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American Savings’ mortgage banking income jumps, but earnings fall

American Savings Bank’s mortgage banking income quadrupled in the fourth quarter, but net income fell 44.5% as the COVID-19 pandemic continued to affect the company’s results.

The state’s third-largest bank, a subsidiary of Hawaiian Electric Industries Inc., reported today that earnings fell to $15.7 million from $28.2 million in the year-earlier quarter after adding $11.3 million to its loan-loss reserve. American Savings finished the year by setting aside $50.8 million for potential loan losses. Reserving funds for loan losses reduces a company’s income.

“I am proud of the tenacity and creativity of our team as we worked to support our customers through this difficult economy, protect our teammates, and care for our community through all the challenges of 2020,” American Savings President and CEO Rich Wacker said in a statement. “Our financial results reflect the negative impact of the elevated credit risk we continue to manage closely, but also the benefits of our record mortgage originations, good cost control to offset increased costs related to COVID while still investing in our core priorities, and conservative liquidity and capital management.”

American Savings finished the year with record residential mortgage production of $1.2 billion. Its mortgage banking income, which includes refinancings and money generated from loans sold to Fannie Mae and Freddie Mac, rose to $7.8 million in the fourth quarter from $1.9 million in the year-earlier period.

For the year, American Savings’ earnings fell 35.3% to $57.6 million from $89 million in 2019. Its full-year results included the impact of an after-tax gain of $5.2 million related to the sale of Visa Class B shares in the second quarter, as well as $5.1 million of direct and incremental COVID-19 related costs.

The bank said its 2019 results included an after-tax gain on the sale of properties of $7.9 million and after-tax transition costs to its new headquarters of $2.4 million.

The bank’s loans rose 4.4% to $5.3 billion from the year-earlier period primarily due to a $300 million increase in Paycheck Protection Program loans and a $210 million increase in commercial real estate loans.

Deposits jumped 17.8% to $7.4 billion.

The bank’s net interest income, which is the difference between what it generates from loans and pays out in deposits, slipped 3.9% to $58.5 million from $60.9 million. Its net interest margin worsened by 62 basis points to 3.12% from 3.74%.

Noninterest income, which includes charges and fees, declined 23.3% to $20.2 million from $26.3 million.

Parent company HEI will announce its full four-quarter results on Nov. 16. HEI’s stock fell 41 cents, or 1.2%, to $33.06 on Friday before American Savings’ results were announced.

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