- Full Year Net Income of $53.4 Million
- 2023 Results Include an $11.0 Million
After-tax Loss Resulting from a Fourth Quarter Balance Sheet
Repositioning Strategy, and $8.3 Million of After-tax Maui
Wildfire-Related Expenses
- Balance Sheet Repositioning Strategy
Strengthens Balance Sheet and Positions Bank for Improved Net
Interest Margin and Profitability
- Bank Maintains a Strong Liquidity Position and
the Support of a Loyal, Long-tenured Deposit Base
- Continued Strong Credit Quality and Capital
Position
American Savings Bank, F.S.B. (ASB), a wholly owned subsidiary
of Hawaiian Electric Industries, Inc. (NYSE - HE), today
reported 2023 net income of $53.4 million, compared to $80.0
million in 2022. Net income for the year included $8.3 million of
Maui wildfire-related expenses after tax, and an $11.0 million
after-tax loss on the sale of investment securities recorded in the
fourth quarter. The loss resulted from selling low-yielding
securities in order to reduce high cost deposits, strengthening the
bank’s balance sheet while positioning the bank for improved net
interest margin. Core net income1 for the year was $72.6 million.
Fourth quarter 2023 net income of $3.2 million included $2.0
million of after-tax Maui-wildfire related expenses as well as the
aforementioned loss on sale of securities. Core net income1 for the
fourth quarter was $16.2 million.
“American Savings Bank continued to provide excellent service to
our customers despite a year filled with unprecedented challenges.
Our business proved resilient through the economic impacts of the
Maui wildfires, and the challenging interest rate environment we
experienced in 2023,” said Ann Teranishi, president and chief
executive officer of ASB. “We continue to be well-positioned with
strong capital, excellent credit quality, lending capacity and
ample liquidity. In addition, the sale of investment securities
executed in the fourth quarter further positions us for improved
profitability and net interest margin while strengthening the
balance sheet.”
___________________ 1 Core net income is a non-GAAP measure
which excludes Maui wildfire-related after-tax costs and the
after-tax loss on sale of securities resulting from the balance
sheet repositioning executed in the fourth quarter. See the
“Explanation of ASB’s Use of Certain Unaudited Non-GAAP Measures”
and the related GAAP reconciliation.
Financial Highlights
Net interest income was $252.0 million in 2023 compared to
$252.6 million in 2022, with higher interest and dividend income
approximately offset by the impacts of higher funding costs. Fourth
quarter 2023 net interest income was $61.2 million compared to
$62.6 million in the third, or linked quarter of 2023 and $66.1
million in the fourth quarter of 2022. Lower net interest income
compared to the linked and prior year quarters was primarily due to
higher funding costs, partially offset by higher interest and
dividend income. Net interest margin was 2.74% in 2023, compared to
2.89% in 2022. Net interest margin for the fourth quarter of 2023
was 2.63%, compared to 2.70% in the linked quarter, and 2.91% in
the fourth quarter of 2022.
The provision for credit losses for 2023 was $10.4 million
compared to $2.0 million in 2022, and included $5.9 million in
additional credit reserves related to borrowers impacted by the
Maui wildfires and the resulting economic disruption. The fourth
quarter 2023 provision for credit losses was $0.3 million, compared
to $8.8 million in the linked quarter and $2.7 million in the
fourth quarter of 2022. As of December 31, 2023, ASB’s allowance
for credit losses to outstanding loans was 1.20% compared to 1.23%
as of September 30, 2023 and 1.21% as of December 31, 2022.
The 2023 net charge-off ratio was 0.12% compared to 0.03% in
2022. The net charge-off ratio for the fourth quarter of 2023 was
0.15%, compared to 0.07% in the linked quarter and 0.06% in the
fourth quarter of 2022. Nonaccrual loans as a percentage of total
loans receivable held for investment were 0.46% as of December 31,
2023, compared to 0.16% as of September 30, 2023 and 0.28% as of
December 31, 2022.
Noninterest income for 2023 was $45.4 million compared to $57.0
million in 2022. The decrease in noninterest income was primarily
due to a $15.0 million pre-tax ($11.0 million after- tax) loss on
sale of investment securities recorded in the fourth quarter. The
sale of investment securities was executed in order to reposition
the balance sheet by divesting securities with below-market yields
to pay down higher cost funding, positioning ASB for improved net
interest margin and profitability. Noninterest income was $0.1
million in the fourth quarter of 2023 compared to $15.3 million in
the linked quarter and $15.3 million in the fourth quarter of 2022,
with the decrease compared to the linked and prior year quarters
also primarily due to the aforementioned balance sheet
repositioning transaction.
