Attached files
| file | filename |
|---|---|
| 8-K - 8-K - HAWAIIAN ELECTRIC INDUSTRIES INC | heiform8-k01x30x17.htm |
Exhibit 99
January 30, 2017
Contact: | Clifford H. Chen | |
Manager, Investor Relations & | Telephone: (808) 543-7300 | |
Strategic Planning | E-mail: ir@hei.com | |
AMERICAN SAVINGS BANK REPORTS 2016 AND FOURTH QUARTER EARNINGS
2016 Net Income of $57.3 Million - Return on Assets of 0.92%
Fourth Quarter 2016 Net Income of $16.2 Million
Solid Profitability In Line with Expectations
Selected 2016 Highlights
• | Achieved 2016 earnings and profitability targets consistent with guidance ranges |
• | Return on assets of 0.92% vs. target of ~0.90% |
• | Net interest margin of 3.59% vs. target of ~3.5% to 3.6% |
• | Loan growth of 2.6% led by commercial real estate and consumer lending |
• | Strong deposit growth of 10.4% including low-cost core deposit growth of 7.5% |
• | Strong capital levels: 8.6% leverage ratio; 13.4% total capital ratio |
• | Named one of Hawaii Business “Best Places to Work” for the 7th consecutive year; American Banker “Best Banks to Work For” list for the 4th consecutive year and only Hawaii bank to make the national list |
• | Contributed ~7,000 volunteer hours and nearly $1 million of charitable contributions to community organizations |
HONOLULU - American Savings Bank, F.S.B. (American), a wholly-owned subsidiary of Hawaiian Electric Industries, Inc. (NYSE - HE) today reported net income for the full year of 2016 of $57.3 million compared to $54.7 million in 2015. Net income for the fourth quarter of 2016 was $16.2 million, compared to $15.1 million in the third, or linked, quarter of 2016 and $15.0 million in the fourth quarter of 2015.
“We closed 2016 with a strong 4th quarter and positioned the bank to deliver for our customers and shareholders in 2017,” said Richard Wacker, president and chief executive officer of American. “We are building on important strategic achievements like the successful implementation of our new e-banking platform to improve efficiency and deepen customer relationships.”
Hawaiian Electric Industries, Inc. Ÿ American Savings Bank, F.S.B.
January 30, 2017
Page 2
Full Year Net Income:
Net income for 2016 of $57.3 million was $2.5 million higher than 2015, reflecting solid revenue and asset growth. The most significant drivers impacting the net income increase for 2016 were as follows on an after-tax basis:
• | $11 million higher net interest income driven mainly by commercial real estate and consumer loan and investment portfolio growth; partially offset by |
• | $6 million higher provision for loan losses largely related to commercial real estate and consumer lending activities; and |
• | $2 million higher noninterest expense primarily due to costs related to the conversion and upgrade of our e-banking platform. |
Fourth Quarter Net Income:
Fourth quarter of 2016 net income of $16.2 million was $1.1 million higher than the third, or linked quarter and $1.3 million higher than the fourth quarter of 2015.
Compared to the linked quarter of 2016, the $1.1 million increase in the fourth quarter of 2016 was primarily driven by the following on an after-tax basis:
• | $3 million lower provision for loan losses primarily due to reserves for specific commercial credits in the third quarter of 2016; and |
• | $1 million higher net interest income driven mainly by higher yields in the commercial real estate and commercial markets loan portfolios and investment portfolio growth. |
These increases were partially offset by the following on an after-tax basis:
• | $1 million lower noninterest income primarily due to the gain on sale of real estate and higher mortgage banking income in the third quarter of 2016; and |
• | $1 million higher noninterest expense. |
Compared to the fourth quarter of 2015, the $1.3 million higher net income in the fourth quarter of 2016 was primarily driven by the following on an after-tax basis:
• | $3 million higher net interest income mainly due to higher yields and growth in the commercial real estate and consumer loan portfolios; partially offset by |
• | $1 million higher noninterest expense. |
_______________________
Note: Amounts indicated as “after-tax” in this earnings release are based upon adjusting items for the composite statutory tax rate of 40% for American.
Hawaiian Electric Industries, Inc. Ÿ American Savings Bank, F.S.B.
