American Savings extends loan momentum but net falls

American Savings Bank keeps growing its loan portfolio amid a low-interest-rate environment that has curbed profits at all financial institutions.

The state’s third-largest bank said Tuesday that loans increased for the 10th consecutive quarter as residential, home equity, consumer and commercial loans all showed improvement.

But American Savings’ net income fell 10.8 percent to $14.2 million in the first quarter from $15.9 million a year ago when the bank had a $1 million tax-related benefit. Excluding the year-earlier benefit, American Savings’ earnings would have been down about 5 percent last quarter.

"We feel pretty good in this extended low-interest-rate environment," American Savings President and CEO Richard Wacker said. "We’ve been able to generate loan growth and other income that’s mostly offset (the lower rates) and keep what I think are very good profitability measures. Our return on assets at 1.12 percent in the quarter compared pretty favorably to our peers."

Total loans grew 6.9 percent to $3.86 billion from $3.79 billion at the end of the fourth quarter, achieving the mid-single-digit increase that the bank is targeting for itself this year.

"We’re pretty comfortable with that as our target," Wacker said. "It’s not that rapid of a growing market, and to grow responsibly, mid-single digits is a pretty good target for us. We’re encouraged by the steady improvement both in the tourism-related businesses and the pipeline of construction projects, and expect that will continue to be good news for our customers and the local economy."

The bank generated $226 million in new residential loans in the first quarter, up 37 percent from the year-earlier period.

Noninterest income, which includes service charges, fees and the gain on sale of loans to the secondary market such as Fannie Mae and Freddie Mac, rose 12.9 percent to $18.7 million from $16.6 million a year earlier.

"The biggest variable (in noninterest income) is the sale of primarily refinanced mortgages," Wacker said. "I think that will be lower (for the bank) this year as the refinancings sort of settle down. We’re also directing a little more of the (mortgage) production to our portfolio, but we do expect for the year that gains on the sale of mortgages will be lower."

American Savings, which launched a mobile banking product in November, said acceptance by consumers has been very strong. The app, which allows customers to deposit checks using their smartphone from any location, has been downloaded by 38,000 customers with the bank receiving approximately 10,000 to 11,000 deposits a month.

"That’s the size of a good-sized branch," Wacker said.

Net interest income, the difference between what American Savings pays depositors and what it brings in from loans, was affected by the low interest rates and fell 4.5 percent to $43.6 million from $45.7 million. Its net interest margin decreased to 3.78 percent from 4.04 percent.

"This interest-rate environment is tough for all banks, no doubt," Wacker said, "but it’s been good for borrowers and has been a factor to help stimulate the economy, and that’s a positive. We have to execute very well as a company in this environment, and we built our plans for that and so far we’ve been able to execute it."

American Savings continued seeing improvement in the economy and set aside $1.9 million for potential loan losses compared with $3.5 million in the year-earlier quarter.

The bank’s ratio of nonperforming assets — or loans 90 days or more overdue — improved to 1.89 percent from 2.02 percent.

Total assets rose 3.1 percent to $5.12 billion from $4.96 billion while total deposits increased 4.5 percent to $4.31 billion from $4.13 billion.

Hawaiian Electric Industries Inc., the owner of American Savings as well as the state’s largest utility, will release its earnings May 8.

Shares of HEI rose 20 cents, or 0.7 percent, to $28.30 Tuesday on the New York Stock Exchange. The results were announced after the stock market closed.