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American Savings sells $225M in mortgage securities


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POSTED: Thursday, December 03, 2009

American Savings Bank has sold $225 million worth of private-issue mortgage-related securities, all but $600,000 of its PMRS portfolio.

“;The securities were backed by mainland mortgages and it was unclear when mainland residential markets might recover,”; said Connie Lau, president and chief executive officer of American Savings parent Hawaiian Electric Industries Inc., in a statement yesterday.

The securities were purchased in large part to manage liquidity and interest rate risk, but the decline in the national real estate market caused a decline in the portfolio's credit quality.

“;The improvement in the bond markets gave us the opportunity to liquidate these securities, reduce the bank's overall credit risk, and improve the prospects for more consistent future earnings support from the bank for HEI's dividend,”; she said.

The sale, to various securities dealers, will reduce HEI's fourth-quarter earnings by $19 million.

HEI said in a filing with the U.S. Securities and Exchange Commission that American Savings does not expect to pay HEI its quarterly dividend in the first quarter of next year.

So far in 2009, American Savings has paid dividends of $50.1 million to HEI.

American Savings expects to resume dividend payments to HEI in the second quarter, the filing said.

A portion of the proceeds from the sale was used to prepay $40 million in advances from the Federal Home Loan Bank.

The early retirement of the debt incurred a prepayment penalty of about $400,000, but it will save the bank about $1 million in annualized costs.

American Savings expects to use remaining proceeds to pay down costly liabilities such as maturing certificates of deposit or wholesale borrowings, the filing said.