3Q 2023 Net Income of $11.4 million
$8.6 Million of Maui Wildfire-Related Expenses,
Including $5.9 Million of Additional Provision
Solid Credit Quality and Capital Position
Liquidity Remains Strong
American Savings Bank, F.S.B. (ASB), a wholly owned subsidiary
of Hawaiian Electric Industries, Inc. (NYSE - HE), today
reported third quarter 2023 net income of $11.4 million, compared
to $20.2 million in the second quarter of 2023 and $20.8 million in
the third quarter of 2022. Core net income1 for the third quarter
of 2023 was $17.6 million.
“American Savings Bank continues to be well-positioned to
support our community with a strong capital position, excellent
credit quality, lending capacity and ample liquidity,” said Ann
Teranishi, president and chief executive officer of ASB. “Despite
the economic impacts of the wildfires, our customers and business
have proved resilient. I’m very proud of our ASB teammates for
delivering exceptional service through this difficult period. Our
hearts are with the people of Maui, and we remain committed to
supporting the recovery and rebuild effort.”
_______________________ 1 Core net income is a non-GAAP
measure which excludes Maui wildfire-related after-tax costs. See
the “Explanation of ASB’s Use of Certain Unaudited Non-GAAP
Measures” and the related GAAP reconciliation.
Financial Highlights
Third quarter 2023 net interest income was $62.6 million
compared to $63.2 million in the second, or linked quarter of 2023
and $65.7 million in the third quarter of 2022. The lower net
interest income compared to the linked and prior year quarters was
primarily due to higher interest expense from rising deposit costs
resulting from growth in higher yielding certificates of deposit.
The lower net interest income compared to the prior year quarter
also included higher interest expense from increased wholesale
borrowings, and lower interest and dividends on investment
securities. Net interest margin for the third quarter of 2023 was
2.70%, compared to 2.75% in the linked quarter, and 2.96% in the
third quarter of last year.
The third quarter 2023 provision for credit losses was $8.8
million, compared to $0.04 million in the linked quarter and a $0.2
million negative provision for credit losses in the third quarter
of 2022. The higher provision for credit losses for the quarter was
primarily due to $5.9 million in additional credit reserves related
to borrowers impacted by the Maui wildfires and the resulting
economic disruption. As of September 30, 2023, ASB’s allowance for
credit losses to outstanding loans was 1.23% compared to 1.13% as
of June 30, 2023 and 1.24% as of September 30, 2022.
The net charge-off ratio for the third quarter of 2023 was
0.07%, compared to 0.14% in the linked quarter and 0.03% in the
third quarter of 2022. Nonaccrual loans as a percentage of total
loans receivable held for investment were 0.16%, compared to 0.22%
in the linked quarter and 0.35% in the prior year quarter.
Noninterest income was $15.3 million in the third quarter of
2023 compared to $15.6 million in the linked quarter and $13.0
million in the third quarter of 2022. The decrease compared to the
linked quarter was primarily due to a gain on sale of real estate
recognized in the linked quarter and lower fee income, partially
offset by higher bank-owned life insurance income. The increase
compared to the prior year quarter was primarily due to higher
bank-owned life insurance income.
Noninterest expense was $56.3 million compared to $53.8 million
in the linked quarter and $51.6 million in the third quarter of
2022. The increase compared to the linked and prior year quarters
was primarily due to wildfire-related expenses incurred during the
quarter, including $1.3 million in professional services costs and
$1.0 million in other extraordinary expenses.
Total loans were $6.2 billion as of September 30, 2023, up 3.6%
from December 31, 2022, primarily reflecting growth in the
commercial real estate and residential mortgage portfolios.
Total deposits were $8.2 billion as of September 30, 2023, an
increase of 0.7% from December 31, 2022. Core deposits declined
5.1%, while certificates of deposits increased 71.8%. As of
September 30, 2023, 87% of deposits were F.D.I.C. insured or fully
collateralized, up slightly from 86% as of June 30, 2023, with
approximately 77% of deposits F.D.I.C. insured. For the third
quarter of 2023, the average cost of funds was 1.02%, up 19 basis
points versus the linked quarter and up 89 basis points versus the
prior year quarter.