Noninterest expense for 2023 was $223.6 million compared to
$205.3 million in 2022. The increase in noninterest expense was
primarily due to pre-tax Maui wildfire-related expenses of $5.4
million ($3.9 million after tax), as well as higher compensation
and employee benefits expenses. Fourth quarter noninterest expense
was $59.1 million compared to $56.3 million in the linked quarter
and $56.1 million in the fourth quarter of 2022. The increase
compared to the linked quarter was primarily due to increased
charitable contributions to support our local communities. The
increase compared to the prior year quarter was primarily due to
increased charitable contributions and Maui wildfire-related
expenses.
Total earning assets as of December 31, 2023 were $9.2 billion,
up 0.50% from December 31, 2022.
Total loans were $6.2 billion as of December 31, 2023, up 3.4%
from December 31, 2022, reflecting growth across the majority of
the portfolio.
Total deposits were $8.1 billion as of December 31, 2023,
approximately flat from December 31, 2022. Core deposits declined
6.3%, while certificates of deposits increased 73.9%. As of
December 31, 2023, 86% of deposits were F.D.I.C. insured or fully
collateralized, down slightly from 87% as of September 30, 2023,
with approximately 80% of deposits F.D.I.C. insured. The average
cost of funds was 0.93% for the full year 2023, 77 basis points
higher than the prior year as higher interest rates and a shift in
funding mix increased funding costs. For the fourth quarter of
2023, the average cost of funds was 118 basis points, up 16 basis
points versus the linked quarter and up 80 basis points versus the
prior year quarter.
Wholesale funding totaled $750 million as of December 31, 2023,
unchanged from September 30, 2023.
ASB’s return on average equity for the full year 2023 was 11.0%
compared to 14.1% in 2022. For the fourth quarter of 2023, return
on average equity was 2.7%, compared to 9.2% in the linked quarter
and 15.7% in the fourth quarter of 2022. Core return on average
equity for the year and quarter were 14.9% and 13.7%, respectively.
Return on average assets for the full year was 0.55% in 2023
compared to 0.86% in 2022. For the fourth quarter of 2023, return
on average assets was 0.13%, compared to 0.47% in the linked
quarter and 0.76% in the prior year quarter. Core return on average
assets was 0.75% and 0.67% for the year and quarter,
respectively2.
In the fourth quarter of 2023, ASB did not pay a dividend to
HEI, supporting its commitment towards helping our Maui community
and customers recover in the wake of the August wildfires, while
supporting ASB’s healthy capital levels. ASB had a Tier 1 leverage
ratio of 7.7% as of December 31, 2023.
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 fourth quarter and full year 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 fourth quarter and full year
2023.
HEI plans to announce its fourth quarter and full year 2023
consolidated financial results on Tuesday, February 13, 2024 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.
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 February 27, 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.
___________________ 2 Core returns on average equity and average
assets are non-GAAP measures which exclude Maui wildfire-related
after-tax costs and the after-tax loss on sale of securities
resulting from the balance sheet repositioning transaction executed
in the fourth quarter. 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 and the after-tax loss on sale of
investment securities resulting from the balance sheet
repositioning transaction executed in the fourth quarter. 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
Years ended December 31
(in thousands)
December 31, 2023
September 30, 2023
December 31, 2022
2023
2022
Interest and dividend income
Interest and fees on loans
$
72,340
$
71,540
$
60,331
$
276,688
$
207,830
Interest and dividends on investment
securities
15,587
14,096
14,315
58,095
58,044
Total interest and dividend income
87,927
85,636
74,646
334,783
265,874
Interest expense
Interest on deposit liabilities
17,961
14,446
3,755
48,905
7,327
Interest on other borrowings
8,721
8,598
4,775
33,892
5,974
Total interest expense
26,682
23,044
8,530
82,797
13,301
Net interest income
61,245
62,592
66,116
251,986
252,573
Provision for credit losses
304
8,835
2,729
10,357
2,037
Net interest income after provision for
credit losses
60,941
53,757
63,387
241,629
250,536
Noninterest income
Fees from other financial services
4,643
4,703
4,764
19,034
19,830
Fee income on deposit liabilities
5,104
4,924
4,640
19,131
18,762
Fee income on other financial products
2,664
2,440
2,628
10,616
10,291
Bank-owned life insurance
1,707
2,303
1,872
7,390
2,533
Mortgage banking income
209
341
62
910
1,692
Gain on sale of real estate
—
—
776
495
