HEI Reports Second Quarter 2020 Results

HONOLULU, Aug. 6, 2020 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE: HE) (HEI) today reported consolidated net income for common stock for the second quarter of 2020 of $48.9 million and EPS of $0.45 compared to $42.5 million and EPS of $0.39 for the second quarter of 2019.

"I am very proud of the performance of our companies and our employees in the unprecedented COVID-19 period," said Connie Lau, HEI president and CEO. "While all of us continue to face uncertainties regarding the trajectory of the virus and its implications for the pace of economic recovery, what is clear is the strength and resilience of our businesses, the dedication of our employees, and our commitment to supporting our customers and community.

"We continue to maintain a strong financial position across the enterprise. Our utility's stabilizing regulatory mechanisms, our bank's conservative approach to risk, and our strong enterprise-wide liquidity have created a solid foundation, enabling us to continue delivering good consolidated results and supporting our customers and community through these challenging times.

"Our utility is advancing important cost reductions to help manage affordability for our customers. As we tighten our belts, we remain focused on collaborating with stakeholders to progress our renewable energy transition, supporting Hawaii's economic recovery and clean energy goals.

"Our bank's results reflect the impact of the crisis in the compression of lending margins and higher provision for potential credit losses. The bank was able to offset some of these pressures through strong mortgage production, good cost control and a gain on sale of securities, while continued deposit growth reinforced its liquidity position and low cost funding base. As the uncertain environment unfolds, the bank will continue to work closely with customers to manage our risk and serve as a source of stability," said Lau.



            _____________


                                       Unless otherwise indicated,
                                         throughout this release
                                         earnings per share (EPS)
                                         refers to diluted earnings per

            
              (1)             share.

HAWAIIAN ELECTRIC COMPANY EARNINGS

Hawaiian Electric Company's (Hawaiian Electric) net income for the second quarter of 2020 was $42.3 million, compared to $32.6 million in the second quarter of 2019, primarily driven by the following after-tax items:

    --  $7 million lower operations and maintenance (O&M) expenses compared to
        the second quarter of 2019, primarily due to fewer generating unit
        overhauls, less generating station maintenance work associated with
        overhauls, the reclassification in the second quarter of COVID-19
        related bad debt expense from the first quarter of 2020 to a regulatory
        asset as a result of Public Utilities Commission approval to defer these
        expenses (increasing quarterly earnings by $1.6 million), and lower
        labor cost due to lower staffing levels and reduced overtime (increasing
        earnings by $1 million). The lower generation overhauls and station
        maintenance work represented approximately $4 million of the $7 million
        total O&M variance, and are largely timing-related as some overhauls and
        station maintenance work will be performed later in 2020 or in 2021;
    --  $5 million revenue increase from $4 million higher rate adjustment
        mechanism (RAM) revenues (including $2 million from Hawaiian Electric
        (Oahu), and $1 million each from Maui Electric (Maui County) and Hawaii
        Electric Light (Hawaii Island)) and $1 million for recovery of the West
        Loch PV project and Grid Modernization projects under the major project
        interim recovery (MPIR) mechanism;
    --  $1 million higher net income due to an unfavorable adjustment made in
        2019 related to 2018 reliability performance incentives; and
    --  $1 million lower interest expense due to debt refinancings at lower
        rates.

These items were partially offset by the following after-tax items:

    --  $1 million lower allowance for funds used during construction as there
        were fewer long duration projects in construction work in progress;
    --  $1 million higher cost savings from enterprise resource planning system
        implementation to be returned to customers; and
    --  $1 million higher depreciation expense due to increasing investments for
        the integration of more renewable energy, improved customer reliability
        and greater system efficiency.



              _________________


               Note:     
              Amounts indicated as after-
                tax in this earnings release are based upon
                adjusting items using the current year composite
                statutory tax rates of 25.75% for the utilities
                and 26.79% for the bank.

AMERICAN SAVINGS BANK EARNINGS

American Savings Bank's (American) second quarter 2020 net income was $14.0 million compared to $15.8 million in the first, or linked quarter of 2020, and $17.0 million in the second quarter of 2019. The decrease in net income compared to the linked and prior year quarters reflects lower asset yields within the loan and investment portfolios as a result of the lower interest rate environment, a higher provision for credit losses due to $7 million in additional credit loss reserves related to COVID-19 and $4 million in provisioning for unfunded commitments. This was partially offset by higher noninterest income due to a $7.1 million gain related to the sale of 34,680 Visa Class B restricted shares and a $2.2 million gain on the sale of investment securities as the bank sold some legacy positions to reduce credit risk and yield volatility in its investment portfolio.

