ASB Navigates Strategic Review with Resilience and Adaptability

American Savings Bank, F.S.B. (ASB), a wholly owned subsidiary of Hawaiian Electric Industries, Inc. (HEI), has reported its second quarter 2024 financial results, reflecting the impact of a non-cash goodwill impairment charge related to HEI's ongoing review of strategic options for the bank. Despite this one-time adjustment, ASB's core operations and earnings remain strong, showcasing the bank's ability to adapt and thrive in the face of evolving market conditions.

Charting a Steady Course Amidst Strategic Evaluation

Resilient Core Earnings and Expanding Margins

ASB's core net income, excluding the non-cash goodwill impairment and Maui wildfire-related expenses, stood at .7 million for the second quarter of 2024. This figure is comparable to the .9 million reported in the first quarter of 2024 and the .2 million recorded in the second quarter of 2023, demonstrating the bank's ability to maintain consistent profitability despite the ongoing strategic review.Furthermore, ASB's net interest margin expanded to 2.79% in the second quarter, up 4 basis points from the prior quarter. This improvement was driven by a 1 basis point increase in the yield on earning assets and a 2 basis point reduction in the cost of funding, reflecting the bank's proactive management of its interest rate environment.

Prudent Credit Risk Management and Healthy Economic Conditions

ASB's credit quality remained strong, with the bank recording a negative provision for credit losses of .9 million in the second quarter. This reflects a {{royaItemContent}}.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 loan balances. As of June 30, 2024, ASB's allowance for credit losses to outstanding loans stood at 1.11%, down from 1.16% in the linked quarter and 1.13% in the prior year quarter.The net charge-off ratio for the second quarter of 2024 was 0.15%, comparable to the 0.14% recorded in both the linked and prior year quarters. Nonaccrual loans as a percentage of total loans receivable held for investment remained stable at 0.53%, indicating the bank's prudent risk management practices and the overall health of the Hawaii economy.

Disciplined Expense Management and Liquidity Preservation

Despite the non-cash goodwill impairment charge, ASB's core noninterest expense, excluding the impact of the impairment and Maui wildfire-related costs, decreased compared to the linked and prior year quarters. This reflects the bank's disciplined approach to expense management, which has enabled it to maintain profitability and operational efficiency.Furthermore, ASB's liquidity position remains strong, with a Tier 1 leverage ratio of 8.4% as of June 30, 2024. The bank did not pay a dividend to HEI during the quarter, further bolstering its capital levels and financial flexibility as it navigates the strategic review process.

Unwavering Commitment to Serving Hawaii's Communities

Despite the ongoing strategic evaluation, ASB remains steadfast in its commitment to serving the financial needs of Hawaii's residents, businesses, and communities. As Ann Teranishi, ASB's president and chief executive officer, stated, "The bank's core operations and earnings remain strong, and in the second quarter ASB improved profitability and grew core net income compared to the same quarter last year."Teranishi further emphasized that the non-cash goodwill impairment 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."

Navigating the Strategic Review with Transparency and Prudence

HEI, ASB's parent company, has been undertaking a comprehensive review of strategic options for the bank, as part of its broader strategy to support a strong, financially healthy enterprise that will empower a thriving future for Hawaii. Scott Seu, HEI's president and CEO, emphasized that the company will continue to take prudent and measured actions to ensure its subsidiaries, including ASB, are well-positioned to serve their customers and communities for the long term.Regarding the strategic review process, HEI and ASB have stated that there is no set timetable, and there can be no assurances that any actions regarding ASB will result from this evaluation. The companies have committed to maintaining transparency and providing updates only when HEI's Board of Directors has approved a definitive course of action or determined that further disclosure is appropriate or necessary.