HEI Exhibit 99
October 30, 2015
Contact: | Clifford H. Chen | |
Manager, Investor Relations & | Telephone: (808) 543-7300 | |
Strategic Planning | E-mail: ir@hei.com | |
AMERICAN SAVINGS BANK REPORTS THIRD QUARTER 2015 EARNINGS
Net Income of $13.5 Million
American Continues to Deliver Solid Results as It Prepares for Spin-off
HONOLULU - 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 third quarter of 2015 of $13.5 million, compared to $12.9 million in the second (or linked) quarter of 2015 and $13.3 million in the third quarter of 2014.
“In the third quarter, we achieved solid revenue growth and healthy loan growth fueled by commercial real estate originations,” said Rich Wacker, president and chief executive officer of American. “We continue to see good opportunities to expand our relationships with our consumer and commercial customers, supported by favorable Hawaii economic conditions.
Third quarter 2015 net income was $0.6 million higher than the linked quarter primarily driven by (on an after-tax basis):
• | $1 million higher net interest income primarily driven by higher average interest-earning assets and favorable shift to higher yielding assets; and |
• | $1 million higher noninterest income primarily due to the gain on sale of an American service center building vacated as part of our facilities consolidation plan; partially offset by |
• | $1 million higher provision for loan losses primarily due to strong loan growth in the quarter; and |
• | $1 million higher noninterest expense. |
Compared to the third quarter of 2014, net income was higher by $0.2 million primarily driven by (on an after-tax basis):
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Note: Amounts indicated as “after-tax” in this earnings release are based upon adjusting items for the composite statutory tax rate of 40% for American.
Hawaiian Electric Industries, Inc. Ÿ American Savings Bank, F.S.B.
October 30, 2015
Page 2
• | $1 million higher net interest income in the third quarter of 2015 primarily due to higher average interest earnings assets; and |
• | $2 million higher noninterest income primarily from the gain on sale of real estate and higher fee income on deposit liabilities and mortgage banking in the third quarter of 2015; offset by |
• | $1 million higher provision for loan losses attributable to higher loan growth; and |
• | $2 million higher noninterest expense in the third quarter of 2015 due primarily to higher pension and benefits expense. |
Net interest income (pretax) was $47.8 million in the third quarter of 2015 compared to $46.6 million in the linked quarter of 2015 and $45.6 million in the prior year quarter. Net interest margin was 3.53% in the third quarter of 2015 compared to 3.52% in the linked quarter and 3.62% in the third quarter of 2014. Compared to the prior year quarter, the decline in net interest margin was largely attributable to lower yields on interest earning assets as loans continued to re-price down.
Provision for loan losses (pretax) was $3.0 million in the third quarter of 2015 compared to $1.8 million in the linked quarter of 2015 and $1.6 million in the third quarter of 2014. The higher provision in the third quarter of 2015 was mainly due to loan growth in the commercial real estate portfolio. The third quarter 2015 net charge-off ratio was 0.10%, compared to 0.11% in the linked quarter and 0.04% in the prior year quarter due to higher overall recoveries in the third quarter of 2014.
Noninterest income (pretax) was $18.5 million in the third quarter of 2015, compared to $16.4 million in the linked quarter and $15.2 million in the third quarter of 2014. The increase in noninterest income over both the linked quarter and the prior year quarter was mainly due to the $2 million gain on sale of real estate and higher deposit-related fee initiatives in the third quarter of 2015.
Noninterest expense (pretax) was $42.4 million in the third quarter of 2015, compared to $41.5 million in the linked quarter and $38.7 million in the third quarter of 2014. Noninterest expense was $0.9 million higher compared to the linked quarter primarily due to higher medical benefits and other expense. Noninterest expense was $3.7 million higher than the prior year quarter primarily due to higher medical and pension benefits expense.
Total loans were $4.5 billion at September 30, 2015, an increase of $78 million and $101 million in the third quarter and year-to-date 2015, respectively. Year-to-date annualized loan growth was 3%.
Total deposits were $4.8 billion at September 30, 2015, an increase of $23 million and $203 million in the third quarter and year-to-date 2015, respectively, primarily driven by the 5% year-to-date annualized increase in low-cost core deposits. Average cost of funds remained low at 0.22% for the third quarter of 2015, unchanged compared to the linked quarter and just below the prior year quarter of 0.23%.
American’s return on average equity was 9.7% for the third quarter of 2015, compared to 9.4% in the linked quarter and 9.9% in the third quarter of last year. Return on average assets was 0.92% for the
Hawaiian Electric Industries, Inc. Ÿ American Savings Bank, F.S.B.
October 30, 2015
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third quarter of 2015, compared to 0.89% for the linked quarter and 0.98% in the same quarter last year. American’s solid results enabled it to pay a dividend of $7.5 million to HEI in the quarter while maintaining healthy capital levels - leverage ratio of 8.8% and total capital ratio of 13.4% at September 30, 2015.
HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2015 EPS GUIDANCE
Concurrent with American’s regulatory filing 30 days after the end of the quarter, American announced its third quarter 2015 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 third quarter of 2015.
HEI plans to announce its third quarter 2015 consolidated financial results on Thursday, November 5, 2015, and will conduct a webcast and conference call to discuss its consolidated earnings, including American’s earnings, and 2015 EPS guidance on Thursday, November 5, 2015, at 12:00 noon Hawaii time (5:00 p.m. Eastern time). Interested parties may listen to the conference call by dialing (888) 311-8190 and entering passcode: 22822426. International parties may listen to the conference call by calling the following toll free number, (330) 863-3378 and entering passcode: 22822426. The event can also be accessed through 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 which will be included 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 on-line replay of the webcast will be available at the same website beginning about two hours after the event. Audio replays of the teleconference will also be available approximately two hours after the event through November 19, 2015, by dialing (855) 859-2056 or (404) 537-3406 and entering passcode: 22822426.
Hawaiian Electric Industries, Inc. Ÿ American Savings Bank, F.S.B.
October 30, 2015
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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, 2014, HEI’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 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.
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American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)
Three months ended | Nine months ended September 30 | |||||||||||||||||||
(in thousands) | September 30, 2015 | June 30, 2015 | September 30, 2014 | 2015 | 2014 | |||||||||||||||
Interest and dividend income | ||||||||||||||||||||
Interest and fees on loans | $ | 46,413 | $ | 46,035 | $ | 45,532 | $ | 137,646 | $ | 133,065 | ||||||||||
Interest and dividends on investment securities | 4,213 | 3,306 | 2,773 | 10,570 | 8,758 | |||||||||||||||
Total interest and dividend income | 50,626 | 49,341 | 48,305 | 148,216 | 141,823 | |||||||||||||||
Interest expense | ||||||||||||||||||||
Interest on deposit liabilities | 1,355 | 1,266 | 1,312 | 3,881 | 3,774 | |||||||||||||||
Interest on other borrowings | 1,515 | 1,487 | 1,438 | 4,468 | 4,263 | |||||||||||||||
Total interest expense | 2,870 | 2,753 | 2,750 | 8,349 | 8,037 | |||||||||||||||
Net interest income | 47,756 | 46,588 | 45,555 | 139,867 | 133,786 | |||||||||||||||
Provision for loan losses | 2,997 | 1,825 | 1,550 | 5,436 | 3,566 | |||||||||||||||
Net interest income after provision for loan losses | 44,759 | 44,763 | 44,005 | 134,431 | 130,220 | |||||||||||||||
Noninterest income | ||||||||||||||||||||
Fees from other financial services | 5,639 | 5,550 | 5,642 | 16,544 | 15,987 | |||||||||||||||
Fee income on deposit liabilities | 5,883 | 5,424 | 5,109 | 16,622 | 14,175 | |||||||||||||||
Fee income on other financial products | 2,096 | 2,103 | 1,971 | 6,088 | 6,325 | |||||||||||||||
Bank-owned life insurance | 1,021 | 1,058 | 1,000 | 3,062 | 2,945 | |||||||||||||||
Mortgage banking income | 1,437 | 2,068 | 875 | 5,327 | 1,749 | |||||||||||||||
Gains on sale of investment securities | — | — | — | — | 2,847 | |||||||||||||||
Other income, net | 2,389 | 239 | 634 | 3,363 | 1,920 | |||||||||||||||
Total noninterest income | 18,465 | 16,442 | 15,231 | 51,006 | 45,948 | |||||||||||||||
Noninterest expense | ||||||||||||||||||||
Compensation and employee benefits | 22,728 | 22,319 | 19,892 | 66,813 | 60,050 | |||||||||||||||
Occupancy | 4,128 | 4,009 | 4,517 | 12,250 | 12,959 | |||||||||||||||
Data processing | 3,032 | 2,953 | 2,684 | 9,101 | 8,715 | |||||||||||||||
Services | 2,556 | 2,833 | 2,580 | 7,730 | 7,708 | |||||||||||||||
Equipment | 1,608 | 1,690 | 1,672 | 4,999 | 4,926 | |||||||||||||||
Office supplies, printing and postage | 1,511 | 1,303 | 1,415 | 4,297 | 4,487 | |||||||||||||||
Marketing | 934 | 844 | 948 | 2,619 | 2,690 | |||||||||||||||
FDIC insurance | 809 | 773 | 840 | 2,393 | 2,441 | |||||||||||||||
Other expense | 5,116 | 4,755 | 4,182 | 14,076 | 11,198 | |||||||||||||||
Total noninterest expense | 42,422 | 41,479 | 38,730 | 124,278 | 115,174 | |||||||||||||||
