- 2Q 2024 net loss of $45.8 million reflects after-tax goodwill
impairment of $66.1 million in connection with HEI’s ongoing review
of strategic options for ASB
- Excluding the non-cash goodwill impairment, and excluding
after-tax Maui wildfire-related expenses of $0.3 million, ASB’s
core net income1 for the second quarter was $20.7 million, compared
to $20.9 million in the first quarter of 2024 and $20.2 million in
the second quarter of 2023
- Non-cash goodwill impairment has no impact on ASB’s liquidity
or ability to serve customers’ financial needs
- Net interest margin expanded to 2.79%, up 4 basis points from
the prior quarter
- Strong credit quality and another release of reserves reflect
healthy Hawaii economy
American Savings Bank, F.S.B. (ASB), a wholly owned subsidiary
of Hawaiian Electric Industries, Inc. (NYSE - HE), today
reported a second quarter 2024 net loss of $45.8 million. The
second quarter 2024 results reflect the impact of an after-tax
goodwill impairment of $66.1 million in connection with HEI’s
ongoing review of strategic options for ASB. The goodwill
impairment is related to acquisitions that took place in the 1980s
and 1990s. The impairment is non-cash and has no impact on ASB’s
liquidity.
“The bank’s core operations and earnings remain strong, and in
the second quarter ASB improved profitability and grew core net
income2 compared to the same quarter last year,” said Ann
Teranishi, president and chief executive officer of ASB. “We saw
net interest margin expand in the quarter, and management’s prudent
expense control resulted in a decrease in core noninterest expense.
ASB is in a strong financial position with high liquidity, deep
borrowing capacity and a loyal, long-tenured base of deposits.”
“Over the last year, HEI has been advancing a strategy designed
to support a strong, financially healthy enterprise that will
empower a thriving future for Hawaii,” said Scott Seu, HEI
president and CEO. “Consistent with this approach, HEI has been
undertaking a comprehensive review of strategic options for ASB. We
will continue to take prudent and measured actions to ensure our
companies are well positioned to serve our customers and community
for the long term.”
Teranishi continued, “In connection with HEI’s ongoing
evaluation, the bank recorded a non-cash goodwill impairment charge
that reflects management’s analysis of our bank’s market valuation.
This non-cash charge has no impact on ASB’s liquidity or ASB’s
ability to serve our customers’ financial needs. We remain focused
on taking care of Hawaii’s residents, businesses and communities as
we have for nearly 100 years.”
There is no set timetable for HEI’s comprehensive review of
strategic options for ASB, and there can be no assurances that any
actions regarding ASB will result from this evaluation. Neither HEI
nor ASB expect to disclose or provide an update concerning
developments related to this process unless or until HEI’s Board of
Directors has approved a definitive course of action or otherwise
determined that further disclosure is appropriate or necessary.
___________
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. For the first quarter of
2024 and the second quarter 2023, core net income was approximately
equivalent to GAAP net income.
2
Refer to footnote 1.
Financial Highlights
Second quarter 2024 net interest income was $61.7 million
compared to $62.3 million in the linked quarter and $63.2 million
in the second quarter of 2023. The lower net interest income
compared to the linked quarter was primarily due to lower yields on
the investment portfolio and lower earning asset balances. The
lower net interest income compared to the prior year quarter was
primarily due to higher interest expense on deposit liabilities,
partially offset by higher interest and dividend income due to
higher earning asset yields. Net interest margin for the second
quarter of 2024 was 2.79% compared to 2.75% in both the linked and
prior year quarters. The yield on earning assets improved 1 basis
point during the quarter, and cost of funding improved 2 basis
points.
In the second quarter of 2024 ASB recorded a negative provision
for credit losses of $1.9 million compared to a negative provision
for credit losses of $2.2 million in the linked quarter and a
provision for credit losses of $0.04 million in the second quarter
of 2023. The quarter’s negative provision reflects a $0.8 million
release of reserves due to an improved economic outlook for Maui
following the August 2023 wildfires, as well as lower loss rates
and lower loan balances. As of June 30, 2024, ASB’s allowance for
credit losses to outstanding loans was 1.11% compared to 1.16% as
of March 31, 2024 and 1.13% as of June 30, 2023.
