EX-99 2 hei9910-30x15.htm EXHIBIT 99 Exhibit


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):

_______________________
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
Page 3

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
Page 4

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.


###
        





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.


5


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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