCIAL RESULTS
2Q 2022 Net Income of $17.5 million
Strong Loan Growth, Expanding Net Interest Margin, Favorable Credit Trends and More Normalized Provision
HONOLULU - American Savings Bank, F.S.B. (ASB), a wholly owned subsidiary of Hawaiian Electric Industries, Inc. (NYSE - HE), today reported second quarter 2022 net income of $17.5 million. ASB grew net interest income compared to the first quarter of 2022 and the second quarter of 2021, benefiting from strong loan growth and a rising interest rate environment, while credit quality has improved. With the bank’s loan growth, the quarter also saw a return to a more normalized provision expense following five consecutive quarters of negative provision.
“Our second quarter results reflect solid execution from our team and an earnings level that is driven by a more normalized provision in comparison to recent periods,” said Ann Teranishi, president and chief executive officer of ASB. “We saw strong loan growth across our portfolio during the quarter, and credit quality has been trending favorably,” said Teranishi. “We continue to make progress in our digital transformation to meet our customers’ needs, including our recent launch of Zelle in our mobile banking platform, providing a fast, safe and easy way for customers to send and receive money with those they trust.”
Financial Highlights
Net income in the second quarter was $17.5 million, compared to $23.9 million in the first, or linked quarter of 2022 and $30.3 million in the second quarter of 2021.
Net interest income of $61.8 million was up from $59.0 million in the linked quarter, and $60.8 million in the second quarter of 2021. The increase versus the linked quarter reflected earning asset growth and higher yields in the commercial and commercial real estate loan portfolios, partially offset by lower fee income associated with the Paycheck Protection Program
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(PPP) portfolio as PPP loans continued to pay down. The increase versus the prior year quarter reflected higher average earning assets partially offset by lower PPP fee income. Net interest margin was 2.85% compared to 2.79% in the linked quarter, and 2.98% in the second quarter last year.
In the second quarter ASB recorded a provision for credit losses of $2.8 million compared to a negative provision for credit losses of $3.3 million in the linked quarter and $12.2 million in the second quarter of 2021. The quarter’s higher provision reflected provisioning for the strong loan growth generated during the quarter, partially offset by favorable credit trends that led to the release of reserves (which reduces provision). As of June 30, 2022, ASB’s allowance for credit losses to outstanding loans was 1.28% compared to 1.30% as of March 31, 2022 and 1.51% as of June 30, 2021.
The net charge-off ratio for the second quarter of 2022 was nil, compared to 0.01% in the linked quarter and 0.04% in the second quarter of 2021. Nonaccrual loans as a percent of total loans receivable held for investment were 0.40% in the second quarter of 2022, compared to 0.72% in the linked quarter and 1.03% in the prior year quarter.
Noninterest income was $12.5 million in the second quarter of 2022 compared to $16.1 million in the linked quarter and $15.2 million in the second quarter of 2021. The decrease compared to the linked quarter was primarily due to the gain on sale of real estate recorded in the first quarter of 2022, lower fees from other financial services, lower bank-owned life insurance income and lower mortgage banking income. The decrease compared to the prior year quarter was primarily due to lower bank-owned life insurance income, lower mortgage banking income and lower fees from other financial services.
Noninterest expense was $49.4 million compared to $48.2 million in the linked quarter and $48.2 million in the second quarter of 2021. The increase in noninterest expense versus the linked quarter was primarily due to increased compensation and benefits expenses and higher data processing costs. The increase in noninterest expense versus the same quarter last year was primarily due to higher occupancy costs and marketing expenses.
Total earning assets as of June 30, 2022 were $8.7 billion, up 2.6% from December 31, 2021.
Total loans were $5.4 billion as of June 30, 2022, up 4.2% from December 31, 2021, reflecting growth across nearly the entire portfolio and driven by strong growth in commercial real estate loans.
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Total deposits were $8.3 billion as of June 30, 2022, an increase of 1.0% from December 31, 2021. For the second quarter of 2022, the average cost of funds was 0.05%, flat versus the linked quarter and down two basis points versus the same quarter last year.
For the second quarter of 2022 return on average equity was 12.2% compared to 13.7% in the linked quarter and 16.8% in the second quarter of 2021. Return on average assets was 0.76% for the second quarter of 2022, compared to 1.04% in the linked quarter and 1.38% in the same quarter last year.
In the second quarter of 2022, ASB paid dividends of $12.0 million to HEI. ASB had a Tier 1 leverage ratio of 7.7% as of June 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 second 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 second quarter of 2022.
HEI plans to announce its second quarter 2022 consolidated financial results on Monday, August 8, 2022 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 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 638186. 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 August 22, 2022. To access the audio replay, dial 1-866-813-9403 (U.S.) or +44-204-525-0658 (international) and enter passcode 484022.
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
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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
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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.
