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American Savings Bank Reports First Quarter 2016 Earnings

HONOLULU, April 29, 2016 /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 of $12.7 million for the first quarter of 2016 compared to $15.0 million in the fourth (or linked) quarter of 2015 and $13.5 million in the first quarter of 2015.

"American delivered solid results this quarter with strong deposit growth, higher net interest income and margins, and a better efficiency ratio. Our bottom line reflected the effect of higher loss provisioning due to loan growth as well as higher provisioning during the construction phase of several commercial real estate projects, and we remain encouraged about the outlook for Hawaii's economy this year," said Rich Wacker, president and chief executive officer of American. "We have advanced our preparations for the planned spin-off of ASB Hawaii and recently filed our updated Form 10 registration statement with the Securities and Exchange Commission."

First quarter 2016 net income was $2.3 million lower than the linked quarter primarily driven by the following on an after-tax basis:

  • $2 million higher provision for loan losses mainly due to growth in lending in commercial real estate and a commercial credit charge-off in the first quarter of 2016 compared to lower provisioning during the fourth quarter of 2015 attributable to net recoveries on previously charged-off loans; and
  • $1 million lower noninterest income compared to the fourth quarter of 2015, which included gains from the sale of mortgage serving rights.

These were partially offset by $1 million (after-tax) higher net interest income primarily attributable to loan and investment portfolio growth and higher yields on interest-earning assets in the first quarter of 2016.




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.

Compared to the first quarter of 2015, net income declined by $0.8 million primarily driven by the following on an after-tax basis:

  • $2 million higher provision for loan losses mainly driven by commercial real estate loan growth and a commercial credit charge-off in the first quarter of 2016; and
  • $1 million higher noninterest expense primarily due to investment in our electronic banking platform and higher compensation expense.

These were offset by $3 million (after-tax) higher net interest income in the first quarter of 2016 due to loan and investment portfolio growth and higher yields on interest-earning assets.

Net interest income (pretax) was $50.4 million in the first quarter of 2016 compared to $48.7 million in the linked quarter of 2015 and $45.5 million in the prior year quarter. The increase was primarily attributable to growth in the commercial real estate loans and the investment portfolios along with higher yields on interest-earning assets. Net interest margin was 3.62% compared to 3.55% in the linked quarter and 3.52% in the first quarter of 2015.

Provision for loan losses (pretax) was $4.8 million in the first quarter of 2016 compared to $0.8 million in the linked quarter of 2015 and $0.6 million in the first quarter of 2015. The increase in provision as discussed above was mainly due to commercial real estate loan growth and a commercial credit charge-off in the first quarter of 2016. During the construction phase of commercial real estate projects, the bank provides at a higher coverage rate compared to the period after construction completion, and lending to construction projects increased $30 million and $53 million compared to the linked and prior year quarters, respectively. The net charge-off ratio was 0.21%, primarily attributable to the aforementioned charge-off related to one commercial borrower, compared to the net recovery in the linked quarter of 0.08% and 0.04% net charge-off ratio in the prior year quarter. Credit quality and trends continue to be stable, reflecting prudent credit risk management and a strong Hawaii economy.

Noninterest income (pretax) was $15.4 million in the first quarter of 2016, compared to $16.8 million in the linked quarter and $16.1 million in the first quarter of 2015. The $1.4 million lower noninterest income compared to the linked quarter was primarily due to the gain on the sale of mortgage servicing rights in the fourth quarter of 2015. The $0.7 million decline compared to the first quarter of 2015 was primarily driven by lower mortgage banking income due to a decline in mortgage loan sales driven by lower origination volume.

Noninterest expense (pretax) was $41.4 million in the first quarter of 2016, compared to $42.0 million in the linked quarter and $40.4 million in the first quarter of 2015. Noninterest expense was $0.6 million lower compared to the linked quarter primarily due to higher performance-based incentive compensation expense in the fourth quarter of 2015. Noninterest expense was $1.0 million greater compared to the prior year quarter primarily due to higher compensation and electronic banking platform expenses.

Loan growth was 2.2% annualized in the first...


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