American Savings Bank Reports First Quarter 2024 Financial Results

• 1Q 2024 Net Income of $20.9 million, an increase of 12.8% from 1Q 2023
• Strategic Balance Sheet Repositioning Executed in the Fourth Quarter of 2023 Contributed to Improved Profitability and Net Interest Margin Expansion
• Release of Maui Wildfire-Related Reserves Reflects Brighter Outlook for Maui Economy
• Strong Credit Quality, Liquidity and Capital Position

 

American Savings Bank, F.S.B. (ASB), a wholly owned subsidiary of Hawaiian Electric Industries, Inc. (NYSE - HE), today reported first quarter 2024 net income of $20.9 million compared to $3.2 million in the fourth quarter of 2023 and $18.6 million in the first quarter of 2023. Net income for the quarter reflected the release of $1.5 million of Maui wildfire-related reserves and the recovery of $0.4 million in cash lost or damaged during the wildfires, partially offset by Maui wildfire-related expenses of $1.8 million. Excluding the after-tax impacts of these items, core net income1 for the first quarter was also $20.9 million.

“American Savings Bank executed well in the first quarter, generating higher net income compared to both the linked quarter and the same quarter last year,” said Ann Teranishi, president and chief executive officer of ASB. “Net interest margin and profitability benefited from the strategic balance sheet repositioning executed last quarter. We also released reserves initially taken following the wildfires on Maui, reflecting Maui’s resilient economy and stronger-than-expected outlook. The bank’s balance sheet remains well-positioned with strong capital, solid credit quality, lending capacity and ample liquidity.” ___________ 1 See the “Explanation of ASB’s Use of Certain Unaudited Non-GAAP Measures” and the related GAAP reconciliation at the end of this release.

Financial Highlights

First quarter 2024 net interest income was $62.3 million compared to $61.2 million in the linked quarter and $64.9 million in the first quarter of 2023. The higher net interest income compared to the linked quarter was primarily due to a higher yield on earning assets. The yield on earning assets improved following last quarter’s balance sheet repositioning, as proceeds from the sale of securities were used to fund maturing public certificates of deposit and reduce wholesale funding. The lower net interest income compared to the prior year quarter was primarily due to higher interest expense, partially offset by higher interest and dividend income due to higher asset yields. Net interest margin for the first quarter of 2024 was 2.75% compared to 2.63% in the linked quarter and 2.85% in the first quarter of 2023. The yield on earning assets improved 11 basis points during the quarter, and cost of funding improved 1 basis point.

In the first quarter ASB recorded a negative provision for credit losses of $2.2 million compared to a provision for credit losses of $0.3 million in the linked quarter and $1.2 million in the first quarter of 2023. The quarter’s negative provision reflects a $1.5 million release of reserves due to an improved economic outlook for Maui following the August 2023 wildfires. As of March 31, 2024, ASB’s allowance for credit losses to outstanding loans was 1.16% compared to 1.20% as of December 31, 2023 and 1.18% as of March 31, 2023.

The net charge-off ratio for the first quarter of 2024 was 0.14%, compared to 0.15% in the linked quarter and 0.14% in the first quarter of 2023. Nonaccrual loans as a percentage of total loans receivable held for investment were 0.53%, compared to 0.46% in the linked quarter and 0.24% in the prior year quarter.

Noninterest income was $17.2 million in the first quarter of 2024 compared to $0.1 million in the linked quarter and $14.4 million in the first quarter of 2023. The increase compared to the linked quarter was primarily due to a $15.0 million pre-tax ($11.0 million after-tax) loss on sale of investment securities recognized in the linked quarter, and higher bank-owned life insurance (BOLI) income. The increase compared to the prior year quarter was primarily due to higher BOLI income. The higher BOLI income compared to the linked and prior year quarters was offset by associated increases in noninterest expense (recorded in compensation and employee benefits).

Noninterest expense was $55.9 million compared to $59.1 million in the linked quarter and $54.4 million in the first quarter of 2023. The decrease compared to the linked quarter was primarily due to the linked quarter’s increased charitable contributions to support our local communities, partially offset by higher compensation and employee benefits expense. The increase compared to the prior year quarter was primarily due to higher compensation and employee benefits expense and Maui wildfire-related expenses.

Total loans were $6.1 billion as of March 31, 2024, down 1.1% from December 31, 2023, primarily reflecting the payoff and sale of loans in the commercial markets portfolio and a decrease in the HELOC portfolio.

Total deposits were $8.0 billion as of March 31, 2024, down 1.7% from December 31, 2023. Core deposits declined 1.2% from December 31, 2023, while certificates of deposit decreased 5.3% primarily due to the paydown of $166 million in public time deposits. As of March 31, 2024, 86% of deposits were F.D.I.C. insured or fully collateralized, consistent with December 31, 2023, with approximately 82% of deposits F.D.I.C. insured. For the first quarter of 2024, the average cost of funds was 117 basis points, down slightly from 118 basis points in the linked quarter and up from 66 basis points in the prior year quarter.

Wholesale funding totaled $593 million as of March 31, 2024, down from $750 million as of December 31, 2023.