Total loans were $5.5 billion as of June 30, 2020, up 6.45%(2) from December 31, 2019, driven mainly by the addition of $370 million in Paycheck Protection Program (PPP) loans, as well as increases in the commercial real estate and commercial and industrial portfolios, offset by reductions in the retail portfolio.

Total deposits were $7.0 billion as of June 30, 2020, an increase of 12.1%(3) from December 31, 2019. The average cost of funds was 0.18% for the quarter, down six basis points versus the linked quarter and down twelve basis points versus the prior year quarter.

Overall, American's return on average equity(4 )for the second quarter of 2020 was 8.00%, compared to 9.15% in the linked quarter and 10.46% in the second quarter of 2019. Return on average assets was 0.72% for the second quarter of 2020, compared to 0.87% in the linked quarter and 0.96% in the same quarter last year.

In the second quarter of 2020, American retained capital and did not pay a dividend to HEI to support its commitment to PPP lending to the community while maintaining healthy capital levels. American had a leverage ratio of 8.4% at June 30, 2020.

Please refer to American's news release issued on July 30, 2020 for additional information on American.



       _____________



       
                (2) Annualized from December 31, 2019,
                           total loans as of June 30, 2020
                           increased 12.9%.



       
                (3) Annualized from December 31, 2019,
                           total deposits as of June 30, 2020
                           increased 24.2%.


      
       
                4  Bank return on average equity
                           calculated using annualized second
                           quarter 2020 bank net income and
                           weighted average daily common
                           equity.

HOLDING AND OTHER COMPANIES

The holding and other companies' net loss was $7.5 million for the second quarter of 2020 compared to $7.1 million in the prior year quarter. The greater net loss was primarily due to an increase and acceleration of charitable contributions to support our community during the COVID-19 pandemic.

BOARD MAINTAINS QUARTERLY DIVIDEND

On August 5, 2020, HEI announced that the Board of Directors maintained HEI's quarterly cash dividend of $0.33 per share payable on September 10, 2020, to shareholders of record at the close of business on August 21, 2020 (ex-dividend date is August 20, 2020). This quarterly dividend is equivalent to an annual rate of $1.32 per share. Dividends have been paid on an uninterrupted basis since 1901. At the indicated annual dividend rate and based on the closing price per share on August 5, 2020 of $34.93, HEI's dividend yield is 3.8%.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2020 GUIDANCE

HEI will conduct a webcast and conference call to review its consolidated results and 2020 earnings guidance and outlook at 10:15 a.m. Hawaii time (4:15 p.m. Eastern time) on Thursday, August 6, 2020.

Interested parties within the United States may listen to the conference by calling (844) 834-0652 and international parties may listen to the conference by calling (412) 317-5198. Parties may also access any presentation materials for the conference call and/or listen to the conference call by accessing the webcast on HEI's website at www.hei.com under the "Investor Relations" section, sub-heading "News and Events - Events and Presentations."

HEI and Hawaiian Electric intend to continue to use HEI's website, www.hei.com, as a means of disclosing additional information; such disclosures will be included on HEI's website in the Investor Relations section. Accordingly, investors should routinely monitor the Investor Relations section of HEI's website at www.hei.com in addition to following HEI's, Hawaiian Electric's and American's press releases, HEI's and Hawaiian Electric's Securities and Exchange Commission (SEC) filings and HEI's public conference calls and webcasts. The information on HEI's website is not incorporated by reference in this document or in HEI's and Hawaiian Electric's SEC filings unless, and except to the extent, specifically incorporated by reference. Investors may also wish to refer to the Public Utilities Commission of the State of Hawaii (PUC) website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC. No information on the PUC website is incorporated by reference in this document or in HEI's and Hawaiian Electric's SEC filings.

An on-line replay of the August 6, 2020 webcast will be available on HEI's website beginning about two hours after the event. Audio replays of the conference call will also be available approximately two hours after the event through August 20, 2020 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode 10146073.

