PR Newswire | Jan 29, 2021 05:00PM EST

Results

01/29 16:00 CST

American Savings Bank Reports Fourth Quarter And Full Year 2020 Financial ResultsFull Year 2020 Performance Highlights- Record residential mortgage production at $1.2 billion- Grew total deposits $1.1 billion or 17.8% to $7.4 billion and total loans $225 million or 4.4% to $5.3 billion- Net interest margin of 3.29%, with record low cost of funds- Net charge-off ratio improved to 0.40%, compared to 0.45% in prior year- Continued strong capital and liquidity position HONOLULU, Jan. 29, 2021

HONOLULU, Jan. 29, 2021 /PRNewswire/ -- American Savings Bank, F.S.B. (American), a wholly-owned subsidiary of Hawaiian Electric Industries, Inc. (NYSE: HE), today reported 2020 net income of $57.6 million,1 compared to $89.0 million2 in 2019.

"I am proud of the tenacity and creativity of our team as we worked to support our customers through this difficult economy, protect our teammates, and care for our community through all the challenges of 2020," said Rich Wacker, president and chief executive officer of American. "Our financial results reflect the negative impact of the elevated credit risk we continue to manage closely, but also the benefits of our record mortgage originations, good cost control to offset increased costs related to COVID while still investing in our core priorities, and conservative liquidity and capital management," said Wacker.

Net income for the fourth quarter of 2020 was $15.7 million, compared to $12.2 million in the third, or linked, quarter of 2020 and $28.2 million3 in the fourth quarter of 2019.

^ Results for 2020 included impact of after-tax gain of $5.2 million related to1 the sale of Visa Class B shares in the second quarter of 2020, as well as $5.1 million of certain direct and incremental COVID-19 related costs.

^2 Results for 2019 included after-tax gain on sale of properties (included in noninterest income) and after-tax campus transition costs (included in noninterest expense) of $7.9 million and $2.4 million, respectively, and $7.9 million and $0.2 million for the fourth quarter of 2019, respectively.

^ See footnote 2.3

Financial Highlights

Net interest income was $233.5 million in 2020 compared to $248.1 million in 2019. Fourth quarter 2020 net interest income was $58.5 million compared to $57.3 million in the linked quarter, and $60.9 million in the fourth quarter of 2019. Net interest income increased over the linked quarter, primarily due to higher average earning assets and lower funding costs in the fourth quarter. Yield on earning assets continued to be negatively impacted by the lower interest rate environment. Net interest margin was 3.29% in 2020, compared to 3.85% in 2019. Net interest margin for the fourth quarter of 2020 was 3.12%, flat compared to the linked quarter and down from 3.74% in the fourth quarter of 2019.

The provision for credit losses was $50.8 million in 2020 compared to $23.5 million in 2019. The increase in provision for credit losses reflects additional credit risk within the loan portfolio associated with the negative impacts of COVID-19. Provision for credit losses in the fourth quarter of 2020 was $11.3 million compared to $14.0 million in the linked quarter and $5.6 million in the fourth quarter of 2019.

The 2020 net charge-off ratio was 0.40% compared to 0.45% in 2019. The net charge-off ratio for the fourth quarter of 2020 was 0.36%, compared to 0.32% in the linked quarter and 0.41% in the fourth quarter of 2019. Nonaccrual loans as a percent of total loans receivable held for investment was 0.89% in the fourth quarter of 2020, compared to 0.77% in the linked quarter and 0.58% in the prior year quarter.

Noninterest income for 2020 was $78.1 million4 compared to $72.8 million in 2019.5 Noninterest income was $20.2 million in the fourth quarter of 2020, compared to $19.0 million in the linked quarter and $26.3 million in the fourth quarter of 2019. The decrease in noninterest income from the prior year quarter was primarily due to gains on sales of former properties in the fourth quarter of 2019,6 partially offset by higher mortgage banking income in the fourth quarter of 2020.

^4 See footnote 1 above.

^5 See footnote 2 above.

^6 See footnote 2 above.

Noninterest expense for 2020 was $191.6 million compared to $185.4 million in 2019. The increase in noninterest expense for the year was primarily due to $5.1 million of COVID-19 related expenses combined with higher pension-related costs of $2.3 million and $0.7 million in costs associated with the bank's branch consolidation strategy. These costs were partially offset by reductions in data processing and marketing expenses. Fourth quarter of 2020 noninterest expense was $49.4 million, compared to $47.3 million in the linked quarter and $46.2 million in the fourth quarter of 2019.

