American Savings Bank Reports Second Quarter 2013 Earnings Net Income of $15.9 Million Bank Continues to Deliver Solid Results PR Newswire HONOLULU, July 30, 2013 HONOLULU, July 30, 2013 /PRNewswire/ -- American Savings Bank, F.S.B. (American), a wholly-owned indirect subsidiary of Hawaiian Electric Industries, Inc. (HEI) (NYSE - HE) today reported net income for the second quarter of 2013 of $15.9 million, compared to $14.2 million in both the first (or linked) quarter of 2013 and in the second quarter of 2012. "American delivered solid results in the second quarter as good loan growth helped us offset the continued pressure of the low interest rate environment. We experienced very low credit costs in the quarter thanks to good risk management systems and the positive trends in the Hawaii economy. We also achieved another strategic objective, reaching agreement for the sale of our credit card portfolio coupled with the introduction of a new, more competitive offering for our customers," said Richard Wacker, president and chief executive officer of American. Second quarter 2013 net income was $1.8 million higher than the linked quarter primarily driven by (after-tax): o$2 million lower provision for loan losses, $1 million of which related to the planned third quarter sale of American's credit card portfolio; and o$1 million higher gains on sales of investment securities. These were largely offset by (after-tax): o$1 million lower mortgage banking income as a larger proportion of new residential mortgages were added to the portfolio rather than sold; and o$1 million higher noninterest expense. Compared to the same quarter of 2012, the $1.7 million net income increase was primarily driven by (after-tax): o$2 million lower provision for loan losses (as discussed above); and o$1 million higher gains on sales of investment securities. These were offset by $1 million (after-tax) higher noninterest expense primarily due to targeted staffing and information technology (IT) expense increases. Net interest margin (NIM) was 3.79% in the second quarter of 2013 compared to 3.78% in the linked quarter and 3.97% in the second quarter of 2012. Loan growth, particularly in residential mortgages, and higher fees associated with the prepayment of some large commercial loans in the quarter offset the continued decline in stated rates that totaled five basis points compared to the linked quarter. The decline in net interest margin compared to the prior year quarter was primarily attributable to lower yields on interest-earning assets as loans continued to re-price down in the low interest rate environment. Provision for loan losses (pretax) was a net credit of $1.0 million in the second quarter of 2013 compared to net charges of $1.9 million in the linked quarter and $2.4 million in the second quarter of 2012. In the second quarter of 2013, American released $1 million (pretax) of reserves in connection with the agreement to sell its credit card portfolio, a transaction that is expected to close in the third quarter. No additional provision expense was incurred: increases in the reserve for loan growth and charge-offs were offset by approximately $3million (pretax) of reversals associated with specific commercial loan paydowns, recoveries of previously charged off consumer loans, and the ongoing improvement in the quality of the bank's loan portfolio. The second quarter 2013 net charge-off ratio improved to 0.08% from 0.12% in the linked quarter and 0.19% in the prior year quarter. Non-interest expense (pretax) was $39.8 million in the second quarter of 2013 compared to $38.7million in the linked quarter and $37.6 million in the second quarter of 2012. The increase from the linked quarter is primarily attributable to the timing of marketing expenses and additional reserves on unfunded commercial lines of credit. The increase from the prior year quarter is largely due to the targeted staffing increases to support increased business volumes, IT and risk management capabilities, as well as increasing employee benefit expenses. In the second quarter and year-to-date 2013, loans grew by $108 million and $173 million, respectively. This quarter's loan growth was primarily driven by residential mortgages as American allocated more of its continued strong production to the portfolio. Year-to-date annualized loan growth was 9.1%. Total deposits were $4.3 billion at June 30, 2013, down $36 million from March31,2013, primarily due to the decreases in commercial deposits and certificates of deposit. Average cost of funds remained low at 0.22% for the second quarter 2013, consistent with the linked quarter and down 5basis points from the same period last year. Overall, return on average equity and return on average assets were strong at 12.6% and 1.25%, respectively, in the quarter. American's solid results enabled it to pay dividends of $10million to HEI in the quarter while maintaining healthy capital levels -- leverage ratio of 9.3% and total risk-based capital ratio of 12.5% at June 30, 2013. HEI EARNINGS RELEASE, WEBCAST AND TELECONFERENCE Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its second quarter 2013 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 2013. HEI plans to announce its second quarter 2013 consolidated financial results on Thursday, August 8, 2013 and will conduct a webcast and teleconference call to review second quarter 2013 consolidated earnings, including American's earnings, on Thursday, August8,2013, at 11:00 a.m. Hawaii time (5:00 p.m. Eastern time). The event can be accessed through HEI's website at www.hei.com or by dialing (877)415-3186, passcode: 97287517 for the teleconference call. The presentation for the webcast will be on HEI's website under the headings "Investor Relations," "News & Events" and "Presentations & Webcasts." HEI and Hawaiian Electric Company, Inc. (HECO) intend to continue to use HEI's website, www.hei.com, as a means of disclosing material information, as well as other