For the first quarter of 2024, return on average equity was 15.6%, compared to 2.7% in the linked quarter and 15.5% in the first quarter of 2023. Return on average assets was 0.88% for the first quarter of 2024, compared to 0.13% in the linked quarter and 0.78% in the prior year quarter.

In the first quarter of 2024, ASB did not pay a dividend to HEI, supporting ASB’s healthy capital levels. ASB had a Tier 1 leverage ratio of 8.0% as of March 31, 2024.

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

Concurrent with ASB’s regulatory filing 30 days after the end of the quarter, ASB announced its first quarter 2024 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 first quarter 2024.

HEI plans to announce its first quarter 2024 consolidated financial results on Friday, May 10, 2024 and will also conduct a webcast and conference call at 10:30 a.m. Hawaii time (4:30 p.m. Eastern time) that same day to discuss its consolidated earnings, including ASB’s earnings.

To listen to the conference call, dial 1-888-660-6377 (U.S.) or 1-929-203-0797 (international) and enter passcode 2393042. Parties may also access presentation materials (which include reconciliation of non-GAAP measures) 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 May 24, 2024. To access the audio replay, dial 1-800-770-2030 (U.S.) or 1-647-362-9199 (international) and enter passcode 2393042.

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 https://hpuc.my.site.com/cdms/s/ 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.

NON-GAAP MEASURES

Core net income is a non-GAAP measure which excludes Maui wildfire-related after-tax costs. See “Explanation of ASB’s Use of Certain Unaudited Non-GAAP Measures” and the related GAAP reconciliations at the end of this release.

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, 2023 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

(in thousands)

 

March 31, 2024

 

December 31, 2023

 

March 31, 2023

Interest and dividend income

 

 

 

 

 

 

Interest and fees on loans

 

$

72,971

 

 

$

72,340

 

 

$

64,842

Interest and dividends on investment securities

 

 

14,964

 

 

 

15,587

 

 

 

14,637

Total interest and dividend income

 

 

87,935

 

 

 

87,927

 

 

 

79,479

Interest expense

 

 

 

 

 

 

Interest on deposit liabilities

 

 

17,432

 

 

 

17,961

 

 

 

6,837

Interest on other borrowings

 

 

8,154

 

 

 

8,721

 

 

 

7,721

Total interest expense

 

 

25,586

 

 

 

26,682

 

 

 

14,558

Net interest income

 

 

62,349

 

 

 

61,245

 

 

 

64,921

Provision for credit losses

 

 

(2,159

)

 

 

304

 

 

 

1,175

Net interest income after provision for credit losses

 

 

64,508

 

 

 

60,941

 

 

 

63,746

Noninterest income

 

 

 

 

 

 

Fees from other financial services

 

 

4,874

 

 

 

4,643

 

 

 

4,679

Fee income on deposit liabilities

 

 

4,898

 

 

 

5,104

 

 

 

4,599

Fee income on other financial products

 

 

2,743

 

 

 

2,664

 

 

 

2,744

Bank-owned life insurance

 

 

3,584

 

 

 

1,707

 

 

 

1,425

Mortgage banking income

 

 

424

 

 

 

209

 

 

 

130

Loss on sale of investment securities

 

 

—

 

 

 

(14,965

)

 

 

—

Other income, net

 

 

686

 

 

 

693

 

 

 

801

Total noninterest income

 

 

17,209

 

 

 

55

 

 

 

14,378

Noninterest expense

 

 

 

 

 

 

Compensation and employee benefits

 

 

32,459

 

 

 

28,797

 

 

 

30,204

Occupancy

 

 

5,063

 

 

 

5,422

 

 

 

5,588

Data processing

 

 

4,846

 

 

 

5,305

 

 

 

5,012

Services

 

 

4,151

 

 

 

5,032

 

 

 

2,595

Equipment

 

 

2,649

 

 

 

3,114

 

 

 

2,646

Office supplies, printing and postage

 

 

1,018

 

 

 

1,019

 

 

 

1,165

Marketing

 

 

776

 

 

 

1,167

 

 

 

1,016

Other expense

 

 

4,942

 

 

 

9,250

 

 

 

6,191

Total noninterest expense

 

 

55,904

 

 

 

59,106

 

 

 

54,417

Income before income taxes

 

 

25,813

 

 

 

1,890

 

 

 

23,707

Income taxes

 

 

4,879

 

 

 

(1,341

)

 

 

5,145

Net income

 

$

20,934

 

 

$

3,231

 

 

$

18,562

Comprehensive income (loss)

 

$

11,166

 

 

$

70,585

 

 

$

36,992

OTHER BANK INFORMATION (annualized %, except as of period end)

 

 

 

 

Return on average assets

 

 

0.88

 

 

 

0.13

 

 

 

0.78

Return on average equity

 

 

15.64

 

 

 

2.74

 

 

 

15.51

Return on average tangible common equity

 

 

18.48

 

 

 

3.32

 

 

 

18.73

Net interest margin

 

 

2.75

 

 

 

2.63

 

 

 

2.85

Efficiency ratio

 