Wholesale funding totaled $750 million as of September 30, 2023,
unchanged from June 30, 2023.
For the third quarter of 2023, return on average equity was
9.2%, compared to 16.2% in the linked quarter and 15.1% in the
third quarter of 2022. Return on average assets was 0.47% for the
third quarter of 2023, compared to 0.84% in the linked quarter and
0.89% in the prior year quarter. Excluding Maui wildfire-related
costs, core returns on average equity and average assets2 were
14.3% and 0.73%, respectively.
In the third quarter of 2023, ASB paid dividends of $14.0
million to HEI. ASB had a Tier 1 leverage ratio of 7.7% as of
September 30, 2023.
HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO
DISCUSS EARNINGS AND 2023 GUIDANCE
Concurrent with ASB’s regulatory filing 30 days after the end of
the quarter, ASB announced its third quarter 2023 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 third quarter 2023.
HEI plans to announce its third quarter 2023 consolidated
financial results on Thursday, November 9, 2023 and will also
conduct a webcast and conference call at 11:30 a.m. Hawaii time
(4:30 p.m. Eastern time) that same day to discuss its consolidated
earnings, including ASB’s earnings, and 2023 guidance.
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 November 23, 2023. 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.
___________________ 2 Core returns on average equity and
average assets are non-GAAP measures which exclude Maui
wildfire-related after-tax costs. See the “Explanation of ASB’s Use
of Certain Unaudited Non-GAAP Measures” and the related GAAP
reconciliation.
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 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, 2022 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
Nine months ended September
30
(in thousands)
September 30, 2023
June 30, 2023
September 30, 2022
2023
2022
Interest and dividend income
Interest and fees on loans
$
71,540
$
67,966
$
53,365
$
204,348
$
147,499
Interest and dividends on investment
securities
14,096
13,775
15,052
42,508
43,729
Total interest and dividend income
85,636
81,741
68,417
246,856
191,228
Interest expense
Interest on deposit liabilities
14,446
9,661
1,704
30,944
3,572
Interest on other borrowings
8,598
8,852
1,055
25,171
1,199
Total interest expense
23,044
18,513
2,759
56,115
4,771
Net interest income
62,592
63,228
65,658
190,741
186,457
Provision for credit losses
8,835
43
(186
)
10,053
(692
)
Net interest income after provision for
credit losses
53,757
63,185
65,844
180,688
187,149
Noninterest income
Fees from other financial services
4,703
5,009
4,763
14,391
15,066
Fee income on deposit liabilities
4,924
4,504
4,879
14,027
14,122
Fee income on other financial products
2,440
2,768
2,416
7,952
7,663
Bank-owned life insurance
2,303
1,955
122
5,683
661
Mortgage banking income
341
230
181
701
1,630
Gain on sale of real estate
—
495
—
495
1,002
Other income, net
627
678
633
2,106
1,480
Total noninterest income
15,338
15,639
12,994
45,355
41,624
Noninterest expense
Compensation and employee benefits
29,902
29,394
28,597
89,500
83,478
Occupancy
5,154
5,539
5,577
16,281
16,996
Data processing
5,133
5,095
4,509
15,240
13,144
Services
3,627
2,689
2,751
8,911
7,712
Equipment
3,125
2,957
2,432
8,728
7,163
Office supplies, printing and postage
1,022
1,109
1,123
3,296
3,256
Marketing
984
834
925
2,834
2,877
Other expense
7,399
6,152
5,643
19,742
14,542
Total noninterest expense
56,346
53,769
51,557
164,532
149,168
Income before income taxes
12,749
25,055
27,281
61,511
79,605
Income taxes
1,384
4,851
6,525
11,380
17,513
Net income
$
11,365
$
20,204
$
20,756
$
50,131
$
62,092
Comprehensive income (loss)
$
(22,866
)
$
12,994
$
(78,186
)
$
27,120
