HE Hawaiian Electric Industries

3Q 2024 Net Income of $18.8 million

• Net interest margin expanded to 2.82%, up 3 basis points from the prior quarter
• 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 third quarter 2024 net income of $18.8 million, compared to a net loss of $45.8 million in the second quarter of 2024 and net income of $11.4 million in the third quarter of 2023. Core net income1 for the quarter was $19.4 million, compared to $20.7 million in the second quarter and $17.6 million in the third quarter of last year.

“American Savings Bank continues to perform well, generating strong net income and profitability while continuing the net interest margin expansion we’ve seen throughout 2024. We remain well-positioned to support our customers and community for the long term, with a strong capital and liquidity position, strong credit quality, and ample lending capacity,” said Ann Teranishi, president and chief executive officer of ASB.

__________

1 See the “Explanation of ASB’s Use of Certain Unaudited Non-GAAP Measures” and the related GAAP reconciliation at the end of this release.

Financial Highlights

Third quarter 2024 net interest income was $62.2 million compared to $61.7 million in the linked quarter and $62.6 million in the third quarter of 2023. The increase in net interest income compared to the linked quarter was primarily due to higher interest and dividend income due to higher earning asset yields, partially offset by higher deposit costs. The lower net interest income compared to the prior year quarter was primarily due to higher deposit costs and lower earning asset balances, partially offset by higher interest and fees on loans due to higher earning asset yields. Net interest margin for the third quarter of 2024 was 2.82% compared to 2.79% in the linked quarter, and 2.70% in the prior year quarter. The yield on earning assets improved 6 basis points during the quarter, while cost of funding increased 3 basis points.

In the third quarter of 2024, ASB recorded a provision for credit losses of $0.2 million compared to a negative provision for credit losses of $1.9 million in the linked quarter and a provision for credit losses of $8.8 million in the third quarter of 2023. The quarter’s provision for credit losses reflects continued strong credit quality and a healthy Hawaii economy. As of September 30, 2024, ASB’s allowance for credit losses to outstanding loans was 1.07% compared to 1.11% as of June 30, 2024 and 1.23% as of September 30, 2023.

The net charge-off ratio for the third quarter of 2024 was 0.15%, compared to 0.15% in the linked quarter, and 0.07% in the prior year quarter. Nonaccrual loans as a percentage of total loans receivable held for investment were 0.42%, compared to 0.53% in the linked quarter and 0.16% in the prior year quarter.

Noninterest income was $17.5 million in the third quarter of 2024, compared to $15.8 million in the linked quarter and $15.3 million in the third quarter of 2023. The increase compared to the linked and prior year quarters included higher fee income and higher bank-owned life insurance income.

Noninterest expense was $56.0 million compared to $136.5 million in the linked quarter and $56.3 million in the third quarter of 2023. The linked quarter’s noninterest expense reflected a goodwill impairment charge of $82.2 million pre-tax ($66.1 million after tax) taken in connection with HEI’s ongoing review of strategic options for ASB. Noninterest expense in the third quarter included net pre-tax wildfire-related expenses of $1.1 million.

Total loans were $6.1 billion as of September 30, 2024, down 2.3% from December 31, 2023.

Total deposits were $8.0 billion as of September 30, 2024, down 1.8% from December 31, 2023. Core deposits declined 2.1% from December 31, 2023, while certificates of deposit were approximately flat. As of September 30, 2024, 83% of deposits were F.D.I.C. insured or fully collateralized, with approximately 79% of deposits F.D.I.C. insured. For the third quarter of 2024, the average cost of funds was 118 basis points, up from 115 basis points in the linked quarter and 102 basis points in the prior year quarter.

Wholesale funding totaled $520 million as of September 30, 2024, unchanged from June 30, 2024.

In the third quarter of 2024, ASB did not pay a dividend to HEI, supporting ASB’s healthy capital levels. ASB had a Tier 1 leverage ratio of 8.6% as of September 30, 2024.

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 third quarter 2024 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 2024.

