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American Savings Bank Reports Fourth Quarter and Full Year 2023 Financial Results

  • 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

Contacts

Mateo Garcia

Director, Investor Relations

Telephone: (808) 543-7300

E-mail: ir@hei.com

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