January 30, 2017
Page 3
Financial Highlights:
Net interest income (pretax) was $206.2 million in 2016, higher than the $188.6 million in 2015 primarily due to commercial real estate and consumer loan and investment portfolio growth in 2016. Net interest margin was 3.59% in 2016 compared to 3.53% in 2015, in line with the bank’s net interest margin target of 3.5% to 3.6% for 2016. The improvement in net interest margin was primarily attributable to higher yields on interest-earning assets and loan growth in higher yielding commercial real estate and consumer loan portfolios. The fourth quarter of 2016 net interest income (pretax) was $53.0 million, compared to $51.9 million in the linked quarter and $48.7 million in the prior year quarter. Net interest margin was 3.59% in the fourth quarter of 2016 compared to 3.57% in the linked quarter and 3.55% in the fourth quarter of 2015.
The provision for loan losses (pretax) was $16.8 million in 2016 compared to $6.3 million in 2015. The higher provision for loan losses was driven by growth in the commercial real estate and consumer portfolios as well as reserves for specific commercial credits. The fourth quarter of 2016 provision for loan losses was $1.5 million compared to $5.7 million in the linked quarter and $0.8 million in the fourth quarter of 2015. The lower fourth quarter of 2016 provision compared to the linked quarter was primarily attributable to reserves for specific commercial and commercial real estate credits in the third quarter of 2016. The 2016 net charge-off ratio was 0.24% compared to 0.04% in 2015. The fourth quarter of 2016 net charge-off ratio was 0.40%, compared to 0.20% in the linked quarter and net recovery of 0.08% in the prior year quarter. The fourth quarter of 2016 net charge-off rate increased primarily due to charge-offs of specific commercial credits that had been previously individually reserved. Nonaccrual loans as a percent of total loans receivable held for investment decreased to 0.49% from 1.11% in the linked quarter. The decrease was driven by the return to accrual status of certain commercial and commercial real estate loans, the full payoff of a troubled commercial loan and the transfer of a segment of residential mortgage loans to the held-for-sale portfolio.
Noninterest income (pretax) for 2016 was $67.0 million, compared to $67.8 million in 2015. In the fourth quarter of 2016, noninterest income (pretax) was $16.5 million, compared to $18.5 million in the linked quarter and $16.8 million in the prior year quarter. The linked quarter was positively impacted by the $1.0 million gain on sale of real estate.
Noninterest expense (pretax) for 2016 was $169.1 million, compared to $166.3 million in 2015. The increase was primarily due to expenses related to the conversion and upgrade of the e-banking platform. In the fourth quarter of 2016, noninterest expense (pretax) was $43.1 million compared to $41.9 million in the linked quarter and $42.0 million in the fourth quarter of 2015.
Hawaiian Electric Industries, Inc. Ÿ American Savings Bank, F.S.B.
January 30, 2017
Page 4
American achieved loan growth of 2.6% in 2016 driven mainly by commercial real estate and consumer loans that also helped to improve net interest margin. At the same time, the bank strategically reduced exposure to shared national credits by $93 million or 2.0% of total loans.
Total deposits were $5.5 billion at December 31, 2016, an increase of $168 million or 12.5% annualized from September 30, 2016, and $524 million or 10.4% from December 31, 2015. Low-cost core deposits increased $152 million or 12.8% annualized from September 30, 2016, and $342 million or 7.5% from December 31, 2015. The average cost of funds was 0.23% for the full year 2016, up 1 basis point from the prior year. For the fourth quarter of 2016, the average cost of funds was 0.22% and unchanged from the prior year quarter.
Overall, American’s return on average equity for the full year was solid at 9.90% in 2016 compared to 9.93% in 2015 and the return on average assets for the full year was 0.92% in 2016 compared to 0.95% in 2015. For the fourth quarter of 2016, the return on average equity was 11.1%, up from 10.4% in the linked quarter and 10.7% in the fourth quarter of 2015. Return on average assets was 1.02% for the fourth quarter of 2016, compared to 0.97% from the linked quarter and 1.01% in the same quarter last year.
In 2016, American paid dividends of $36 million to HEI while maintaining healthy capital levels -- leverage ratio of 8.6% and total capital ratio of 13.4% at December 31, 2016.
HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2017 EPS GUIDANCE
Concurrent with American’s regulatory filing 30 days after the end of the quarter, American announced its fourth quarter 2016 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 2016.
HEI plans to announce its fourth quarter and 2016 consolidated financial results on Tuesday, February 14, 2017 and will conduct a webcast and conference call to discuss its consolidated earnings, including American’s earnings, and 2017 EPS guidance on Tuesday, February 14, 2017, at 10:00 a.m. Hawaii time (3:00 p.m. Eastern time).
