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American Savings Bank Q2 net income $17.5 million

Christian Fernsby |
American Savings Bank, a wholly owned subsidiary of Hawaiian Electric Industries, reported second quarter 2022 net income of $17.5 million.

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ASB grew net interest income compared to the first quarter of 2022 and the second quarter of 2021, benefiting from strong loan growth and a rising interest rate environment, while credit quality has improved. With the bank's loan growth, the quarter also saw a return to a more normalized provision expense following five consecutive quarters of negative provision.

Net income in the second quarter was $17.5 million, compared to $23.9 million in the first, or linked quarter of 2022 and $30.3 million in the second quarter of 2021.

Net interest income of $61.8 million was up from $59.0 million in the linked quarter, and $60.8 million in the second quarter of 2021.

The increase versus the linked quarter reflected earning asset growth and higher yields in the commercial and commercial real estate loan portfolios, partially offset by lower fee income associated with the Paycheck Protection Program (PPP) portfolio as PPP loans continued to pay down.

The increase versus the prior year quarter reflected higher average earning assets partially offset by lower PPP fee income. Net interest margin was 2.85% compared to 2.79% in the linked quarter, and 2.98% in the second quarter last year.

In the second quarter ASB recorded a provision for credit losses of $2.8 million compared to a negative provision for credit losses of $3.3 million in the linked quarter and $12.2 million in the second quarter of 2021.

The quarter's higher provision reflected provisioning for the strong loan growth generated during the quarter, partially offset by favorable credit trends that led to the release of reserves (which reduces provision). As of June 30, 2022, ASB's allowance for credit losses to outstanding loans was 1.28% compared to 1.30% as of March 31, 2022 and 1.51% as of June 30, 2021.

The net charge-off ratio for the second quarter of 2022 was nil, compared to 0.01% in the linked quarter and 0.04% in the second quarter of 2021. Nonaccrual loans as a percent of total loans receivable held for investment were 0.40% in the second quarter of 2022, compared to 0.72% in the linked quarter and 1.03% in the prior year quarter.

Noninterest income was $12.5 million in the second quarter of 2022 compared to $16.1 million in the linked quarter and $15.2 million in the second quarter of 2021.

The decrease compared to the linked quarter was primarily due to the gain on sale of real estate recorded in the first quarter of 2022, lower fees from other financial services, lower bank-owned life insurance income and lower mortgage banking income.

The decrease compared to the prior year quarter was primarily due to lower bank-owned life insurance income, lower mortgage banking income and lower fees from other financial services.

Noninterest expense was $49.4 million compared to $48.2 million in the linked quarter and $48.2 million in the second quarter of 2021.

The increase in noninterest expense versus the linked quarter was primarily due to increased compensation and benefits expenses and higher data processing costs.

The increase in noninterest expense versus the same quarter last year was primarily due to higher occupancy costs and marketing expenses.

Total earning assets as of June 30, 2022 were $8.7 billion, up 2.6% from December 31, 2021.

Total loans were $5.4 billion as of June 30, 2022, up 4.2% from December 31, 2021, reflecting growth across nearly the entire portfolio and driven by strong growth in commercial real estate loans.

Total deposits were $8.3 billion as of June 30, 2022, an increase of 1.0% from December 31, 2021. For the second quarter of 2022, the average cost of funds was 0.05%, flat versus the linked quarter and down two basis points versus the same quarter last year.

For the second quarter of 2022 return on average equity was 12.2% compared to 13.7% in the linked quarter and 16.8% in the second quarter of 2021. Return on average assets was 0.76% for the second quarter of 2022, compared to 1.04% in the linked quarter and 1.38% in the same quarter last year.

In the second quarter of 2022, ASB paid dividends of $12.0 million to HEI. ASB had a Tier 1 leverage ratio of 7.7% as of June 30, 2022.


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