HEI supplies power to approximately 95% of Hawaii's population through its electric utility, Hawaiian Electric; provides a wide array of banking and other financial services to consumers and businesses through American, one of Hawaii's largest financial institutions; and helps advance Hawaii's clean energy and sustainability goals through investments by its non-regulated subsidiary, Pacific Current, LLC.

FORWARD-LOOKING STATEMENTS

This release may contain "forward-looking statements," which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as "will," "expects," "anticipates," "intends," "plans," "believes," "predicts," "estimates" or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries, the performance of the industries in which they do business and economic, political and market factors, among other things. These forward-looking statements are not guarantees of future performance.

Forward-looking statements in this release should be read in conjunction with the "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" discussions (which are incorporated by reference herein) set forth in HEI's Annual Report on Form 10-K for the year ended December 31, 2019 and HEI's other periodic reports that discuss important factors that could cause HEI's results to differ materially from those anticipated in such statements. These forward-looking statements speak only as of the date of the release, report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



              Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries


              CONSOLIDATED STATEMENTS OF INCOME DATA


              (Unaudited)




                                                                                                Three months ended June 30                              Six months ended June 30



              
                (in thousands, except per share amounts)                 2020                        2019                  2020                                      2019



              
                Revenues



              Electric utility                                                           $
         534,215                                    $
        633,784                             $
           1,131,657  $
          1,212,279



              Bank                                                                74,714                                  81,687                              154,452                            164,739



              Other                                                                   16                                      14                                   22                                 82



              Total revenues                                                     608,945                                 715,485                            1,286,131                          1,377,100



              
                Expenses



              Electric utility                                                   466,414                                 578,090                            1,019,898                          1,100,025



              Bank                                                                66,221                                  60,435                              126,556                            117,365



              Other                                                                4,754                                   4,326                                8,419                              9,139



              Total expenses                                                     537,389                                 642,851                            1,154,873                          1,226,529



              
                Operating income (loss)



              Electric utility                                                    67,801                                  55,694                              111,759                            112,254



              Bank                                                                 8,493                                  21,252                               27,896                             47,374



              Other                                                              (4,738)                                (4,312)                             (8,397)                           (9,057)



              Total operating income                                              71,556                                  72,634                              131,258                            150,571



              Retirement defined benefits expense-other than service costs         (934)                                  (761)                             (1,868)                           (1,524)



              Interest expense, net-other than on deposit liabilities and       (22,613)                               (23,533)                            (44,388)                          (46,656)
       other bank borrowings



              Allowance for borrowed funds used during construction                  752                                   1,179                                1,440                              2,257



              Allowance for equity funds used during construction                  2,194                                   3,175                                4,209                              6,085



              Gain on sale of investment securities, net                           9,275                                                                       9,275



              
                Income before income taxes                             60,230                                  52,694                               99,926                            110,733



              Income taxes                                                        10,870                                   9,709                               16,673                             21,587



              
                Net income                                             49,360                                  42,985                               83,253                             89,146



              Preferred stock dividends of subsidiaries                              473                                     473                                  946                                946



              
                Net income for common stock                                    $
         48,887                                     $
        42,512                                $
           82,307     $
          88,200



              
                Basic earnings per common share                                  $
         0.45                                       $
        0.39                                  $
           0.75       $
          0.81



              
                Diluted earnings per common share                                $
         0.45                                       $
        0.39                                  $
           0.75       $
          0.81



              
                Dividends declared per common share                              $
         0.33                                       $
        0.32                                  $
           0.66       $
          0.64



              
                Weighted-average number of common shares outstanding  109,146                                 108,938                              109,098                            108,925



              
                Weighted-average shares assuming dilution             109,305                                 109,255                              109,374                            109,324



              
                Net income (loss) for common stock by segment



              Electric utility                                                            $
         42,329                                     $
        32,574                                $
           66,234     $
          64,700



              Bank                                                                14,014                                  17,016                               29,775                             37,855



              Other                                                              (7,456)                                (7,078)                            (13,702)                          (14,355)



              
                Net income for common stock                                    $
         48,887                                     $
        42,512                                $
           82,307     $
          88,200



              Comprehensive income attributable to Hawaiian Electric                      $
         48,555                                     $
        56,211                               $
           100,187    $
          111,140
       Industries, Inc.



