HEI Reports 2020 Results
HONOLULU, Feb. 16, 2021 /PRNewswire/ --
2020 Highlights:
-- Solid consolidated earnings reflect strength of HEI platform and
commitment to community
-- Financial stability enabled HEI companies to support customers and
communities during pandemic
-- Record charitable commitments of $5.5 million; $3.5 million related
to COVID, including $2 million to help qualifying families with
utility bills
-- Hawaiian Electric delivered on strategic priorities while supporting
customers
-- Proposed holding base rates flat to help manage customer bills
-- Cost savings and efficiency focus enabled utility to forego base
rate increase
-- Collaborated with stakeholders to develop performance-based
regulation framework
-- Continued to lead nation in rooftop solar integration with 20% of
residential customers and 36% of Oahu single family homes now with
rooftop solar
-- Aggressively advanced utility-scale renewable procurements; together
Stage 1 and Stage 2 projects filed or pending filing have potential
to add 657 MW of solar and ~3 GWh of storage
-- 2020 RPS of 34.5% exceeded 2020 renewable portfolio milestone of 30%
-- American Savings Bank delivered solid profitability in dynamic
environment
-- Record residential mortgage production of $1.2 billion
-- Grew total deposits 17.8% to $7.4 billion and total loans 4.4% to
$5.3 billion
-- Net interest margin of 3.29%, with record low cost of funds
-- Net charge-off ratio improved to 0.40%, compared to 0.45% in prior
year
-- Deployed $370 million in round one Paycheck Protection Program
loans, supporting ~4,100 small businesses representing 40,000+ jobs
1 Results for 2020
included impact of
after-tax gain of
$5.2 million ($7.0
million pre-tax)
related to the
bank's sale of
Visa Class B
shares in the
second quarter of
2020, as well as
certain direct and
incremental COVID-
19 related costs
at the bank
totaling $3.7
million after-tax
($5.1 million pre-
tax).
2 Unless otherwise
indicated,
throughout this
release earnings
per share (EPS)
refers to diluted
earnings per
share.
Hawaiian Electric Industries, Inc. (NYSE: HE) (HEI) today reported 2020 year-end consolidated net income for common stock of $197.8 million(3) and EPS of $1.81 compared to $217.9 million(4) and EPS of $1.99 for 2019. For the fourth quarter of 2020, consolidated net income for common stock was $50.5 million and EPS was $0.46 compared to $66.3 million(5) and EPS of $0.61 for the fourth quarter of 2019.
"I am proud of the commitment of our employees across the HEI family of companies as we worked to support our customers through this difficult economy, protect fellow employees, and care for our community, all while continuing to advance long-term priorities and deliver solid consolidated financial results," said Constance H. Lau, HEI president and CEO. "Based on our utility's strong financial results, at year end we provided $2 million for Hawaiian Electric to be the founding sponsor of an Aloha United Way program to help families across the islands who are financially impacted by the pandemic pay bills for electric, water, sewer and gas utilities.
"In December the Hawaii Public Utilities Commission issued its phase two decision on performance-based regulation, a landmark regulatory framework designed to increase renewable energy, lower costs and improve customer service. Our utility's focus on efficiency will enable it to deliver on its customer savings commitments and position it well to operate under the new regulatory framework while continuing to aggressively advance our ambitious clean energy transition.
"While our bank's financial results were impacted by pandemic-driven credit risk that we continue to manage closely, they also reflect the benefits of record mortgage originations, good cost control to offset increased costs related to COVID while still investing in core priorities, and conservative liquidity and capital management," said Lau.
3 See footnote 1.
4 Results for
2019 included
after-tax
gain on sale
(included in
bank
noninterest
income) of
bank
properties
exited when
the bank moved
to its new
campus and
after-tax
campus
transition
costs
(included in
noninterest
expense) of
$7.9 million
and $2.4
million,
respectively,
and $7.9
million and
$0.2 million
for the fourth
quarter of
2019,
respectively.
5 See footnote 4.
HAWAIIAN ELECTRIC COMPANY EARNINGS
Full Year Results:
Hawaiian Electric Company's (Hawaiian Electric) full-year 2020 net income was $169.3 million, compared to $156.8 million in 2019. The increase over the prior year was primarily driven by the following after-tax items:
-- $17 million under the rate adjustment mechanism (RAM), which funds
investments in resilience, reliability and the integration of renewable
energy;
-- $6 million from lower operations and maintenance (O&M) expenses,
primarily due to fewer generating facility overhauls, efficiency
improvements in planning and execution of work, and reduced staffing
levels, offset in part by higher environmental reserves for Pearl Harbor
sediment remediation;
-- $3 million from lower interest expense due to debt refinancings; and
-- $2 million from recovery of the West Loch PV and Grid Modernization
projects under the major project interim recovery (MPIR) mechanism,
partially offset by lower MPIR revenues for the Schofield generation
project.