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American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)
Three months ended
Six months ended June 30
(in thousands)
June 30, 2022
March 31, 2022
June 30, 2021
2022
2021
Interest and dividend income
Interest and fees on loans
$
48,129
$
46,005
$
51,026
$
94,134
$
100,973
Interest and dividends on investment securities
14,693
13,984
11,040
28,677
19,713
Total interest and dividend income
62,822
59,989
62,066
122,811
120,686
Interest expense
Interest on deposit liabilities
921
947
1,281
1,868
2,743
Interest on other borrowings
139
5
23
144
50
Total interest expense
1,060
952
1,304
2,012
2,793
Net interest income
61,762
59,037
60,762
120,799
117,893
Provision for credit losses
2,757
(3,263)
(12,207)
(506)
(20,642)
Net interest income after provision for credit losses
59,005
62,300
72,969
121,305
138,535
Noninterest income
Fees from other financial services
4,716
5,587
5,464
10,303
10,537
Fee income on deposit liabilities
4,552
4,691
3,904
9,243
7,767
Fee income on other financial products
2,529
2,718
2,201
5,247
4,643
Bank-owned life insurance
(142)
681
1,624
539
4,185
Mortgage banking income
372
1,077
1,925
1,449
6,225
Gain on sale of real estate
—
1,002
—
1,002
—
Gain on sale of investment securities, net
—
—
—
—
528
Other income, net
475
372
76
847
348
Total noninterest income
12,502
16,128
15,194
28,630
34,233
Noninterest expense
Compensation and employee benefits
27,666
27,215
27,670
54,881
55,707
Occupancy
5,467
5,952
5,100
11,419
10,069
Data processing
4,484
4,151
4,533
8,635
8,884
Services
2,522
2,439
2,475
4,961
5,337
Equipment
2,402
2,329
2,394
4,731
4,616
Office supplies, printing and postage
1,073
1,060
978
2,133
2,022
Marketing
934
1,018
665
1,952
1,313
FDIC insurance
891
808
788
1,699
1,604
Other expense
3,959
3,241
3,568
7,200
6,122
Total noninterest expense
49,398
48,213
48,171
97,611
95,674
Income before income taxes
22,109
30,215
39,992
52,324
77,094
Income taxes
4,643
6,345
9,708
10,988
17,254
Net income
$
17,466
$
23,870
$
30,284
$
41,336
$
59,840
Comprehensive income (loss)
$
(71,369)
$
(98,571)
$
47,283
$
(169,940)
$
31,085
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets
0.76
1.04
1.38
0.90
1.39
Return on average equity
12.17
13.70
16.76
13.01
16.40
Return on average tangible common equity
14.20
15.53
18.92
14.95
18.48
Net interest margin
2.85
2.79
2.98
2.82
2.97
Efficiency ratio
66.52
64.14
63.42
65.32
62.89
Net charge-offs to average loans outstanding
0.00
0.01
0.04
0.01
0.11
As of period end
Nonaccrual loans to loans receivable held for investment
0.40
0.72
1.03
Allowance for credit losses to loans outstanding
1.28
1.30
1.51
Tangible common equity to tangible assets
4.9
5.8
7.5
Tier-1 leverage ratio
7.7
7.8
8.0
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)
$
12.0
$
15.0
$
23.0
$
27.0
$
28.0
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.
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American Savings Bank, F.S.B.
BALANCE SHEETS DATA
(Unaudited)
(in thousands)
June 30, 2022
December 31, 2021
Assets
Cash and due from banks
$
128,971
$
100,051
Interest-bearing deposits
12,054
151,189
Cash and cash equivalents
141,025
251,240
Investment securities
Available-for-sale, at fair value
2,444,267
2,574,618
Held-to-maturity, at amortized cost
513,767
522,270
Stock in Federal Home Loan Bank, at cost
13,200
10,000
Loans held for investment
5,426,995
5,211,114
Allowance for credit losses
(69,456)
(71,130)
Net loans
5,357,539
5,139,984
Loans held for sale, at lower of cost or fair value
3,738
10,404
Other
659,139
590,897
Goodwill
82,190
82,190
Total assets
$
9,214,865
$
9,181,603
Liabilities and shareholder’s equity
Deposit liabilities–noninterest-bearing
$
2,993,900
$
2,976,632
Deposit liabilities–interest-bearing
5,259,636
5,195,580
Other borrowings
241,610
88,305
Other
187,770
193,268
Total liabilities
8,682,916
8,453,785
Common stock
1
1
Additional paid-in capital
354,966
353,895
Retained earnings
426,040
411,704
Accumulated other comprehensive loss, net of tax benefits
Net unrealized losses on securities
$
(241,301)
$
(32,037)
Retirement benefit plans
(7,757)
(249,058)
(5,745)
(37,782)
Total shareholder’s equity
531,949
727,818
Total liabilities and shareholder’s equity
$
9,214,865
$
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.