The net charge-off ratio for the second quarter of 2024 was
0.15%, compared to 0.14% in both the linked and prior year
quarters. Nonaccrual loans as a percentage of total loans
receivable held for investment were 0.53%, compared to 0.53% in the
linked quarter and 0.22% in the prior year quarter.
Noninterest income was $15.8 million in the second quarter of
2024 compared to $17.2 million in the linked quarter and $15.6
million in the second quarter of 2023. The decrease compared to the
linked quarter was primarily due to lower bank-owned life insurance
(BOLI) income related to changes in the fair market value of the
underlying assets. The increase compared to the prior year quarter
was primarily due to higher BOLI income and higher fee income,
partially offset by the gain on sale of real estate recorded last
year.
Noninterest expense was $136.5 million compared to $55.9 million
in the linked quarter and $53.8 million in the second quarter of
2023. The increase compared to the linked and prior year quarters
primarily reflects the 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
for the quarter also included pre-tax wildfire-related services
expenses of $1.2 million.
Total loans were $6.1 billion as of June 30, 2024, down 2.5%
from December 31, 2023.
Total deposits were $8.0 billion as of June 30, 2024, down 1.3%
from December 31, 2023. Core deposits declined 1.3% from December
31, 2023, while certificates of deposit decreased 1.4% primarily
due to the paydown of $166 million in public time deposits. As of
June 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 second quarter of 2024, the average cost of funds
was 115 basis points, down slightly from 117 basis points in the
linked quarter and up 32 basis points from the prior year
quarter.
Wholesale funding totaled $520 million as of June 30, 2024, down
$73 million from March 31, 2024.
In the second 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 8.4% as of June 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 second 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 second quarter 2024.
HEI plans to announce its second quarter 2024 consolidated
financial results on Friday, August 9, 2024 and will also conduct a
webcast and conference call at 10:30 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 August 23, 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.
NON-GAAP MEASURES
Measures described as “core” (e.g., core net income and core
noninterest expense) 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
Six months ended June 30
(in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
2024
2023
Interest and dividend income
Interest and fees on loans
$
72,960
$
72,971
$
67,966
$
145,931
$
132,808
Interest and dividends on investment
securities
13,218
14,964
13,775
28,182
28,412
Total interest and dividend income
86,178
87,935
81,741
174,113
161,220
Interest expense
Interest on deposit liabilities
18,015
17,432
9,661
35,447
16,498
Interest on other borrowings
6,479
8,154
8,852
14,633
16,573
Total interest expense
24,494
25,586
18,513
50,080
33,071
Net interest income
61,684
62,349
63,228
124,033
128,149
Provision for credit losses
(1,910
)
(2,159
)
43
(4,069
)
1,218
Net interest income after provision for
credit losses
63,594
64,508
63,185
128,102
126,931
Noninterest income
Fees from other financial services
5,133
4,874
5,009
10,007
9,688
Fee income on deposit liabilities
4,630
4,898
4,504
9,528
9,103
Fee income on other financial products
2,960
2,743
2,768
5,703
5,512
Bank-owned life insurance
2,255
3,584
1,955
5,839
3,380
Mortgage banking income
364
424
230
788
360
Gain on sale of real estate
—
—
495
—
495
Other income, net
423
686
678
1,109
1,479
Total noninterest income
15,765
17,209
15,639
32,974
30,017
Noninterest expense
Compensation and employee benefits
29,802
32,459
29,394
62,261
59,598
Occupancy
5,220
5,063
5,539
10,283
11,127
Data processing
4,960
4,846
5,095
9,806
10,107
Services
4,250
4,151
2,689
8,401
5,284
Equipment
2,477
2,649
2,957
5,126
5,603
Office supplies, printing and postage
1,006
1,018
1,109
2,024
2,274
Marketing
747
776
834
1,523
1,850
