American Savings Bank boosts earnings 88%, pares loan-loss reserve

American Savings Bank’s earnings jumped nearly 88% in the first quarter as the company posted record deposit growth and released $8.4 million from its loan-loss reserve amid an improving economy.

The state’s third-largest bank, a subsidiary of Hawaiian Electric Industries Inc., reported today that net income rose to $29.6 million from $15.8 million in the year-earlier period when American Savings put into its reserve $10.4 million for potential loan losses. Reserving funds for loan losses reduces a company’s income.

Deposits jumped 21.3% to $7.75 billion from the year-earlier period and increased 4.9% from the December quarter.

“Our financial results reflect good execution in an environment that remains challenging for bank profitability,” American Savings President and CEO Rich Wacker said in a statement. “Our strong residential mortgage production and new ASB CARES, or Paycheck Protection Program, loans are bright spots, but record deposit growth continues to outpace lending opportunities in this early stage of Hawaii’s economic recovery. Our results benefited from a reduction of reserves for credit losses, as certain commercial credits earned upgrades and our exposure to riskier unsecured consumer loans declined.”

The bank’s mortgage banking income remained strong as it more than doubled to $4.3 million in the first quarter from $2 million in the year-earlier period. Mortgage banking income includes fees generated from refinancings and gains on sales of mortgages to Fannie Mae and Freddie Mac.

Loans rose just 2.5% to $5.31 billion from $5.18 billion in the year-earlier period and slipped 0.4% from the December quarter. The bank said its loans were lower from the previous quarter primarily due to declines in the residential mortgage and home equity line of credit portfolios.

American Savings said that while residential mortgage originations remained strong, it continued to sell residential mortgage production into the secondary market. The bank said the decrease in residential mortgage and home equity line of credit portfolios was partially offset by growth with the ASB CARES (Paycheck Protection Program) and commercial real estate portfolios. During the quarter, American Savings originated $150 million in ASB CARES loans supporting small businesses and their employees.

The bank’s net interest income, which is the difference between what it generates from loans and pays out in deposits, fell 6.5% to $57.1 million from $61.1 million. Its net interest margin worsened by 77 basis points to 2.95% from 3.72%.

Noninterest income, which includes charges and fees, increased 29% to $19 million from $14.8 million primarily due to higher banking income.

Parent company HEI will announce first-quarter results on May 7. HEI’s stock rose 14 cents to $43.06 Friday before American Savings’ results were announced.