HEI plans to announce its third quarter 2024 consolidated financial results on Friday, November 8, 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 November 22, 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, and modernize and harden the grid to ensure resilience and public safety. 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.

NON-GAAP MEASURES

Measures described as “core” are non-GAAP measures which exclude after-tax Maui wildfire-related costs and the goodwill impairment taken in connection with HEI’s ongoing review of strategic options for ASB. See “Explanation of ASB’s Use of Certain Unaudited Non-GAAP Measures” and the 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, 2023 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, 2024

 

June 30, 2024

 

September 30, 2023

 

 

2024

 

 

 

2023

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

73,654

 

$

72,960

 

 

$

71,540

 

 

$

219,585

 

 

$

204,348

Interest and dividends on investment securities

 

 

14,001

 

 

13,218

 

 

 

14,096

 

 

 

42,183

 

 

 

42,508

Total interest and dividend income

 

 

87,655

 

 

86,178

 

 

 

85,636

 

 

 

261,768

 

 

 

246,856

Interest expense

 

 

 

 

 

 

 

 

 

 

Interest on deposit liabilities

 

 

19,018

 

 

18,015

 

 

 

14,446

 

 

 

54,465

 

 

 

30,944

Interest on other borrowings

 

 

6,403

 

 

6,479

 

 

 

8,598

 

 

 

21,036

 

 

 

25,171

Total interest expense

 

 

25,421

 

 

24,494

 

 

 

23,044

 

 

 

75,501

 

 

 

56,115

Net interest income

 

 

62,234

 

 

61,684

 

 

 

62,592

 

 

 

186,267

 

 

 

190,741

Provision for credit losses

 

 

248

 

 

(1,910

)

 

 

8,835

 

 

 

(3,821

)

 

 

10,053

Net interest income after provision for credit losses

 

 

61,986

 

 

63,594

 

 

 

53,757

 

 

 

190,088

 

 

 

180,688

Noninterest income

 

 

 

 

 

 

 

 

 

 

Fees from other financial services

 

 

5,188

 

 

5,133

 

 

 

4,703

 

 

 

15,195

 

 

 

14,391

Fee income on deposit liabilities

 

 

5,156

 

 

4,630

 

 

 

4,924

 

 

 

14,684

 

 

 

14,027

Fee income on other financial products

 

 

3,131

 

 

2,960

 

 

 

2,440

 

 

 

8,834

 

 

 

7,952

Bank-owned life insurance

 

 

2,993

 

 

2,255

 

 

 

2,303

 

 

 

8,832

 

 

 

5,683

Mortgage banking income

 

 

363

 

 

364

 

 

 

341

 

 

 

1,151

 

 

 

701

Gain on sale of real estate

 

 

—

 

 

—

 

 

 

—

 

 

 

—

 

 

 

495

Other income, net

 

 

658

 

 

423

 

 

 

627

 

 

 

1,767

 

 

 

2,106

Total noninterest income

 

 

17,489

 

 

15,765

 

 

 

15,338

 

 

 

50,463

 

 

 

45,355

Noninterest expense

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

 

31,485

 

 

29,802

 

 

 

29,902

 

 

 

93,746

 

 

 

89,500

Occupancy

 

 

5,630

 

 

5,220

 

 

 

5,154

 

 

 

15,913

 

 

 

16,281

Data processing

 

 

4,974

 

 

4,960

 

 

 

5,133

 

 

 

14,780

 

 

 

15,240

Services

 

 

3,816

 

 

4,250

 

 

 

3,627

 

 

 

12,217

 

 

 

8,911

Equipment

 

 

2,436

 

 

2,477

 

 

 

3,125

 

 

 

7,562

 

 

 

8,728

Office supplies, printing and postage

 

 

1,014

 

 

1,006

 

 

 

1,022

 

 

 

3,038

 

 

 

3,296

Marketing

 

 

885

 

 

747

 

 

 

984

 

 

 

2,408

 

 

 

2,834

Goodwill impairment

 

 

—

 

 

82,190

 

 

 

—

 

 

 

82,190

 

 

 

—

Other expense

 

 

5,806

 

 

5,813

 

 

 

7,399

 

