American Savings Bank’s earnings more than doubled in the second quarter as it released $12.2 million from its loan-loss reserve amid the state’s improving economy.

The state’s third-largest bank, a subsidiary of Hawaiian Electric Industries Inc., reported today that net income rose to $30.3 million from $14 million in the year-earlier period when American Savings put into its reserve $15.1 million for potential loan losses. Reserving funds for loan losses reduces a company’s income.

“We’re pleased with our financial results in the second quarter, which reflect the strengthening local economy, solid execution and our continuing efforts to work closely with our customers,” said President and CEO Ann Teranishi, who took over for Rich Wacker on May 7.

Teranishi, 46, previously was ASB’s executive vice president of operations and had been at the bank for nearly 14 years.

“Our results benefited from another reduction of reserves for credit losses, driven by the improving economy and credit quality,” she said in a statement. “We remain focused on sound management of our core business as we transform our operating model to provide excellent customer experience in an increasingly digital world.”

Wacker, 58, had been at the helm of ASB since November 2010. The bank said at the time of his departure announcement that he stepped down to pursue other interests, but he responded at the time that even though the bank had a succession plan, the timing of his departure wasn’t his decision.

His separation agreement was worth $5 million, less applicable taxes, according to a regulatory filing by HEI. In addition to the $5 million separation, HEI and ASB agreed to match charitable donations made by Wacker and his spouse, at a rate of $2 for every dollar donated, up to a maximum contribution by HEI and ASB of $1 million, the filing said. The separation agreement also provided for the settlement and release of Equal Employment Opportunity Commission claims by Wacker against HEI and ASB. HEI and ASB declined to elaborate on the nature of the claims when they were disclosed and Wacker didn’t respond to messages.

American Savings said its second-quarter results included credit upgrades in its commercial loan portfolio, lower net charge-offs, and lower reserve requirements for the consumer unsecured loan portfolio.

American Savings’ loans fell 4.7% to $5.18 billion from the year-earlier quarter while deposits jumped 12% to $7.87 billion and assets increased 11.1% to $8.91 billion.

The bank’s net interest income, which is the difference between what it generates from loans and pays out in deposits, rose 7.2% to $60.8 million from $56.7 million. Its net interest margin worsened by 23 basis points to 2.98% from 3.21%.

Noninterest income, which includes charges and fees, fell 37.1% to $15.2 million from $24.2 million in the year-earlier quarter primarily due to higher gains on sales of securities, including a $7.1 million gain related to the sale of Visa Class B restricted shares; and higher mortgage banking income in the second quarter of 2020. Mortgage banking income was $1.9 million last quarter compared with $6.3 million in the year-earlier quarter.

Parent company HEI will announce second-quarter results on Aug. 9. HEI’s stock fell 49 cents to $43.34 Friday before American Savings’ results were announced.

Banking on assets

Hawaii’s five-largest banks by assets as of June 30:

1. First Hawaiian Bank $24.25 billion

2. Bank of Hawaii $22.67 billion

3. American Savings Bank $8.91 billion

4. Central Pacific Bank $7.18 billion

5. Territorial Savings Bank $2.13 billion