Interested parties within the United States may listen to the conference by calling (888) 317-6016 and international parties may listen to the conference by calling (412) 317-6016 or by accessing the webcast on HEI’s website at www.hei.com under the heading “Investor Relations.” 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.
Hawaiian Electric Industries, Inc. Ÿ American Savings Bank, F.S.B.
January 30, 2017
Page 5
Accordingly, investors should routinely monitor such portions of HEI’s website, 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 in order 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.
An on-line replay of the February 14, 2017 webcast will be available on HEI’s website beginning about two hours after the event. Replays of the conference call will also be available approximately two hours after the event through February 28, 2017 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10097589.
HEI supplies power to approximately 95% of Hawaii’s population through its electric utilities, Hawaiian Electric, Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited and provides a wide array of banking and other financial services to consumers and businesses through American, one of Hawaii’s largest financial institutions.
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 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and HEI’s future periodic reports that discuss important factors that could cause HEI’s results to differ materially from
Hawaiian Electric Industries, Inc. Ÿ American Savings Bank, F.S.B.
January 30, 2017
Page 6
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 31, 2016 | September 30, 2016 | December 31, 2015 | 2016 | 2015 | |||||||||||||||
Interest and dividend income | ||||||||||||||||||||
Interest and fees on loans | $ | 51,203 | $ | 50,444 | $ | 47,136 | $ | 199,774 | $ | 184,782 | ||||||||||
Interest and dividends on investment securities | 4,965 | 4,759 | 4,550 | 19,184 | 15,120 | |||||||||||||||
Total interest and dividend income | 56,168 | 55,203 | 51,686 | 218,958 | 199,902 | |||||||||||||||
Interest expense | ||||||||||||||||||||
Interest on deposit liabilities | 2,013 | 1,871 | 1,467 | 7,167 | 5,348 | |||||||||||||||
Interest on other borrowings | 1,172 | 1,464 | 1,510 | 5,588 | 5,978 | |||||||||||||||
Total interest expense | 3,185 | 3,335 | 2,977 | 12,755 | 11,326 | |||||||||||||||
Net interest income | 52,983 | 51,868 | 48,709 | 206,203 | 188,576 | |||||||||||||||
Provision for loan losses | 1,497 | 5,747 | 839 | 16,763 | 6,275 | |||||||||||||||
Net interest income after provision for loan losses | 51,486 | 46,121 | 47,870 | 189,440 | 182,301 | |||||||||||||||
Noninterest income | ||||||||||||||||||||
Fees from other financial services | 5,585 | 5,599 | 5,667 | 22,384 | 22,211 | |||||||||||||||
Fee income on deposit liabilities | 5,714 | 5,627 | 5,746 | 21,759 | 22,368 | |||||||||||||||
Fee income on other financial products | 2,144 | 2,151 | 2,006 | 8,707 | 8,094 | |||||||||||||||
Bank-owned life insurance | 1,017 | 1,616 | 1,016 | 4,637 | 4,078 | |||||||||||||||
Mortgage banking income | 1,529 | 2,347 | 1,003 | 6,625 | 6,330 | |||||||||||||||
Gains on sale of investment securities, net | — | — | — | 598 | — | |||||||||||||||
Other income, net | 470 | 1,165 | 1,387 | 2,256 | 4,750 | |||||||||||||||
Total noninterest income | 16,459 | 18,505 | 16,825 | 66,966 | 67,831 | |||||||||||||||
Noninterest expense | ||||||||||||||||||||
Compensation and employee benefits | 22,920 | 22,844 | 23,705 | 90,117 | 90,518 | |||||||||||||||
Occupancy | 4,077 | 3,991 | 4,115 | 16,321 | 16,365 | |||||||||||||||
Data processing | 3,431 | 3,150 | 3,002 | 13,030 | 12,103 | |||||||||||||||
Services | 2,961 | 2,427 | 2,474 | 11,054 | 10,204 | |||||||||||||||
Equipment | 1,745 | 1,759 | 1,578 | 6,938 | 6,577 | |||||||||||||||
