Deal to help HEI’s
bottom line

By Russ Lynch
Star-Bulletin

American Savings Bank's acquisition of Bank of America's savings and loan business in Hawaii is a significant boost for ASB's parent, Hawaiian Electric Industries Inc.

It increases American Savings' size and its contribution to HEI's earnings. The assets of American Savings will grow to an estimated $5.6 billion, from $3.8 billion, a 47 percent increase.

That makes the HEI unit a strong third-place competitor to the state's biggest banks, Pacific Century Financial Corp., parent of Bank of Hawaii, and First Hawaiian Inc., parent of First Hawaiian Bank.

It will cost some money to get there -- American Savings will pay an estimated $96 million for the Bank of America business. HEI will invest $160 million in American Savings, borrowing it in short-term loans, to lift the savings and loan institution's capital to meet regulatory requirements. That money will be paid back over time out of American Savings earnings and other income sources.

The acquisition increases HEI's diversification by increasing the earnings it gets from sources other than its basic utility businesses, Hawaiian Electric Co. and its neighbor island subsidiaries.

American Savings' contribution will increase to 30 percent of HEI's earnings, from a 25 percent contribution before the acquisition, executives say.

That means a profit increase for HEI. How much that will be is hard to tell because Securities & Exchange Commission rules restrict what HEI can say.

The earnings improvement at HEI won't start to show until the first quarter of 1998. Although the added income from BofA goes into American Savings' books starting after midnight tonight, there are acquisition-related expenses of $1.9 million that will offset any earnings boost this year, said Connie Lau, HEI treasurer.