 

70.27

 

 

 

96.42

 

 

 

68.62

Net charge-offs to average loans outstanding

 

 

0.14

 

 

 

0.15

 

 

 

0.14

As of period end

 

 

 

 

 

 

Nonaccrual loans to loans receivable held for investment

 

 

0.53

 

 

 

0.46

 

 

 

0.24

Allowance for credit losses to loans outstanding

 

 

1.16

 

 

 

1.20

 

 

 

1.18

Tangible common equity to tangible assets

 

 

5.0

 

 

 

4.7

 

 

 

4.3

Tier-1 leverage ratio

 

 

8.0

 

 

 

7.7

 

 

 

7.7

Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)

 

$

—

 

 

$

—

 

 

$

14.0

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)

March 31, 2024

December 31, 2023

Assets

 

 

 

 

Cash and due from banks

 

$

126,259

 

 

$

184,383

 

Interest-bearing deposits

 

 

100,681

 

 

 

251,072

 

Cash and cash equivalents

 

 

226,940

 

 

 

435,455

 

Investment securities

 

 

 

 

Available-for-sale, at fair value

 

 

1,091,889

 

 

 

1,136,439

 

Held-to-maturity, at amortized cost

 

 

1,191,074

 

 

 

1,201,314

 

Stock in Federal Home Loan Bank, at cost

 

 

32,489

 

 

 

14,728

 

Loans held for investment

 

 

6,116,722

 

 

 

6,180,810

 

Allowance for credit losses

 

 

(71,057

)

 

 

(74,372

)

Net loans

 

 

6,045,665

 

 

 

6,106,438

 

Loans held for sale, at lower of cost or fair value

 

 

2,923

 

 

 

15,168

 

Other

 

 

687,059

 

 

 

681,460

 

Goodwill

 

 

82,190

 

 

 

82,190

 

Total assets

 

$

9,360,229

 

 

$

9,673,192

 

Liabilities and shareholder’s equity

 

 

 

 

Deposit liabilities–noninterest-bearing

 

$

2,557,240

 

 

$

2,599,762

 

Deposit liabilities–interest-bearing

 

 

5,447,824

 

 

 

5,546,016

 

Other borrowings

 

 

593,000

 

 

 

750,000

 

Other

 

 

220,570

 

 

 

247,563

 

Total liabilities

 

 

8,818,634

 

 

 

9,143,341

 

Common stock

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

358,645

 

 

 

358,067

 

Retained earnings

 

 

484,989

 

 

 

464,055

 

Accumulated other comprehensive loss, net of tax benefits

 

 

 

 

Net unrealized losses on securities

$

(293,466

)

 

$

(282,963

)

 

Retirement benefit plans

 

(8,574

)

 

(302,040

)

 

(9,309

)

 

(292,272

)

Total shareholder’s equity

 

 

541,595

 

 

 

529,851

 

Total liabilities and shareholder’s equity

 

$

9,360,229

 

 

$

9,673,192

 

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

Explanation of ASB’s Use of Certain Unaudited Non-GAAP Measures

HEI and ASB management use certain non-GAAP measures to evaluate the performance of HEI and the bank.

Management believes these non-GAAP measures provide useful information and are a better indicator of the companies’ core operating activities. Core earnings and other financial measures as presented here may not be comparable to similarly titled measures used by other companies. The accompanying tables provide a reconciliation of reported GAAP1 earnings to non-GAAP core earnings and returns on average equity and average assets for the bank.

The reconciling adjustments from GAAP earnings to core earnings are limited to the costs related to the Maui wildfires. Management does not consider these items to be representative of the company’s fundamental core earnings.

Reconciliation of GAAP to non-GAAP Measures

American Savings Bank F.S.B.

Unaudited

(in thousands)

 

Three months ended March 31, 2024

Maui wildfire related costs

 

 

Pretax expenses:

 

 

Provision for credit losses

 

$

(1,500

)

Professional services expense

 

 

1,708

 

Other expenses, net

 

 

(317

)

Pretax Maui wildfire related costs, net

 

 

(109

)

Income tax benefits

 

 

29

 

After-tax expenses, net

 

$

(80

)

ASB net income

 

 

GAAP (as reported)

 

$

20,934

 

Maui wildfire costs (after tax):

 

 

Provision for credit losses

 

 

(1,098

)

Professional services expense

 

 

1,250

 

Other expenses, net

 

 

(232

)

Maui wildfire related cost, net (after tax)

 

 

(80

)

Non-GAAP (core) net income

 

$

20,854

 

 

 

Three months ended March 31, 2024

Ratios (annualized %)

 

 

Based on GAAP

 

 

Return on average assets

 

0.88

Return on average equity

 

15.64

Return on average tangible common equity

 

18.48

Efficiency ratio

 

70.27

Based on Non-GAAP (core)

 

 

Return on average assets

 

0.88

Return on average equity

 

15.58

Return on average tangible common equity

 

18.41

Efficiency ratio

 

68.52

1 Accounting principles generally accepted in the United States of America

 

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Mateo Garcia Director, Investor Relations [e-mail]