important information. Such disclosures will be included on HEI's website in the Investor Relations section. Accordingly, investors should routinely monitor such portions of HEI's website, in addition to following HEI's, HECO's and American's press releases, HEI's and HECO's Securities and Exchange Commission (SEC) filings and HEI's public conference calls and webcasts. Also, at the Investor Relations section of HEI's website, investors may sign up to receive e-mail alerts (based on each investor's selected preferences). The information on HEI's website is not incorporated by reference in this document or in HEI's and HECO'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 HECO's SEC filings. An online replay of the webcast will be available at the same website beginning about two hours after the event. Replays of the teleconference call will also be available approximately two hours after the event through August 22, 2013, by dialing (888)286-8010, passcode: 60955453. HEI supplies power to approximately 450,000 customers or 95% of Hawaii's population through its electric utilities, HECO, Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited and provides a wide array of banking and other financial services to consumers and businesses through American, one of Hawaii's largest financial institutions. 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 "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 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 "Forward-Looking Statements" and "Risk Factors" discussions (which are incorporated by reference herein) set forth in HEI's Quarterly Report on Form 10-Q for the quarter ended March31,2013 and HEI's subsequent 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, HECO, 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, March June 30, June 30 31, (in thousands) 2013 2013 2012 2013 2012 Interest income Interest and fees on loans $ $ $ $ 86,227 $ 89,361 43,624 42,603 44,473 Interest on investment and mortgage-related 3,234 3,464 3,297 6,698 7,102 securities Total interest income 46,858 46,067 47,770 92,925 96,463 Interest expense Interest on deposit 1,296 1,312 1,696 2,608 3,475 liabilities Interest on other 1,178 1,164 1,214 2,342 2,475 borrowings Total interest 2,474 2,476 2,910 4,950 5,950 expense Net interest income 44,384 43,591 44,860 87,975 90,513 Provision (credit) for (959) 1,858 2,378 899 5,924 loan losses Net interest income after provision (credit) for 45,343 41,733 42,482 87,076 84,589 loan losses Noninterest income Fees from other financial 7,996 7,643 7,463 15,639 14,800 services Fee income on deposit 4,433 4,314 4,322 8,747 8,600 liabilities Fee income on other 1,780 1,794 1,532 3,574 3,081 financial products Mortgage banking income 2,003 3,346 2,185 5,349 4,220 Gain on sale of securities 1,226 - 134 1,226 134 Other income 1,731 1,592 1,315 3,323 2,675 Total noninterest 19,169 18,689 16,951 37,858 33,510 income Noninterest expense Compensation and employee 20,063 20,088 18,696 40,151 37,342 benefits Occupancy 4,219 4,123 4,241 8,342 8,466 Data processing 2,827 2,987 2,489 5,814 4,600 Services 2,328 2,103 2,221 4,431 4,004 Equipment 1,870 1,774 1,807 3,644 3,537 Other expense 8,500 7,595 8,106 16,095 14,813 Total noninterest 39,807 38,670 37,560 78,477 72,762 expense Income before income taxes 24,705 21,752 21,873 46,457 45,337 Income taxes 8,786 7,597 7,684 16,383 15,271 Net income $ $ $ $ 30,074 $ 30,066 15,919 14,155 14,189 Comprehensive income $ $ $ $ 22,824 $ 31,355 7,340 15,484 15,456 OTHER BANK INFORMATION (annualized %, except as of period end) Return on average assets 1.25 1.12 1.15 1.19 1.22 Return on average equity 12.56 11.28 11.35 11.93 12.11 Return on average tangible 15.00 13.49 13.58 14.25 14.50 common equity Net interest margin 3.79 3.78 3.97 3.79 4.01 Net charge-offs to average 0.08 0.12 0.19 0.10 0.24 loans outstanding Efficiency ratio 62 61 60 62 58 As of period end Nonperforming assets to loans outstanding and real estate 1.56 1.89 1.84 owned * Allowance for loan losses 1.04 1.11 1.06 to loans outstanding Tier-1 leverage ratio * 9.3 9.1 9.2 Total risk-based capital 12.5 12.8 12.8 ratio * Tangible common equity to 8.42 8.38 8.58 total assets Dividend paid to HEI (via 10 10 10 20 20 ASHI) ($ in millions) * Regulatory basis This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2012 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013 (when filed), as updated by SEC Forms 8-K. 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) June 30, December 31, (in thousands) 2013 2012 Assets Cash and cash equivalents $ 143,912 $ 184,430 Available-for-sale investment and 560,172 671,358 mortgage-related securities Investment in stock of Federal Home Loan Bank of 94,281 96,022 Seattle Loans receivable held for investment 3,953,634 3,779,218 Allowance for loan losses (41,004) (41,985) Loans receivable held for investment, net 3,912,630 3,737,233 Loans held for sale, at lower of cost or fair 34,073 26,005 value Other 241,513 244,435 Goodwill 82,190 82,190 Total assets $ 5,068,771 $ 5,041,673 Liabilities and shareholder's equity Deposit liabilities–noninterest-bearing $ 1,168,937 $ 1,164,308 Deposit liabilities–interest-bearing 3,107,306 3,065,608 Other borrowings 187,884 195,926 Other 102,516 117,752 Total liabilities 4,566,643 4,543,594 Common stock 334,937 333,712 Retained earnings 189,837 179,763 Accumulated other comprehensive loss, net of tax (22,646) (15,396) benefits Total shareholder's equity 502,128 498,079 Total liabilities and shareholder's equity $ 5,068,771 $ 5,041,673 This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2012 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year. Contact: Shelee M.T. Kimura Manager, Investor Relations Telephone: (808) 543-7384 & Strategic Planning E-mail: firstname.lastname@example.org (Logo: http://photos.prnewswire.com/prnh/20110411/LA80136LOGO) SOURCE Hawaiian Electric Industries, Inc. Website: http://www.hei.com
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