Income before income taxes | 20,802 | 19,726 | 20,506 | 61,159 | 60,994 | |||||||||||||||
Income taxes | 7,351 | 6,875 | 7,253 | 21,382 | 21,806 | |||||||||||||||
Net income | $ | 13,451 | $ | 12,851 | $ | 13,253 | $ | 39,777 | $ | 39,188 | ||||||||||
Comprehensive income | $ | 17,678 | $ | 9,544 | $ | 11,804 | $ | 44,540 | $ | 41,521 | ||||||||||
OTHER BANK INFORMATION (annualized %, except as of period end) | ||||||||||||||||||||
Return on average assets | 0.92 | 0.89 | 0.98 | 0.92 | 0.97 | |||||||||||||||
Return on average equity | 9.73 | 9.38 | 9.88 | 9.69 | 9.83 | |||||||||||||||
Return on average tangible common equity | 11.43 | 11.04 | 11.67 | 11.40 | 11.63 | |||||||||||||||
Net interest margin | 3.53 | 3.52 | 3.62 | 3.52 | 3.60 | |||||||||||||||
Net charge-offs to average loans outstanding | 0.10 | 0.11 | 0.04 | 0.08 | 0.01 | |||||||||||||||
As of period end | ||||||||||||||||||||
Nonperforming assets to loans outstanding and real estate owned * | 1.00 | 0.70 | 0.88 | |||||||||||||||||
Allowance for loan losses to loans outstanding | 1.06 | 1.04 | 1.00 | |||||||||||||||||
Tangible common equity to tangible assets | 8.23 | 8.16 | 8.48 | |||||||||||||||||
Tier-1 leverage ratio * | 8.8 | 8.8 | 9.1 | |||||||||||||||||
Total capital ratio * | 13.4 | 13.5 | 12.6 | |||||||||||||||||
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions) | $ | 7.5 | $ | 7.5 | $ | 8.8 | ||||||||||||||
* Regulatory basis. Capital ratios as of September 30, 2015 and June 30, 2015 calculated under Basel III rules, which became effective January 1, 2015.
Prior period financial statements reflect the retrospective application of Accounting Standards Update (ASU) No. 2014-01, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” which was adopted as of January 1, 2015 and did not have a material impact on ASB’s financial condition or results of operations.
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, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (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.
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American Savings Bank, F.S.B.
BALANCE SHEETS DATA
(Unaudited)
September 30, 2015 | December 31, 2014 | |||||||||||
(in thousands) | ||||||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 103,934 | $ | 107,233 | ||||||||
Interest-bearing deposits | 73,041 | 54,230 | ||||||||||
Available-for-sale investment securities, at fair value | 785,837 | 550,394 | ||||||||||
Stock in Federal Home Loan Bank, at cost | 10,678 | 69,302 | ||||||||||
Loans receivable held for investment | 4,535,404 | 4,434,651 | ||||||||||
Allowance for loan losses | (48,274 | ) | (45,618 | ) | ||||||||
Net loans | 4,487,130 | 4,389,033 | ||||||||||
Loans held for sale, at lower of cost or fair value | 5,598 | 8,424 | ||||||||||
Other | 307,089 | 305,416 | ||||||||||
Goodwill | 82,190 | 82,190 | ||||||||||
Total assets | $ | 5,855,497 | $ | 5,566,222 | ||||||||
Liabilities and shareholder’s equity | ||||||||||||
Deposit liabilities–noninterest-bearing | $ | 1,422,843 | $ | 1,342,794 | ||||||||
Deposit liabilities–interest-bearing | 3,403,111 | 3,280,621 | ||||||||||
Other borrowings | 368,593 | 290,656 | ||||||||||
Other | 103,553 | 118,363 | ||||||||||
Total liabilities | 5,298,100 | 5,032,434 | ||||||||||
Common stock | 1 | 1 | ||||||||||
Additional paid in capital | 339,980 | 338,411 | ||||||||||
Retained earnings | 229,211 | 211,934 | ||||||||||
Accumulated other comprehensive loss, net of tax benefits | ||||||||||||
Net unrealized gains on securities | $ | 4,070 | $ | 462 | ||||||||
Retirement benefit plans | (15,865 | ) | (11,795 | ) | (17,020 | ) | (16,558 | ) | ||||
Total shareholder’s equity | 557,397 | 533,788 | ||||||||||
Total liabilities and shareholder’s equity | $ | 5,855,497 | $ | 5,566,222 | ||||||||
Prior period financial statements reflect the retrospective application of Accounting Standards Update (ASU) No. 2014-01, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” which was adopted as of January 1, 2015 and did not have a material impact on ASB’s financial condition or results of operations.
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, 2014, ASB Hawaii, Inc.'s Form 10 filed with the SEC on March 30, 2015 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 (when filed), as updated by SEC Forms 8-K.
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