 

 

16,561

 

 

 

19,742

Total noninterest expense

 

 

56,046

 

 

136,465

 

 

 

56,346

 

 

 

248,415

 

 

 

164,532

Income (loss) before income taxes

 

 

23,429

 

 

(57,106

)

 

 

12,749

 

 

 

(7,864

)

 

 

61,511

Income tax expense (benefit)

 

 

4,651

 

 

(11,319

)

 

 

1,384

 

 

 

(1,789

)

 

 

11,380

Net income (loss)

 

$

18,778

 

$

(45,787

)

 

$

11,365

 

 

$

(6,075

)

 

$

50,131

Comprehensive income (loss)

 

$

58,982

 

$

(44,154

)

 

$

(22,866

)

 

$

25,994

 

 

$

27,120

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

 

 

 

 

 

 

 

 

Return on average assets

 

 

0.81

 

 

(1.97

)

 

 

0.47

 

 

 

(0.09

)

 

 

0.70

Return on average equity

 

 

14.28

 

 

(33.97

)

 

 

9.19

 

 

 

(1.52

)

 

 

13.62

Return on average tangible common equity

 

 

14.28

 

 

(39.84

)

 

 

11.02

 

 

 

(1.69

)

 

 

16.36

Net interest margin

 

 

2.82

 

 

2.79

 

 

 

2.70

 

 

 

2.78

 

 

 

2.77

Efficiency ratio

 

 

70.30

 

 

176.20

 

 

 

72.30

 

 

 

104.94

 

 

 

69.69

Net charge-offs to average loans outstanding

 

 

0.15

 

 

0.15

 

 

 

0.07

 

 

 

0.15

 

 

 

0.11

As of period end

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans to loans receivable held for investment

 

 

0.42

 

 

0.53

 

 

 

0.16

 

 

 

 

 

Allowance for credit losses to loans outstanding

 

 

1.07

 

 

1.11

 

 

 

1.23

 

 

 

 

 

Tangible common equity to tangible assets

 

 

6.0

 

 

5.4

 

 

 

3.9

 

 

 

 

 

Tier-1 leverage ratio

 

 

8.6

 

 

8.4

 

 

 

7.7

 

 

 

 

 

Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)

 

$

—

 

$

—

 

 

$

14.0

 

 

$

—

 

 

$

39.0

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, 2024

December 31, 2023

Assets

 

 

 

 

Cash and due from banks

 

$

155,869

 

 

$

184,383

 

Interest-bearing deposits

 

 

176,784

 

 

 

251,072

 

Cash and cash equivalents

 

 

332,653

 

 

 

435,455

 

Investment securities

 

 

 

 

Available-for-sale, at fair value

 

 

1,084,083

 

 

 

1,136,439

 

Held-to-maturity, at amortized cost

 

 

1,159,229

 

 

 

1,201,314

 

Stock in Federal Home Loan Bank, at cost

 

 

29,204

 

 

 

14,728

 

Loans held for investment

 

 

6,037,410

 

 

 

6,180,810

 

Allowance for credit losses

 

 

(64,796

)

 

 

(74,372

)

Net loans

 

 

5,972,614

 

 

 

6,106,438

 

Loans held for sale, at lower of cost or fair value

 

 

2,704

 

 

 

15,168

 

Other

 

 

687,359

 

 

 

681,460

 

Goodwill

 

 

—

 

 

 

82,190

 

Total assets

 

$

9,267,846

 

 

$

9,673,192

 

Liabilities and shareholder’s equity

 

 

 

 

Deposit liabilities–noninterest-bearing

 

$

2,486,717

 

 

$

2,599,762

 

Deposit liabilities–interest-bearing

 

 

5,512,493

 

 

 

5,546,016

 

Other borrowings

 

 

520,000

 

 

 

750,000

 

Other

 

 

191,512

 

 

 

247,563

 

Total liabilities

 

 

8,710,722

 

 

 

9,143,341

 

Common stock

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

359,346

 

 

 

358,067

 

Retained earnings

 

 

457,980

 

 

 

464,055

 