$
(248,126
)
OTHER BANK INFORMATION (annualized %,
except as of period end)
Return on average assets
0.47
0.84
0.89
0.70
0.90
Return on average equity
9.19
16.20
15.11
13.62
13.65
Return on average tangible common
equity
11.02
19.40
17.77
16.36
15.79
Net interest margin
2.70
2.75
2.96
2.77
2.87
Efficiency ratio
72.30
68.18
65.55
69.69
65.40
Net charge-offs to average loans
outstanding
0.07
0.14
0.03
0.11
0.01
As of period end
Nonaccrual loans to loans receivable held
for investment
0.16
0.22
0.35
Allowance for credit losses to loans
outstanding
1.23
1.13
1.24
Tangible common equity to tangible
assets
3.9
4.3
4.0
Tier-1 leverage ratio
7.7
7.8
7.7
Dividend paid to HEI (via ASB Hawaii,
Inc.) ($ in millions)
$
14.0
$
11.0
$
5.0
$
39.0
$
32.0
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)
September 30, 2023
December 31, 2022
Assets
Cash and due from banks
$
139,059
$
153,042
Interest-bearing deposits
124,531
3,107
Cash and cash equivalents
263,590
156,149
Investment securities
Available-for-sale, at fair value
1,266,412
1,429,667
Held-to-maturity, at amortized cost
1,212,005
1,251,747
Stock in Federal Home Loan Bank, at
cost
18,000
26,560
Loans held for investment
6,191,006
5,978,906
Allowance for credit losses
(76,366
)
(72,216
)
Net loans
6,114,640
5,906,690
Loans held for sale, at lower of cost or
fair value
2,171
824
Other
698,420
692,143
Goodwill
82,190
82,190
Total assets
$
9,657,428
$
9,545,970
Liabilities and shareholder’s
equity
Deposit
liabilities–noninterest-bearing
$
2,573,010
$
2,811,077
Deposit liabilities–interest-bearing
5,651,341
5,358,619
Other borrowings
750,000
695,120
Other
224,136
212,269
Total liabilities
9,198,487
9,077,085
Common stock
1
1
Additional paid-in capital
357,742
355,806
Retained earnings
460,824
449,693
Accumulated other comprehensive loss, net
of tax benefits
Net unrealized losses on securities
$
(350,234
)
$
(328,904
)
Retirement benefit plans
(9,392
)
(359,626
)
(7,711
)
(336,615
)
Total shareholder’s equity
458,941
468,885
Total liabilities and shareholder’s
equity
$
9,657,428
$
9,545,970
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 recent Maui wildfires.
Management does not consider these items to be representative of
the company’s fundamental core earnings.
Reconciliation of GAAP1 to non-GAAP
Measures
American Savings Bank F.S.B.
Unaudited
(in thousands)
Three months ended September
30, 2023
Nine months ended September
30, 2023
Maui wildfire
related costs
Pretax expenses:
Provision for credit losses
$
5,900
$
5,900
Professional services expense
1,300
1,300
Other expenses
1,357
1,357
Pretax expenses
8,557
8,557
Current income tax benefits
(2,293
)
(2,293
)
After-tax expenses
$
6,264
$
6,264
ASB net
income
GAAP (as reported)
$
11,365
$
50,131
Excluding expense related to Maui wildfire
(after tax):
Provision for credit losses
4,319
4,319
Professional services expense
952
952
Other expenses
993
993
Maui wildfire related cost (after tax)
6,264
6,264
Non-GAAP (core) net income
$
17,629
$
56,395
Three months ended September
30, 2023
Nine months ended September
30, 2023
Ratios
(annualized %)
Based on GAAP1
Return on average assets
0.47
0.70
Return on average equity
9.19
13.62
Return on average tangible common
equity
11.02
16.36
Efficiency ratio
72.30
69.69
Based on Non-GAAP (core)
Return on average assets
0.73
0.78
Return on average equity
14.25
15.32
Return on average tangible common
equity
17.09
18.40
Efficiency ratio
68.89
68.56
1 Accounting principles generally accepted in the United States
of America
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231030503534/en/
Mateo Garcia Director, Investor Relations Telephone: (808)
543-7300 E-mail: ir@hei.com
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