American Savings Bank’s loans grew in the third quarter, but earnings fell 13.2 percent primarily due to the 2013 sale of its credit card portfolio, more money being set aside for potential loan losses and less mortgage and fee income generated from the year-earlier period.

The subsidiary of Hawaiian Electric Industries Inc. said Thursday that net income declined to $13.3 million from $15.3 million.

American Savings said the year-earlier third quarter included a $1 million net gain from the sale of its $25 million card portfolio to First Bankcard, a division of First National Bank of Omaha. There was no similar one-time benefit in this year’s third quarter.

In addition, the bank took a higher loan-loss provision this past quarter and had lower mortgage and fee income. The higher provision and lower fees both accounted for $1 million less of net income.

Still, American Savings President and CEO Rich Wacker called it "a good quarter."

"We had good loan growth in most of our income lines, and (provision for loan)losses were right in line with what we expected," he said. "Credit quality was what we expected it to be, and we held our expenses (which were virtually flat). It was a good, disciplined quarter overall."

Loans rose 7.1 percent to $4.3 billion from $4 billion in the year-earlier quarter with the bank seeing strength in most areas.

"We were up in residential mortgage, home equity and commercial real estate," Wacker said. "The normal business banking piece was about stable. I think everybody is enjoying the resurgence of the construction market and the developments that are going on. We’re participating in that as well."

Noninterest income, which includes service charges and fees, fell 18.5 percent to $15.2 million from $18.7 million, but Wacker called it "a tough comparison" when matched against the third quarter of 2013.

"We were up about 10 percent (in noninterest income) from the second quarter," he said. "Last year we had a couple of unusual things, such as the sale of the credit card portfolio, and the mortgage market was strong. The gains of mortgage sales in the (2013) third quarter was probably the quarter where we had our highest noninterest last year. So basically it was a tough comparison. But when you look at this year and see the progress we’re making against the most recent quarter, it’s favorable against most of the (income) lines."

The payoff of nonperforming commercial loans related to one borrower boosted net income and lowered nonperforming assets (loans 90 day or more delinquent), the bank said.

"One borrower had multiple loans and got into trouble earlier this year," Wacker said. "We were able to work out a process to get a full payment of almost all of the relationship. There’s still one of the loans we’re working out, and we hope to resolve it over the next quarter or so."

The bank set aside $1.6 million for potential loan losses in the third quarter after only taking a $54,000 provision in the year-earlier period due to the release of reserves related to the payoff of a different commercial loan and recoveries of previously charged-off loans.

American Savings’ net interest margin — the spread between its lending rates and deposit rates — fell to 3.62 percent from 3.73 percent in the year-earlier quarter primarily due to lower yields on interest-earning assets.

"Low interest rates continue to put pressure on the financing margins because new business comes on at rates that are lower than the business it is replacing," Wacker said. "There’s not much room for us to lower deposit costs anymore because deposit rates are already rock bottom. And as the lending yield continues to decline in this market, our margins get squeezed. It’s been that way now for several years. That’s why we have to control costs and make good decisions on asset quality and provide other services to help us get some fee income."

The bank’s net interest income rose 3.8 percent to $45.6 million from $43.9 million in the year-ago period primarily due to higher loan balances and the recognition of interest associated with the payoff of the nonperforming commercial loans by the one borrower. The ratio of nonperforming assets to total loans improved to 0.88 percent from 1.33 percent in the year-earlier quarter.

Total deposits rose 5.2 percent to $4.5 billion from $4.3 billion in the year-earlier period while total assets increased 5.5 percent to $5.4 billion from $5.2 billion.

"We feel like the economy is on a good roll, and we think the bank is on a good roll as well," Wacker said. "We see opportunities out there to support what our customers are trying to do — both the individual and our business customers."

Parent company HEI will report its earnings Nov. 6.