Goodwill impairment
82,190
—
—
82,190
—
Other expense
5,813
4,942
6,152
10,755
12,343
Total noninterest expense
136,465
55,904
53,769
192,369
108,186
Income (loss) before income
taxes
(57,106
)
25,813
25,055
(31,293
)
48,762
Income tax (benefit)
(11,319
)
4,879
4,851
(6,440
)
9,996
Net income (loss)
$
(45,787
)
$
20,934
$
20,204
$
(24,853
)
$
38,766
Comprehensive income (loss)
$
(44,154
)
$
11,166
$
12,994
$
(32,988
)
$
49,986
OTHER BANK INFORMATION (annualized %,
except as of period end)
Return on average assets
(1.97
)
0.88
0.84
(0.53
)
0.81
Return on average equity
(33.97
)
15.64
16.20
(9.25
)
15.87
Return on average tangible common
equity
(39.84
)
18.48
19.40
(10.89
)
19.07
Net interest margin
2.79
2.75
2.75
2.77
2.80
Efficiency ratio
176.20
70.27
68.18
122.52
68.40
Net charge-offs to average loans
outstanding
0.15
0.14
0.14
0.14
0.14
As of period end
Nonaccrual loans to loans receivable held
for investment
0.53
0.53
0.22
Allowance for credit losses to loans
outstanding
1.11
1.16
1.13
Tangible common equity to tangible
assets
5.4
5.0
4.3
Tier-1 leverage ratio
8.4
8.0
7.8
Dividend paid to HEI (via ASB Hawaii,
Inc.) ($ in millions)
$
—
$
—
$
11.0
$
—
$
25.0
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)
June 30, 2024
December 31, 2023
Assets
Cash and due from banks
$
139,114
$
184,383
Interest-bearing deposits
195,721
251,072
Cash and cash equivalents
334,835
435,455
Investment securities
Available-for-sale, at fair value
1,061,687
1,136,439
Held-to-maturity, at amortized cost
1,179,182
1,201,314
Stock in Federal Home Loan Bank, at
cost
29,204
14,728
Loans held for investment
6,030,158
6,180,810
Allowance for credit losses
(66,813
)
(74,372
)
Net loans
5,963,345
6,106,438
Loans held for sale, at lower of cost or
fair value
13,904
15,168
Other
698,648
681,460
Goodwill
—
82,190
Total assets
$
9,280,805
$
9,673,192
Liabilities and shareholder’s
equity
Deposit
liabilities–noninterest-bearing
$
2,515,062
$
2,599,762
Deposit liabilities–interest-bearing
5,521,411
5,546,016
Other borrowings
520,000
750,000
Other
226,488
247,563
Total liabilities
8,782,961
9,143,341
Common stock
1
1
Additional paid-in capital
359,048
358,067
Retained earnings
439,202
464,055
Accumulated other comprehensive loss, net
of tax benefits
Net unrealized losses on securities
$
(291,864
)
$
(282,963
)
Retirement benefit plans
(8,543
)
(300,407
)
(9,309
)
(292,272
)
Total shareholder’s equity
497,844
529,851
Total liabilities and shareholder’s
equity
$
9,280,805
$
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
(in thousands)
Three months ended June 30,
2024
Six months ended June
30, 2024
Maui wildfire
related costs and goodwill impairment
Pretax expenses:
Provision for credit losses
$
(800
)
$
(2,300
)
Professional services expense
1,201
2,909
Other expenses, net
51
(266
)
Pretax Maui wildfire related costs,
net
452
343
Pretax goodwill impairment
82,190
82,190
Income tax benefit
(16,181
)
(16,152
)
After-tax expenses
$
66,461
$
66,381
ASB net income
(loss)
GAAP (as reported)
$
(45,787
)
$
(24,853
)
Excluding expense relating to Maui
wildfire costs and goodwill impairment (after tax):
Provision for credit losses
(586
)
(1,684
)
Professional services expense
880
2,130
Other expenses, net
37
(195
)
Goodwill impairment
66,130
66,130
Maui wildfire related cost, net and
goodwill impairment (after tax)
66,461
66,381
Non-GAAP (core) net income
$
20,674
$
41,528
Three months ended June 30,
2024
Six months ended June
30, 2024
Ratios
(annualized %)
Based on GAAP
Return on average assets
(1.97
)
(0.53
)
Return on average equity
(33.97
)
(9.25
)
Return on average tangible common
equity
(39.84
)
(10.89
)
Efficiency ratio
176.20
122.52
Based on Non-GAAP (core)
Return on average assets
0.89
0.88
Return on average equity
15.34
15.46
Return on average tangible common
equity
17.99
18.20
Efficiency ratio
68.46
68.49
1
Accounting principles generally accepted
in the United States of America
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240730272283/en/
Mateo Garcia Director, Investor Relations Telephone: (808)
543-7300 E-mail: ir@hei.com
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