Accumulated other comprehensive loss, net of tax benefits

 

 

 

 

Net unrealized losses on securities

$

(251,703

)

 

$

(282,963

)

 

Retirement benefit plans

 

(8,500

)

 

(260,203

)

 

(9,309

)

 

(292,272

)

Total shareholder’s equity

 

 

557,124

 

 

 

529,851

 

Total liabilities and shareholder’s equity

 

$

9,267,846

 

 

$

9,673,192

 

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 Maui wildfires and the goodwill impairment taken in connection with HEI’s ongoing review of strategic options for ASB. Management does not consider these items to be representative of the company’s fundamental core earnings.

Reconciliation of GAAP to non-GAAP Measures

American Savings Bank F.S.B.

Unaudited

 

 

 

Three months ended September 30

 

Nine months ended September 30

(in thousands)

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Maui wildfire related costs and goodwill impairment

 

 

 

 

 

 

 

 

Pretax expenses:

 

 

 

 

 

 

 

 

Provision for credit losses

 

$

(200

)

 

$

5,900

 

 

$

(2,500

)

 

$

5,900

 

Professional services expense

 

 

1,134

 

 

 

1,300

 

 

 

4,043

 

 

 

1,300

 

Other expenses, net

 

 

(42

)

 

 

1,357

 

 

 

(308

)

 

 

1,357

 

Pretax Maui wildfire related costs, net

 

 

892

 

 

 

8,557

 

 

 

1,235

 

 

 

8,557

 

Pretax goodwill impairment

 

 

—

 

 

 

—

 

 

 

82,190

 

 

 

—

 

Income tax benefit

 

 

(239

)

 

 

(2,293

)

 

 

(16,391

)

 

 

(2,293

)

After-tax expenses

 

$

653

 

 

$

6,264

 

 

$

67,034

 

 

$

6,264

 

 

 

 

 

 

 

 

 

 

ASB net income (loss)

 

 

 

 

 

 

 

 

GAAP (as reported)

 

$

18,778

 

 

$

11,365

 

 

$

(6,075

)

 

$

50,131

 

Excluding expense relating to Maui wildfire costs and goodwill impairment (after tax):

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

(146

)

 

 

4,319

 

 

 

(1,830

)

 

 

4,319

 

Professional services expense

 

 

830

 

 

 

952

 

 

 

2,960

 

 

 

952

 

Other expenses, net

 

 

(31

)

 

 

993

 

 

 

(226

)

 

 

993

 

Goodwill impairment

 

 

—

 

 

 

—

 

 

 

66,130

 

 

 

—

 

Maui wildfire related cost, net and goodwill impairment (after tax)

 

 

653

 

 

 

6,264

 

 

 

67,034

 

 

 

6,264

 

Non-GAAP (core) net income

 

$

19,431

 

 

$

17,629

 

 

$

60,959

 

 

$

56,395

 

1 Accounting principles generally accepted in the United States of America

 

 

Three months ended September 30

 

Nine months ended September 30

 

 

2024

 

2023

 

2024

 

 

2023

Ratios (annualized %)

 

 

 

 

 

 

 

 

Based on GAAP

 

 

 

 

 

 

 

 

Return on average assets

 

0.81

 

0.47

 

(0.09

)

 

0.70

Return on average equity

 

14.28

 

9.19

 

(1.52

)

 

13.62

Return on average tangible common equity

 

14.28

 

11.02

 

(1.69

)

 

16.36

Efficiency ratio

 

70.30

 

72.30

 

104.94

 

 

69.69

Based on Non-GAAP (core)

 

 

 

 

 

 

 

 

Return on average assets

 

0.84

 

0.73

 

0.87

 

 

0.78

Return on average equity

 

14.78

 

14.25

 

15.24

 

 

15.32

Return on average tangible common equity

 

14.78

 

17.09

 

16.94

 

 

18.40

Efficiency ratio

 

68.93

 

68.89

 

68.64

 

 

68.56

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241030464231/en/

Mateo Garcia Director, Investor Relations Telephone: (808) 543-7300 E-mail: ir@hei.com