American Savings Bank Reports Second Quarter 2014 Earnings Net Income of $11.7 Million Bank Delivers Solid Results In Line with Expectations PR Newswire HONOLULU, July 30, 2014 HONOLULU, July 30, 2014 /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 2014 of $11.7 million, compared to $14.5 million in the first (or linked) quarter of 2014 and $15.9million in the second quarter of 2013. "American continued to deliver solid results in line with expectations, with good growth across our target market segments in both loans and core deposits. Asset quality continued to improve, reflecting the healthy local market environment, and our rate of asset growth has helped offset the effects of the persistently low rate environment," said Rich Wacker, president and chief executive officer of American. Second quarter 2014 net income was $2.9 million lower than the linked quarter primarily driven by (on an after-tax basis): o$2million gain on the sale of municipal bond securities in the first (or linked) quarter of 2014 in response to recent regulatory guidance on liquidity standards and the anticipation of higher interest rates over time; and o$1 million higher noninterest expense due to higher branch security expense, product development costs, and timing of debit card-related expenses. Compared to the same quarter of 2013, net income decreased by $4.2 million primarily driven by (on an after-tax basis): o$1 million lower interchange fees under regulatory caps (Durbin Amendment) that became effective for American on July1,2013; o$1 million gain on the sale of securities in the second quarter of 2013; o$1 million lower mortgage banking income from significantly lower refinancing activity; and o$1 million change in the provision for loan losses, which was a credit in the second quarter of 2013 due to the sale of American's credit card portfolio. Net interest income (pretax) was $44.1 million in both the second quarter of 2014 and in the linked quarter and $44.4 million in the second quarter of 2013. Net interest margin was 3.55% compared to 3.64% in the linked quarter and 3.79% in the second quarter of 2013. The 0.09% point decline in net interest margin compared to the linked quarter was attributable to multiple factors, including the effect of the sale of higher yielding municipal bond securities in the first quarter and slower recognition of mortgage-related fees as prepayment rates decline, and the ongoing effect of low rates on interest-earning assets. Compared to the second quarter of 2013, the net interest margin decline was primarily attributable to lower yields on interest earning assets as the loan portfolio continued to re-price down in the low interest rate environment. In both periods, a portion of the net interest margin decline was offset by loan growth. Provision for loan losses (pretax) was $1.0 million in the second quarter of 2014, flat compared to the linked quarter, but higher than the net credit of $1.0million in the second quarter of 2013. In the second quarter of 2013, American released $1 million (pretax) of allowance for loan losses in connection with the agreement to sell its credit card portfolio in the third quarter of 2013 and released allowance associated with specific commercial loan paydowns. The second quarter 2014 net charge-off ratio improved to a recovery of 0.04% from a charge-off of 0.02% in the linked quarter and a charge-off of 0.08% in the prior year quarter primarily due to the improved credit quality of the loan portfolio and the strengthening Hawaii economy. Noninterest income (pretax) was $13.8 million in the second quarter of 2014, compared to $16.9million in the linked quarter and $19.2 million in the second quarter of 2013. Second quarter noninterest income was relatively in line with the first quarter, excluding the $2.8 million gain on the sale of the municipal bond portfolio in the linked quarter. Compared to the second quarter of 2013, noninterest income declined by $5.4 million primarily due to lower year-over-year fee income due to the regulatory limits on interchange fees (Durbin Amendment) of $2.3 million, lower mortgage banking income of $1.8million due to lower refinancing volumes and no gain on sales of securities, which were $1.2million in the prior year quarter. Noninterest expense (pretax) was $39.9 million in the second quarter of 2014, higher than $38.4million in the linked quarter and in line with $39.8 million in the second quarter of 2013. Noninterest expense was higher compared to the linked quarter primarily due to higher branch security expense, product development costs and timing of debit card-related expenses. Total loans grew by $99 million and $136 million in the second quarter and year-to-date 2014, respectively. Second quarter loan growth was primarily driven by increases in residential, home equity lending and commercial real estate. Annualized loan growth was 9.4% and 6.5% in the second quarter and year-to-date 2014, respectively. Total deposits were $4.5 billion at June 30, 2014, an increase of $47 million and $152 million in the second quarter and year-to-date 2014, respectively. Second quarter deposit growth was primarily due to the increase in low-cost core deposits. Annualized deposit growth was 4.2% and 7.0% in the second quarter and year-to-date 2014, respectively. Average cost of funds remained low at 0.22% for the second quarter of 2014, 1 basis point lower than the linked quarter and consistent with the prior year quarter. As a result of the net income impacts detailed above, American's second quarter 2014 return on average equity was 8.8%, compared to 11.0% in the linked quarter and 12.6% in the second quarter of last year. Return on average assets was 0.87% for the second quarter of 2014, compared to 1.10% in the linked quarter and 1.25% in the same quarter last year. American's year-to-date return on average equity was 9.9%, compared to 11.9% for the same period in the prior year. Year-to-date return on average assets was 0.98% compared to 1.19% for the same period in the prior year. American's continued solid results enabled