Hawaiian Electric Industries sells bank in wake of wildfire devastation

Maui County

Hawaiian Electric Industries, parent of the embattled utility that faces a nearly $2 billion settlement tied to the deadly Maui wildfires, sold its banking subsidiary to bolster its cash position.

The company, which authorities cited for the Lahaina fires that devastated Maui and killed more than 100 people in 2023, said it sold a 90.1% stake in the $9.3 billion-asset American Savings Bank to a group of investors. The investors collectively paid $405 million in cash. HEI said in a press release that the deal valued American Savings at $450 million.

The transaction closed Tuesday, the last day of 2024.

"The sale allows HEI to enhance our focus on the utility as we work to help our state recover from the 2023 Maui wildfires and strengthen the financial and strategic position of our company," President and CEO Scott Seu said in the release. HEI aims to use the proceeds to reduce its debt, increasing flexibility for how the company funds its wildfire-settlement contributions and utility initiatives, Seu said.

The utility raised going-concern worries after disclosing it did not have a financing plan to pay for the $1.99 billion settlement it reached in August. It has since raised capital in addition to the bank sale.

The deal with investors created an independent, local bank headquartered in Honolulu. It is led by American Savings' current management team and retains its existing brand, the company said. HEI retained a 9.9% interest in the bank. No investor owns more than 9.9% of the bank, HEI said.

"This represents the best outcome for ASB, our customers, employees, and the communities we've served since 1925," Ann Teranishi, president and CEO of the bank, said in the release.  

American Savings most recently reported third-quarter net income of $18.8 million, up from $11.4 million a year earlier. 

The investor group includes more than 20 parties, including Teranishi and the top executives at American Savings; Richard Dahl, the chairman of American Savings' board; Yoko Otani, a member of the bank's board; Celtic Bank Corp., founded by Chairman and CEO Reese Howell Jr.; and a living trust associated with the Kennedy family, according to a filing with the Securities and Exchange Commission.

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HEI faced dozens of lawsuits across state and federal courts. Many of the legal complaints accused the utility of sparking the blazes that ultimately caused more than $5 billion of property damage. A report from the Maui Fire Department and the Federal Bureau of Alcohol Tobacco, Firearms and Explosives said the disaster was started from a blaze caused by broken power lines.

"We deeply regret that our operations contributed to the fire. … We have looked closely at our protocols and actions that day and have made many changes in our operations and resilience strategies to ensure we fulfill our commitment to keep the public safe, especially in extreme weather events, which are becoming more frequent and severe," HEI said in a statement after authorities released their report.

Last summer, Central Pacific Bancorp in Honolulu was in talks to buy American Savings. But Central Pacific Chairman and CEO Arnold Martines said in October during the $7.4 billion-asset bank's third quarter earnings call that negotiations had stalled. He did not provide a reason for the impasse.

American Savings was not the only Hawaiian bank on the sale block in 2024. The $17.4 billion-asset Hope Bancorp in Los Angeles agreed in April to an all-stock deal valued at $78.6 million to buy the $2.2 billion-asset Territorial Bancorp in Honolulu.   

An investor group led by Blue Hill Advisors and former Bank of Hawaii CEO Allan Landon made a competing offer for Territorial in August. Territorial's management rebuffed that offer, and the company's shareholders in November voted in favor of the sale to Hope. The deal awaits regulatory approval.

Bank deals ramped up last year, with more than 120 banks announcing plans to sell, S&P Global Market Intelligence data show. Those 2024 deals had an aggregate value that topped $15 billion. In 2023, there were 98 deal announcements with a combined value of $4.2 billion.