American Savings Bank’s earnings surged 41.3% in the fourth quarter amid double-digit deposit growth and the release of $3.5 million from its loan-loss reserve.

The state’s third-largest bank, which is owned by Hawaiian Electric Industries Inc., reported today net income of $22.1 million compared with $15.7 million in the year-ago period when it set aside $11.3 million for potential loan losses.

For the year, American Savings’ net income jumped 75.8% to $101.2 million from $57.6 million in 2020. The increase was aided by $25.8 million that was released from its loan-loss reserve in 2021 compared with $50.8 million that was put into its reserve in 2020 for potential loan losses.

American Savings said it released funds set aside for possible loan defaults because of favorable credit trends and continued improvement in the economy, as well as a slight shift in loan portfolio composition with growth in the real estate-secured portfolio. Banks are required to account for potential loan defaults and expenses to make sure they present an accurate assessment of their overall financial health.

“We’re pleased with our 2021 results, which reflect strong performance by our teammates, solid credit quality, an improving Hawaii economy and robust earning asset growth,” American Savings President and CEO Ann Teranishi said in a statement. “We made major strides in our digital transformation and remain focused on making banking easy anytime and anywhere for our customers.”

The bank’s deposits rose 10.6% to $8.2 billion from $7.4 billion while total earnings assets jumped 11.4% to $8.5 billion.

Loans fell 2.3% to $5.21 billion from $5.33 billion in 2020. The bank attributed the decline to a $231 million net reduction in Paycheck Protection Program loans, as well as declines in the home equity line of credit and consumer portfolios.

”Our strong performance was matched with our continued commitment to support our community’s recovery. We’re particularly proud of our ASB teammates’ efforts to build on the momentum from 2020 and once again lead the Hawaii Restaurant Card — Business Holiday Card program in the fourth quarter. The statewide campaign resulted in the sale of 14,000 prepaid cards, totaling over $750,000, in direct support for our restaurant and food supply industries.”

The bank’s net interest income, which is the difference between what it generates from loans and pays out in deposits, inched up 1% to $59.1 million from the year-earlier quarter. Its net interest margin worsened by 38 basis points to 2.91% from 3.29%.

Noninterest income, which includes charges and fees, fell 22.5% to $15.7 million as mortgage amid mortgage. banking income that decreased by $6 million from the year-earlier quarter.

Parent company HEI will announce its fourth-quarter and full-year results on Feb. 14. HEI’s stock rose 67 cents to $41.84 Friday before American Savings’ results were announced.