It is a little-known fact that Hawaii Electric is the Holding Company for 4-Star American Savings Bank, FSB, Honolulu, HI and its parent, ASB Hawaii Inc., a savings & loan Holding Company.
In this week's Jumbo Rate News we address what happens at the bank level when its parent holding company finds itself in trouble. We have also provided lists of all banks and credit unions headquartered in Hawaii.
Other Resources: Bauer's Due Diligence Performance Report provides a year over year comparison of the institution's balance sheet, income statement, key ratios and, where available, holding company affiliation.
Another Impact of the Maui Fires
Hawaii became our nation’s 50th state on August 21, 1959. Not all Hawaiians celebrate this milestone, but those who do are celebrating this weekend. Most financial institutions on the islands are closed Friday, August 18th. That, of course, is in addition to those that were forced to close due to the fires.
Most wildfires are caused by nature and largely beyond human control. And, while there is no official cause yet for the Maui fires, the Wall Street Journal reported that Hawaii Electric knew for years that its equipment was shooting sparks (August 16, 2023).
According to the article, Hawaii Electric vowed to mitigate the dangers these sparks could cause in 2019, but failed to follow through.
What does this have to do with banking? Hawaii Electric is the holding company for 4-Star American Savings Bank, FSB, Honolulu, HI and its parent, ASB Hawaii Inc., a savings & loan HC.
Cash and check donations are being accepted at all ASB branches statewide. Checks should be made out to “Hawaii Community Foundation” with “Maui Strong” written in the memo section. Or just follow the link and go to the source.
(All federally-insured banks and credit unions headquartered in the state of Hawaii can be found on page 2 (banks) & page 5 (C.U.s) of this issue of Jumbo Rate News. Those with hyperlinks have links to donate to the Maui community on their website.)
We are often asked, “What happens to a bank when its holding company gets in trouble?” Simple question. Not such a simple answer. In fact, every situation is a little bit different.
The latest bank failure is perhaps an example of the most likely scenario. Heartland Tri-State Bank, Elkhart, KS failed on July 28th after it was victimized by scam artists. Heartland was a small community bank with total assets of just $139 million. It did everything it could, including self-reporting the incident, but to no avail.
Its parent, Elkhart Financial Corp., had just $8 million in assets. The collapse of the bank inevitably caused the demise of the tiny parent as well.
The size of the bank relative to the size of the holding company is one key component.
Another key component is how many other banks are held by the same parent. Although Bauer does not rate holding companies, it does evaluate banks in light of others in the same holding company. If, for example, a holding company owns three banks, one large and two small, the weight of the larger bank, if it ran into problems, could affect Bauer’s rating of the smaller banks.
In the case of ASB, the bank’s assets represent 58% of the Top Tier Holding Co., Hawaiian Electric’s assets. Hawaiian Electric owns 17 entities, including, as we mentioned, ASB Hawaii, Inc., the savings and loan holding company that owns American Savings Bank.
This double holding company structure provides an added layer of protection for the bank as it keeps its financials separated from those of the utility. Bottom line: American SB, and any deposits you may have there, remain protected and of course are insured up to the FDIC limits.