Total loans were $5.3 billion as of December 31, 2020, up 4.4% from December 31, 2019. The increase in total loans was primarily due to a $300 million increase in Paycheck Protection Program loans and a $210 million increase in commercial real estate loans. The increase in these portfolios was offset by reductions in the home equity line of credit and personal unsecured loan portfolios.

Total deposits were $7.4 billion as of December 31, 2020, an increase of 17.8% from December 31, 2019. The average cost of funds was 0.16% for the full year 2020, thirteen basis points lower than the prior year. For the fourth quarter of 2020, the average cost of funds was 0.09%, down four basis points versus the linked quarter and down seventeen basis points versus the prior year quarter.

Overall, American's return on average equity for the full year 2020 was 8.1% compared to 13.5% in 2019. Return on average assets for the full year was 0.74% in 2020 compared to 1.25% in 2019. For the fourth quarter of 2020 return on average equity was 8.6%, compared to 6.8% in the linked quarter and 16.5% in the fourth quarter of 2019. Return on average assets was 0.77% for the fourth quarter of 2020, compared to 0.61% in the linked quarter and 1.58% in the same quarter last year.

In the fourth quarter of 2020, American paid dividends of $3.0 million to HEI. American had a leverage ratio of 8.4% at December 31, 2020.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2021 GUIDANCE

Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its fourth quarter and full year 2020 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 fourth quarter and full year 2020.

HEI plans to announce its fourth quarter and full year 2020 consolidated financial results on Tuesday, February 16, 2021 and will also conduct a webcast and conference call at 11:15 a.m.Hawaii time (4:15 p.m. Eastern time) that same day to discuss its consolidated earnings, including American's earnings, and 2021 guidance.

Parties in the U.S. may listen to the conference call by dialing (844) 834-0652. International parties may listen to the conference call by dialing (412) 317-5198. Parties may also access presentation materials and/or listen to the conference call by visiting the conference call/webcast link on HEI's website at www.hei.com under the "Investor Relations" section, sub-heading "News and Events - Events and Presentations."

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 on HEI's website in the Investor Relations section. Accordingly, investors should routinely monitor the Investor Relations section of HEI's website at www.hei.com 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 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.

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 March 2, 2021. To access the audio replay, dial (877) 344-7529 (U.S.) or (412) 317-0088 (international) and enter passcode 10151332.

HEI supplies power to approximately 95% of Hawaii's population through its electric utility, Hawaiian Electric; provides a wide array of banking and other financial services to consumers and businesses through American, one of Hawaii's largest financial institutions; and helps advance Hawaii's clean energy and sustainability goals through investments by its non-regulated subsidiary, Pacific Current.

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, 2019 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, 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 Years ended December 31

(in thousands) December SeptemberDecember 2020 2019 31, 2020 30, 2020 31, 2019

Interest and dividend income

Interest and fees on$52,629$52,419$57,892$214,134$233,632loans

Interest and dividends on 7,590 7,221 7,160 30,529 32,922 investment securities

Total interest and 60,219 59,640 65,052 244,663 266,554 dividend income

Interest expense

Interest on deposit 1,709 2,287 3,907 10,654 16,830 liabilities

Interest on other 11 61 249 460 1,610 borrowings

Total interest 1,720 2,348 4,156 11,114 18,440 expense

Net interest income 58,499 57,292 60,896 233,549 248,114

Provision for credit11,307 13,970 5,607 50,811 23,480 losses

Net interest income after provision for 47,192 43,322 55,289 182,738 224,634 credit losses