              Return on average common equity (twelve months ended)                                                              9.4
      %                              9.4
            %

    ===



               This information should be read
                in conjunction with the
                consolidated financial
                statements and the notes
                thereto in HEI filings with the
                SEC. Results of operations for
                interim periods are not
                necessarily indicative of
                results to be expected for
                future interim periods or the
                full year.



     Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries


     CONSOLIDATED STATEMENTS OF INCOME DATA


     (Unaudited)




                                                                                         Three months ended June 30                             Six months ended June 30



     
                ($ in thousands, except per barrel amounts)                 2020                       2019                  2020                                     2019



     
                Revenues                                                         $
        534,215                                    $
       633,784                             $
          1,131,657  $
         1,212,279



     
                Expenses



     Fuel oil                                                              112,451                                181,620                             285,672                           342,229



     Purchased power                                                       136,838                                162,854                             276,654                           297,299



     Other operation and maintenance                                       110,041                                119,260                             237,588                           237,390



     Depreciation                                                           55,696                                 53,913                             111,546                           107,860



     Taxes, other than income taxes                                         51,388                                 60,443                             108,438                           115,247



     Total expenses                                                        466,414                                578,090                           1,019,898                         1,100,025



     
                Operating income                                          67,801                                 55,694                             111,759                           112,254



     Allowance for equity funds used during construction                     2,194                                  3,175                               4,209                             6,085



     Retirement defined benefits expense-other than service costs            (382)                                 (701)                              (763)                          (1,404)



     Interest expense and other charges, net                              (17,338)                              (18,530)                           (33,932)                         (36,516)



     Allowance for borrowed funds used during construction                     752                                  1,179                               1,440                             2,257



     
                Income before income taxes                                53,027                                 40,817                              82,713                            82,676



     Income taxes                                                           10,199                                  7,744                              15,481                            16,978



     
                Net income                                                42,828                                 33,073                              67,232                            65,698



     Preferred stock dividends of subsidiaries                                 229                                    229                                 458                               458



     
                Net income attributable to Hawaiian Electric              42,599                                 32,844                              66,774                            65,240



     Preferred stock dividends of Hawaiian Electric                            270                                    270                                 540                               540



     
                Net income for common stock                                       $
        42,329                                     $
       32,574                                $
          66,234     $
         64,700



     
                Comprehensive income attributable to Hawaiian Electric            $
        42,354                                     $
       32,597                                $
          66,285     $
         64,747



     OTHER ELECTRIC UTILITY INFORMATION



     Kilowatthour sales (millions)



        Hawaiian Electric                                                    1,444                                  1,593                               2,940                             3,016



        Hawaii Electric Light                                                  224                                    253                                 476                               498



        Maui Electric                                                          206                                    273                                 464                               521


                                                                              1,874                                  2,119                               3,880                             4,035



     Average fuel oil cost per barrel                                                $
        63.12                                      $
       88.38                                 $
          72.77      $
         84.44



     Return on average common equity (twelve months ended)(1)                                                             7.9
      %                             7.8
            %



                            1     
              Simple average.


               This information should be read
                in conjunction with the
                consolidated financial
                statements and the notes
                thereto in Hawaiian Electric
                filings with the SEC. Results
                of operations for interim
                periods are not necessarily
                indicative of results to be
                expected for future interim
                periods or the full year.



     American Savings Bank, F.S.B.


     STATEMENTS OF INCOME DATA


     (Unaudited)




                                                                                                     
     Three months ended                                            
     Six months ended June 30



     ($ in thousands)                                                   June 30, 2020                 March 31, 2020            June 30, 2019                2020         2019



     
                Interest and dividend income



     Interest and fees on loans                                                           $
     53,541                                               $
      55,545                                   $
      58,620             $
       109,086    $
       116,480



     Interest and dividends on investment securities                            6,288                                     9,430                               7,535                                 15,718  18,163



     Total interest and dividend income                                        59,829                                    64,975                              66,155                                124,804 134,643



     
                Interest expense



     Interest on deposit liabilities                                            3,071                                     3,587                               4,287                                  6,658   8,539



     Interest on other borrowings                                                  75                                       313                                 411                                    388     939



     Total interest expense                                                     3,146                                     3,900                               4,698                                  7,046   9,478



     
                Net interest income                                          56,683                                    61,075                              61,457                                117,758 125,165