1,778
Loss on sale of investment securities
(14,965
)
—
—
(14,965
)
—
Other income, net
693
627
606
2,799
2,086
Total noninterest income
55
15,338
15,348
45,410
56,972
Noninterest expense
Compensation and employee benefits
28,797
29,902
30,361
118,297
113,839
Occupancy
5,422
5,154
7,030
21,703
24,026
Data processing
5,305
5,133
4,537
20,545
17,681
Services
5,032
3,627
2,967
13,943
10,679
Equipment
3,114
3,125
2,937
11,842
10,100
Office supplies, printing and postage
1,019
1,022
1,142
4,315
4,398
Marketing
1,167
984
1,091
4,001
3,968
Other expense
9,250
7,399
6,034
28,992
20,576
Total noninterest expense
59,106
56,346
56,099
223,638
205,267
Income before income taxes
1,890
12,749
22,636
63,401
102,241
Income taxes
(1,341
)
1,384
4,739
10,039
22,252
Net income
$
3,231
$
11,365
$
17,897
$
53,362
$
79,989
Comprehensive income (loss)
$
70,585
$
(22,866
)
$
29,282
$
97,705
$
(218,844
)
OTHER BANK INFORMATION (annualized %,
except as of period end)
Return on average assets
0.13
0.47
0.76
0.55
0.86
Return on average equity
2.74
9.19
15.73
10.98
14.08
Return on average tangible common
equity
3.32
11.02
19.20
13.22
16.46
Net interest margin
2.63
2.70
2.91
2.74
2.89
Efficiency ratio
96.42
72.30
68.86
75.20
66.31
Net charge-offs to average loans
outstanding
0.15
0.07
0.06
0.12
0.03
As of period end
Nonaccrual loans to loans receivable held
for investment
0.46
0.16
0.28
Allowance for credit losses to loans
outstanding
1.20
1.23
1.21
Tangible common equity to tangible
assets
4.7
3.9
4.1
Tier-1 leverage ratio
7.7
7.7
7.8
Dividend paid to HEI (via ASB Hawaii,
Inc.) ($ in millions)
$
—
$
14.0
$
10.0
$
39.0
$
42.0
This information should be read in conjunction with the
consolidated financial statements and the notes thereto in HEI
filings with the SEC.
American Savings Bank, F.S.B.
BALANCE SHEETS DATA
(Unaudited)
(in thousands)
December 31, 2023
December 31, 2022
Assets
Cash and due from banks
$
184,383
$
153,042
Interest-bearing deposits
251,072
3,107
Cash and cash equivalents
435,455
156,149
Investment securities
Available-for-sale, at fair value
1,136,439
1,429,667
Held-to-maturity, at amortized cost
1,201,314
1,251,747
Stock in Federal Home Loan Bank, at
cost
14,728
26,560
Loans held for investment
6,180,810
5,978,906
Allowance for credit losses
(74,372
)
(72,216
)
Net loans
6,106,438
5,906,690
Loans held for sale, at lower of cost or
fair value
15,168
824
Other
681,460
692,143
Goodwill
82,190
82,190
Total assets
$
9,673,192
$
9,545,970
Liabilities and shareholder’s
equity
Deposit
liabilities–noninterest-bearing
$
2,599,762
$
2,811,077
Deposit liabilities–interest-bearing
5,546,016
5,358,619
Other borrowings
750,000
695,120
Other
247,563
212,269
Total liabilities
9,143,341
9,077,085
Common stock
1
1
Additional paid-in capital
358,067
355,806
Retained earnings
464,055
449,693
Accumulated other comprehensive loss, net
of tax benefits
Net unrealized losses on securities
$
(282,963
)
$
(328,904
)
Retirement benefit plans
(9,309
)
(292,272
)
(7,711
)
(336,615
)
Total shareholder’s equity
529,851
468,885
Total liabilities and shareholder’s
equity
$
9,673,192
$
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 and
the loss on sale of investment securities from the balance sheet
repositioning transaction executed in the fourth quarter.
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 December
31, 2023
Year ended December 31,
2023
Maui wildfire
related costs and loss on sale of securities
Pretax expenses:
Provision for credit losses
$
—
$
5,900
Professional services expense
2,405
3,705
Other expenses
309
1,666
Pretax Maui wildfire related costs
2,714
11,271
Pretax loss on sale of investment
securities
14,965
14,965
Income tax benefits
(4,738
)
(7,031
)
After-tax expenses
$
12,941
$
19,205
ASB net
income
GAAP (as reported)
$
3,231
$
53,362
Excluding expense related to Maui wildfire
and securities loss (after tax):
Provision for credit losses
—
4,319
Professional services expense
1,760
2,712
Other expenses
227
1,220
Loss on sale of investment securities
10,954
10,954
Maui wildfire related cost and securities
loss (after tax)
12,941
19,205
Non-GAAP (core) net income
$
16,172
$
72,567
Three months ended December
31, 2023
Year ended December 31,
2023
Ratios
(annualized %)
Based on GAAP1
Return on average assets
0.13
0.55
Return on average equity
2.74
10.98
Return on average tangible common
equity
3.32
13.22
Efficiency ratio
96.42
75.20
Based on Non-GAAP (core)
Return on average assets
0.67
0.75
Return on average equity
13.73
14.94
Return on average tangible common
equity
16.63
17.98
Efficiency ratio
73.94
69.88
1 Accounting principles generally accepted in the United States
of America
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240130061296/en/
Mateo Garcia Director, Investor Relations Telephone: (808)
543-7300 E-mail: ir@hei.com
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