Office supplies, printing and postage | 1,644 | 1,483 | 1,452 | 6,075 | 5,749 | |||||||||||||||
Marketing | 982 | 747 | 844 | 3,489 | 3,463 | |||||||||||||||
FDIC insurance | 839 | 907 | 881 | 3,543 | 3,274 | |||||||||||||||
Other expense | 4,539 | 4,591 | 3,991 | 18,487 | 18,067 | |||||||||||||||
Total noninterest expense | 43,138 | 41,899 | 42,042 | 169,054 | 166,320 | |||||||||||||||
Income before income taxes | 24,807 | 22,727 | 22,653 | 87,352 | 83,812 | |||||||||||||||
Income taxes | 8,590 | 7,623 | 7,700 | 30,073 | 29,082 | |||||||||||||||
Net income | $ | 16,217 | $ | 15,104 | $ | 14,953 | $ | 57,279 | $ | 54,730 | ||||||||||
Comprehensive income | $ | 2,540 | $ | 13,176 | $ | 9,477 | $ | 52,077 | $ | 54,017 | ||||||||||
OTHER BANK INFORMATION (annualized %, except as of period end) | ||||||||||||||||||||
Return on average assets | 1.02 | 0.97 | 1.01 | 0.92 | 0.95 | |||||||||||||||
Return on average equity | 11.09 | 10.36 | 10.66 | 9.90 | 9.93 | |||||||||||||||
Return on average tangible common equity | 12.90 | 12.06 | 12.48 | 11.53 | 11.68 | |||||||||||||||
Net interest margin | 3.59 | 3.57 | 3.55 | 3.59 | 3.53 | |||||||||||||||
Efficiency ratio | 62.12 | 59.54 | 64.15 | 61.89 | 64.87 | |||||||||||||||
Net charge-offs (recoveries) to average loans outstanding | 0.40 | 0.20 | (0.08 | ) | 0.24 | 0.04 | ||||||||||||||
As of period end | ||||||||||||||||||||
Nonaccrual loans to loans receivable held for investment | 0.49 | 1.11 | 1.00 | |||||||||||||||||
Allowance for loan losses to loans outstanding | 1.17 | 1.24 | 1.08 | |||||||||||||||||
Tangible common equity to tangible assets | 7.82 | 8.03 | 8.05 | |||||||||||||||||
Tier-1 leverage ratio | 8.6 | 8.6 | 8.8 | |||||||||||||||||
Total capital ratio | 13.4 | 13.3 | 13.3 | |||||||||||||||||
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions) | $ | 9.0 | $ | 9.0 | $ | 7.5 | $ | 36.0 | $ | 30.0 | ||||||||||
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.
7
American Savings Bank, F.S.B.
BALANCE SHEETS DATA
(Unaudited)
December 31 | 2016 | 2015 | ||||||||||
(in thousands) | ||||||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 137,083 | $ | 127,201 | ||||||||
Interest-bearing deposits | 52,128 | 93,680 | ||||||||||
Restricted cash | 1,764 | — | ||||||||||
Available-for-sale investment securities, at fair value | 1,105,182 | 820,648 | ||||||||||
Stock in Federal Home Loan Bank, at cost | 11,218 | 10,678 | ||||||||||
Loans receivable held for investment | 4,738,693 | 4,615,819 | ||||||||||
Allowance for loan losses | (55,533 | ) | (50,038 | ) | ||||||||
Net loans | 4,683,160 | 4,565,781 | ||||||||||
Loans held for sale, at lower of cost or fair value | 18,817 | 4,631 | ||||||||||
Other | 329,815 | 309,946 | ||||||||||
Goodwill | 82,190 | 82,190 | ||||||||||
Total assets | $ | 6,421,357 | $ | 6,014,755 | ||||||||
Liabilities and shareholder’s equity | ||||||||||||
Deposit liabilities–noninterest-bearing | $ | 1,639,051 | $ | 1,520,374 | ||||||||
Deposit liabilities–interest-bearing | 3,909,878 | 3,504,880 | ||||||||||
Other borrowings | 192,618 | 328,582 | ||||||||||
Other | 101,635 | 101,029 | ||||||||||
Total liabilities | 5,843,182 | 5,454,865 | ||||||||||
Common stock | 1 | 1 | ||||||||||
Additional paid in capital | 342,704 | 340,496 | ||||||||||
Retained earnings | 257,943 | 236,664 | ||||||||||
Accumulated other comprehensive loss, net of tax benefits | ||||||||||||
Net unrealized losses on securities | $ | (7,931 | ) | $ | (1,872 | ) | ||||||
Retirement benefit plans | (14,542 | ) | (22,473 | ) | (15,399 | ) | (17,271 | ) | ||||
Total shareholder’s equity | 578,175 | 559,890 | ||||||||||
Total liabilities and shareholder’s equity | $ | 6,421,357 | $ | 6,014,755 | ||||||||
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.
8