American Savings reserves $15.1M for potential loan losses

American Savings Bank set aside $15.1 million for potential loan losses and incurred $3.7 million in COVID-19 related expenses in the second quarter as it continued to navigate the uncertainty stemming from the COVID-19 pandemic.

The state’s third-largest bank, a subsidiary of Hawaiian Electric Industries Inc., reported today that its net income declined 17.6% to $14 million from $17 million in the year-earlier quarter primarily due to taking the loan-loss provision. But American Savings was partially able to offset that loss with a gain of $7.1 million from the sale of 34,680 Visa Class B restricted stock and an additional gain of $2.2 million from the sale of investment securities.

Revenue rose 5% to $80.8 million.

“I’m extremely proud of the performance of our teammates for our customers, our bank and our community through a quarter filled with challenges,” American Savings President and CEO Rich Wacker said in a statement. “Our results reflect the impact of the crisis in the compression of our lending margins and higher provision for potential credit losses. We were able to partially offset these pressures through strong mortgage production, good cost control and a gain on sale of securities, while strong deposit growth reinforced our healthy liquidity position.”

American Savings said its COVID expenses consisted of additional pay to front-line employees who continued serving customers during the pandemic, the repurchase of excess vacation days for employees unable to use vacation while working through the pandemic, purchases of personal protective equipment and sanitation supplies, and employee meals purchased to promote employee safety and support small-business restaurants. The higher COVID-19 related expenses were partially offset by lower travel, business development and marketing expenses.

The bank has now set aside $25.5 million for potential loan losses through midyear.

”As the uncertain environment unfolds, we will continue to work closely with our customers to manage our risk and serve as a source of stability,” Wacker said.

American Savings’ loans rose 9.1% to $5.5 billion from the year-earlier quarter.

American Savings’ loans rose 9.1% to $5.5 billion from the year-earlier quarter. The increase was mainly driven by the addition of Paycheck Protection Program loans that by July 14 had totaled $371 million for more than 4,100 customers that represent more than an estimated 47,000-plus jobs.

Deposits jumped 12.3% to $7 billion from the year-earlier period.

The bank’s net interest margin, which is the difference between what it generates from loans and pays out in deposits, declined 61 basis points to 3.21% from 3.82% in the year-earlier quarter and 51 basis points from 3.72% in the first quarter.

American Savings’ noninterest income, which included the Visa and investment securities sales, jumped 55.5% to $24.2 million from $15.5 million in the year-earlier quarter. Included in the big increase was a more than sixfold gain in mortgage banking income to $6.3 million from $976,000.

Hawaiian Electric Industries will announce its full second-quarter results on Aug. 6.