     Provision for credit losses                                               15,133                                    10,401                               7,688                                 25,534  14,558



     
                Net interest income after provision for credit losses        41,550                                    50,674                              53,769                                 92,224 110,607



     
                Noninterest income



     Fees from other financial services                                         3,102                                     4,571                               4,798                                  7,673   9,360



     Fee income on deposit liabilities                                          2,897                                     5,113                               5,004                                  8,010  10,082



     Fee income on other financial products                                     1,212                                     1,872                               1,830                                  3,084   3,423



     Bank-owned life insurance                                                  1,673                                       794                               2,390                                  2,467   4,649



     Mortgage banking income                                                    6,252                                     2,000                                 976                                  8,252   1,590



     Gain on sale of securities, net                                            9,275                                                                                                              9,275



     Other income, net                                                          (251)                                      413                                 534                                    162     992



     Total noninterest income                                                  24,160                                    14,763                              15,532                                 38,923  30,096



     
                Noninterest expense



     Compensation and employee benefits                                        25,079                                    25,777                              25,750                                 50,856  51,262



     Occupancy                                                                  5,442                                     5,267                               5,479                                 10,709  10,149



     Data processing                                                            3,849                                     3,837                               3,852                                  7,686   7,590



     Services                                                                   2,474                                     2,809                               2,606                                  5,283   5,032



     Equipment                                                                  2,290                                     2,339                               2,189                                  4,629   4,253



     Office supplies, printing and postage                                      1,049                                     1,341                               1,663                                  2,390   3,023



     Marketing                                                                    379                                       802                               1,323                                  1,181   2,313



     FDIC insurance                                                               751                                       102                                 628                                    853   1,254



     Other expense(1)                                                           7,063                                     4,194                               4,519                                 11,257   8,373



     Total noninterest expense                                                 48,376                                    46,468                              48,009                                 94,844  93,249



     
                Income before income taxes                                   17,334                                    18,969                              21,292                                 36,303  47,454



     Income taxes                                                               3,320                                     3,208                               4,276                                  6,528   9,599



     
                Net income                                                          $
     
       14,014                                           $
     
        15,761                      $
              
        17,016          $
     
         29,775 $
     
         37,855



     
                Comprehensive income                                                $
     
       13,734                                           $
     
        35,608                      $
              
        31,291          $
     
         49,342 $
     
         58,382



     OTHER BANK INFORMATION (annualized %, except as of period end)



     Return on average assets                                                    0.72                                      0.87                                0.96                                   0.79    1.07



     Return on average equity                                                    8.00                                      9.15                               10.46                                   8.57   11.76



     Return on average tangible common equity                                    9.07                                     10.39                               11.97                                   9.72   13.48



     Net interest margin                                                         3.21                                      3.72                                3.82                                   3.46    3.90



     Efficiency ratio                                                           59.84                                     61.27                               62.36                                  60.53   60.06



     Net charge-offs to average loans outstanding                                0.49                                      0.44                                0.29                                   0.46    0.34



     As of period end



     Nonaccrual loans to loans receivable held for investment                    0.86                                      0.90                                0.79



     Allowance for credit losses to loans outstanding                            1.50                                      1.49                                1.17



     Tangible common equity to tangible assets                                    7.9                                       8.3                                 8.2



     Tier-1 leverage ratio                                                        8.4                                       8.8                                 8.7



     Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)         
              $                                                              $
      28.0                                     $
      15.0                $
       28.0       $
       33.0




              
                1               The three- and six-month periods
                                             ended June 30, 2020 include
                                             approximately $3.7 million and
                                             $3.8 million, respectively, of
                                             certain significant direct and
                                             incremental COVID-19 related
                                             costs. These costs, which have
                                             been recorded in Other expense,
                                             include $2.3 million of
                                             compensation expense and $1.1
                                             million of enhanced cleaning and
                                             sanitation costs.




               This information should be read in
                conjunction with the consolidated financial
                statements and the notes thereto in HEI
                filings with the SEC. Results of operations
                for interim periods are not necessarily
                indicative of results to be expected for
                future interim periods or the full year.



     Contact: Julie R. Smolinski   Telephone: (808) 543-7300


               Director, Investor
                Relations         
            E-mail: ir@hei.com

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SOURCE Hawaiian Electric Industries, Inc.