Noninterest income

Fees from other 4,541 4,233 4,830 16,447 19,275 financial services

Fee income on 4,217 3,832 5,475 16,059 20,877 deposit liabilities

Fee income on other 1,773 1,524 1,378 6,381 6,507 financial products

Bank-owned life 2,051 1,965 1,378 6,483 7,687 insurance

Mortgage banking 7,801 7,681 1,863 23,734 4,943 income

Gain on sale of real- - 10,762 - 10,762 estate

Gain on sale of - - - 9,275 653 securities, net

Other income, net (187) (231) 654 (256) 2,074

Total noninterest 20,196 19,004 26,340 78,123 72,778 income

Noninterest expense

Compensation and 27,156 26,431 26,383 104,443 103,009 employee benefits

Occupancy 5,171 5,693 5,429 21,573 21,272

Data processing 3,717 3,366 3,953 14,769 15,306

Services 3,214 2,624 2,378 11,121 10,239

Equipment 2,371 2,001 2,344 9,001 8,760

Office supplies, 1,046 1,187 1,192 4,623 5,512 printing and postage

Marketing 1,527 727 1,035 3,435 4,490

FDIC insurance 775 714 (45) 2,342 1,204

Other expense^1 4,470 4,556 3,537 20,283 15,586

Total noninterest 49,447 47,299 46,206 191,590 185,378 expense

Income before income17,941 15,027 35,423 69,271 112,034 taxes

Income taxes 2,283 2,877 7,193 11,688 23,061

Net income $15,658$12,150$28,230$57,583 $88,973

Comprehensive income$18,306$13,543$33,300$81,191 $118,379

OTHER BANK INFORMATION (annualized %, except as of period end)

Return on average 0.77 0.61 1.58 0.74 1.25 assets

Return on average 8.58 6.75 16.45 8.11 13.48 equity

Return on average tangible common 9.67 7.62 18.69 9.17 15.39 equity

Net interest margin 3.12 3.12 3.74 3.29 3.85

Efficiency ratio 62.83 61.99 52.97 61.47 57.77

Net charge-offs to average loans 0.36 0.32 0.41 0.40 0.45 outstanding

As of period end

Nonaccrual loans to loans receivable 0.89 0.77 0.58 held for investment

Allowance for credit losses to loans 1.90 1.67 1.04 outstanding

Tangible common equity to tangible 7.9 8.0 8.6 assets

Tier-1 leverage 8.4 8.3 9.1 ratio

Dividend paid to HEI (via ASB Hawaii, $3.0 $- $9.0 $31.0 $56.0 Inc.) ($ in millions)

The fourth quarter of 2020, third quarter of 2020 and year ended December 31, 2020 include approximately $0.6 million, $0.7 million and^ $5.1 million, respectively, of certain direct and incremental COVID-191 related costs. For 2020, these costs, which have been recorded in Other expense, include $2.5 million of compensation expense and $2.0 million of enhanced cleaning and sanitation costs.

This information should be read in conjunction with the consolidated financialstatements and the notes thereto in HEI filings with the SEC.

American Savings Bank, F.S.B.BALANCE SHEETS DATA(Unaudited)

(in thousands) December 31, 2020 December 31, 2019

Assets

Cash and due from banks $ 178,422 $ 129,770

Interest-bearing deposits 114,304 48,628

Cash and cash equivalents 292,726 178,398

Investment securities

Available-for-sale, at fair 1,970,417 1,232,826value

Held-to-maturity, at amortized 226,947 139,451cost

Stock in Federal Home Loan Bank, 8,680 8,434at cost

Loans held for investment 5,333,843 5,121,176

Allowance for credit losses (101,201) (53,355)

Net loans 5,232,642 5,067,821

Loans held for sale, at lower of 28,275 12,286cost or fair value

Other 554,656 511,611

Goodwill 82,190 82,190

Total assets $ 8,396,533 $ 7,233,017

Liabilities and shareholder'sequity

Deposit $ 2,598,500 $ 1,909,682liabilities-noninterest-bearing

Deposit 4,788,457 4,362,220liabilities-interest-bearing

Other borrowings 89,670 115,110

Other 183,731 146,954

Total liabilities 7,660,358 6,533,966

Common stock 1 1

Additional paid-in capital 351,758 349,453

Retained earnings 369,470 358,259

Accumulated other comprehensiveincome (loss), net of taxes

Net unrealized gains on $ 19,986 $ 2,481securities

Retirement benefit plans (5,040) 14,946 (11,143) (8,662)

Total shareholder's equity 736,175 699,051

Total liabilities and $ 8,396,533 $ 7,233,017shareholder's equity

This information should be read in conjunction with the consolidated financialstatements and the notes thereto in HEI filings with the SEC.

Contact:Julie R. Smolinski Telephone: (808) 543-7300

Vice President, Investor Relations & Corporate E-mail: ir@hei.com Sustainability

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SOURCE American Savings Bank; Hawaiian Electric Industries, Inc.