it to pay dividends of $9.75 million to HEI in the quarter while maintaining healthy capital levels – leverage ratio of 9.0% and total risk-based capital ratio of 12.6% at June 30, 2014. Note: Amounts indicated as "after-tax" in this earnings release are based upon adjusting items for the composite statutory tax rate of 40% for the bank. HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2014 EPS GUIDANCE Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its second quarter 2014 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 2014. HEI plans to announce its second quarter 2014 consolidated financial results on Monday, August11,2014 and will conduct a webcast and conference call to discuss its consolidated earnings, including American's earnings, and 2014 EPS guidance on Monday, August 11, 2014, at 7:00 a.m. Hawaii time (1:00p.m. Eastern time). Interested parties may listen to the conference by calling (877)474-9504 and entering passcode: 92297255, or by accessing the webcast on HEI's website at www.hei.com under the heading "Investor Relations." 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 such portions of HEI's website, 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 online replay of the webcast will be available at the same 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 August 25, 2014, by dialing (888)286-8010, passcode: 58411343. HEI supplies power to approximately 450,000 customers or 95% of Hawaii's population through its electric utilities, Hawaiian Electric Company, Inc., 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 Annual Report on Form 10-K for the year ended December 31, 2013, HEI's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 and HEI's future 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 (inthousands) June 30, March 31, June 30, 2014 2013 2014 2014 2013 Interest and dividend income Interest and fees on $ 43,851 $ 43,682 $ 43,624 $ 87,533 $ 86,227 loans Interest and dividends on investment and 2,950 3,035 3,234 5,985 6,698 mortgage-related securities Total interest and 46,801 46,717 46,858 93,518 92,925 dividend income Interest expense Interest on deposit 1,237 1,225 1,296 2,462 2,608 liabilities Interest on other 1,420 1,405 1,178 2,825 2,342 borrowings Total interest expense 2,657 2,630 2,474 5,287 4,950 Net interest income 44,144 44,087 44,384 88,231 87,975 Provision (credit) for 1,021 995 (959) 2,016 899 loan losses Net interest income after provision 43,123 43,092 45,343 86,215 87,076 (credit) for loan losses Noninterest income Fees from other 5,217 5,128 7,996 10,345 15,639 financial services Fee income on deposit 4,645 4,421 4,433 9,066 8,747 liabilities Fee income on other 2,064 2,290 1,780 4,354 3,574 financial products Mortgage banking income 246 628 2,003 874 5,349 Gain on sale of — 2,847 1,226 2,847 1,226 securities Other income, net 1,643 1,588 1,731 3,231 3,323 Total noninterest 13,815 16,902 19,169 30,717 37,858 income Noninterest expense Compensation and 19,872 20,286 20,063 40,158 40,151 employee benefits Occupancy 4,489 3,953 4,219 8,442 8,342 Data processing 2,971 3,060 2,827 6,031 5,814 Services 2,855 2,273 2,328 5,128 4,431 Equipment 1,609 1,645 1,870 3,254 3,644 Other expense 8,094 7,153 8,500 15,247 16,095 Total noninterest 39,890 38,370 39,807 78,260 78,477 expense Income before income 17,048 21,624 24,705 38,672 46,457 taxes Income taxes 5,372 7,085 8,786 12,457 16,383 Net income $ 11,676 $ 14,539 $ 15,919 $ 26,215 $ 30,074 Comprehensive income $ 14,434 $ 15,563 $ 7,340 $ 29,997 $ 22,824 OTHER BANK INFORMATION (annualized %, except as of period end) Return on average 0.87 1.10 1.25 0.98 1.19 assets Return on average 8.78 11.03 12.56 9.90 11.93 equity Return on average 10.39 13.06 15.00 11.72 14.25 tangible common equity Net interest margin 3.55 3.64 3.79 3.59 3.79 Net charge-offs (recoveries) to average (0.04) 0.02 0.08 (0.01) 0.10 loans outstanding As of period end Nonperforming assets to loans outstanding and 1.05 1.12 1.56 real estate owned * Allowance for loan losses to loans 0.99 0.98 1.04 outstanding Tier-1 leverage ratio * 9.0 9.0 9.3 Total risk-based 12.6 12.7 12.5 capital ratio * Tangible common equity 8.46 8.44 8.42 to total assets Dividend paid to HEI (via ASHI) ($ in 10 9 10 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, 2013 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014 (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) (inthousands) June 30, 2014 December 31, 2013 Assets Cash and cash equivalents $ 174,950 $ 156,603 Available-for-sale investment 549,321 529,007 and mortgage-related securities Investment in stock of Federal 80,863 92,546 Home Loan Bank of Seattle Loans receivable held for 4,287,612 4,150,229 investment Allowance for loan losses (42,372) (40,116) Loans receivable held for 4,245,240 4,110,113 investment, net Loans held for sale, at lower 956 5,302 of cost or fair value Other 284,607 268,063 Goodwill 82,190 82,190 Total assets $ 5,418,127 $ 5,243,824 Liabilities and shareholder's equity Deposit $ 1,301,758 $ 1,214,418 liabilities—noninterest-bearing Deposit 3,223,102 3,158,059 liabilities—interest-bearing Other borrowings 242,455 244,514 Other 116,953 105,679 Total liabilities 4,884,268 4,722,670 Common stock 337,262 336,054 Retained earnings 205,012 197,297 Accumulated other comprehensive loss, net of tax benefits Net unrealized losses on $ (315) $ (3,663) securities Retirement benefit plans (8,100) (8,415) (8,534) (12,197) Total shareholder's equity 533,859 521,154 Total liabilities and $ 5,418,127 $ 5,243,824 shareholder's equity 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, 2013 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014 (when filed), as updated by SEC Forms 8-K. Contact: Clifford H. Chen Manager, Investor Relations & Telephone: (808) 543-7384 Strategic Planning E-mail: firstname.lastname@example.org Logo - http://photos.prnewswire.com/prnh/20110411/LA80136LOGO SOURCE American Savings Bank, F.S.B. Website: http://www.hei.com
American Savings Bank Reports Second Quarter 2014 Earnings
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