These items were partially offset by the following after-tax items:
-- $5 million from higher depreciation expense due to increasing
investments to integrate more renewable energy and improve customer
reliability and system efficiency;
-- $4 million from higher enterprise resource planning system
implementation benefits to be returned to customers;
-- $4 million lower allowance for funds used during construction (AFUDC) as
there were fewer long duration projects in construction work in
progress; and
-- $2 million higher fuel handling costs.
Fourth Quarter Results:
Hawaiian Electric's net income for the fourth quarter of 2020 was $43.0 million, compared to $45.4 million in the fourth quarter of 2019, primarily driven by the following after-tax items:
-- $4 million from higher O&M expenses, largely due to higher environmental
reserves for Pearl Harbor sediment remediation;
-- $1 million from higher depreciation expense due to increasing
investments to integrate more renewable energy and improve customer
reliability and system efficiency;
-- $1 million from lower AFUDC; and
-- $1 million due to lower amortization of excess deferred income taxes and
other miscellaneous tax adjustments.
These items were partially offset by the following after-tax items:
-- $4 million from higher RAM revenues; and
-- $1 million from lower non-service pension costs due to the reset of
pension costs included in rates as part of rate case decisions.
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
Full Year Results:
American Savings Bank's (American) full-year 2020 net income was $57.6 million(6) compared to $89.0 million(7) in 2019. Net interest income was $233.5 million in 2020 compared to $248.1 million in 2019, primarily due to lower net interest margin as yields on earning assets were impacted by the lower interest rate environment. Noninterest income was $5.3 million higher than 2019, primarily due to higher mortgage banking income in 2020. The provision for credit losses in 2020 was $27.3 million higher than 2019, reflecting additional credit risk within the loan portfolio associated with the negative impacts of COVID-19. Noninterest expense for the year was $6.2 million higher than 2019 primarily due to $5.1 million of COVID-19 related expenses combined with higher pension-related costs of $2.3 million and $0.7 million in costs associated with the bank's branch consolidation strategy, partially offset by reductions in data processing and marketing expenses.
Total loans were $5.3 billion as of December 31, 2020, up 4.4% from December 31, 2019, driven mainly by the addition of $300 million in Paycheck Protection Program loans, as well as a $210 million increase in commercial real estate loans, offset by reductions in the home equity line of credit and consumer loan portfolios.
Total deposits were $7.4 billion as of December 31, 2020, an increase of 17.8% from December 31, 2019. The average cost of funds was a record low 0.16% for the full year 2020, down thirteen basis points versus the prior year.
American's return on average equity for the full year 2020 was 8.1% compared to 13.5% in 2019. The bank's return on average assets was 0.74% compared to 1.25% in 2019.
Fourth Quarter Results:
American's fourth quarter 2020 net income was $15.7 million compared to $12.2 million in the third, or linked quarter of 2020, and $28.2 million(8) in the fourth quarter of 2019. The increase in net income compared to the linked quarter was primarily due to lower provision for credit losses. The decrease in net income from the prior year quarter was primarily due to gains on sales of properties in the fourth quarter of 2019.
Overall, American's return on average equity(9 )for the fourth quarter of 2020 was 8.6%, compared to 6.8% in the linked quarter and 16.5%(10) in the fourth quarter of 2019. Return on average assets was 0.77% for the fourth quarter of 2020, compared to 0.61% in the linked quarter and 1.58% in the same quarter last year.
Please refer to American's news release issued on January 29, 2021 for additional information on American.
6 See footnote 1.
7 See footnote 4.
8 See footnote 4.
Bank return on
average equity
calculated
using weighted
average daily
9 common equity.
10 See footnote 4.
HOLDING AND OTHER COMPANIES
The holding and other companies' net loss was $29.1 million in 2020 compared to $27.9 million in 2019. The fourth quarter net loss of $8.2 million was $0.9 million higher than the prior year quarter. The greater net loss compared to the prior year and prior year quarter was primarily due to increased charitable contributions to support communities affected by the pandemic.
BOARD INCREASES QUARTERLY DIVIDEND
On February 9, 2021, HEI announced that the Board of Directors increased HEI's quarterly cash dividend from $0.33 per share to $0.34 per share, payable on March 10, 2021, to shareholders of record at the close of business on February 25, 2021 (ex-dividend date is February 24, 2021). This quarterly dividend is equivalent to an annual rate of $1.36 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 February 12, 2021 of $34.72, HEI's dividend yield is 3.9%.
WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2021 GUIDANCE
HEI will conduct a webcast and conference call to review its fourth quarter and full year 2020 results and 2021 EPS guidance on Tuesday, February 16, 2021 at 11:15 a.m. Hawaii time (4:15 p.m. Eastern).
Parties in the U.S. may listen to the conference call by dialing (844) 834-0652. International parties may listen to the conference call by dialing (412) 317-5198. Parties may also access presentation materials and/or listen to the conference call by visiting the conference call/webcast link on HEI's website at www.hei.com under the "Investor Relations" section, sub-heading "News and Events -- Events and Presentations."
A replay will be available online and via phone. The online replay will be available on HEI's website about two hours after the event. An audio replay will also be available about two hours after the event through March 2, 2021. To access the audio replay, dial (877) 344-7529 (U.S.) or (412) 317-0088 (international) and enter passcode 10151332.
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 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.
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.
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 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 Years ended December 31
December 31
(in thousands, except per share amounts) 2020 2019 2020 2019
---
Revenues
Electric utility $
571,095 $
645,333 $
2,265,320 $
2,545,942
Bank 80,415 80,630 313,511 327,917
Other 707 3 944 89
---
Total revenues 652,217 725,966 2,579,775 2,873,948
---
Expenses
Electric utility 502,822 575,002 1,996,770 2,291,564
Bank (includes $10.8 million gain on sales of properties in 2019) 62,002 45,403 251,702 217,008
Other 6,719 4,766 19,810 17,355
---
Total expenses 571,543 625,171 2,268,282 2,525,927
---
Operating income (loss)
Electric utility 68,273 70,331 268,550 254,378
Bank 18,413 35,227 61,809 110,909
Other (6,012) (4,763) (18,866) (17,266)
---
Total operating income 80,674 100,795 311,493 348,021
---
Retirement defined benefits expense-other than service costs (240) (634) (3,210) (2,806)
Interest expense, net-other than on deposit liabilities and other bank borrowings (22,220) (21,818) (88,694) (90,899)
Allowance for borrowed funds used during construction 751 988 2,992 4,453
Allowance for equity funds used during construction 2,212 2,652 8,768 11,987
Gain on sale of investment securities, net 9,275 653
---
Income before income taxes 61,177 81,983 240,624 271,409
Income taxes 10,219 15,247 40,910 51,637
---
Net income 50,958 66,736 199,714 219,772
Preferred stock dividends of subsidiaries 473 473 1,890 1,890
---
Net income for common stock $
50,485 $
66,263 $
197,824 $
217,882
===
Basic earnings per common share $
0.46 $
0.61 $
1.81 $
2.00
===
Diluted earnings per common share $
0.46 $
0.61 $
1.81 $
1.99
===
Dividends declared per common share $
0.33 $
0.32 $
1.32 $
1.28
===
Weighted-average number of common shares outstanding 109,181 108,973 109,140 108,949
===
Weighted-average shares assuming dilution 109,339 109,405 109,356 109,407
===
Net income (loss) for common stock by segment
Electric utility $
43,041 $
45,361 $
169,340 $
156,840
Bank 15,658 28,230 57,583 88,973
Other (8,214) (7,328) (29,099) (27,931)
---
Net income for common stock $
50,485 $
66,263 $
197,824 $
217,882
===
Comprehensive income attributable to Hawaiian Electric Industries, Inc. $
49,940 $
70,597 $
216,599 $
248,453
===
Return on average common equity (%) (twelve months ended) 8.6 9.8
===
This information should be read
in conjunction with the
consolidated financial
statements and the notes
thereto in HEI filings with the
SEC.
Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME DATA
(Unaudited)
Three months ended Years ended December 31
December 31
($ in thousands, except per barrel
amounts) 2020 2019 2020 2019
---
Revenues $
571,095 $
645,333 $
2,265,320 $
2,545,942
---
Expenses
Fuel oil 124,560 179,387 515,274 720,709
Purchased power 143,070 160,920 568,749 633,256
Other operation and maintenance 125,361 119,932 474,192 481,737
Depreciation 55,498 53,936 222,733 215,731
Taxes, other than income taxes 54,333 60,827 215,822 240,131
---
Total expenses 502,822 575,002 1,996,770 2,291,564
---
Operating income 68,273 70,331 268,550 254,378
Allowance for equity funds used
during construction 2,212 2,652 8,768 11,987
Retirement defined benefits
expense-other than service costs 432 (709) (763) (2,836)
Interest expense and other charges,
net (17,026) (16,897) (67,794) (70,842)
Allowance for borrowed funds used
during construction 751 988 2,992 4,453
---
Income before income taxes 54,642 56,365 211,753 197,140
Income taxes 11,102 10,505 40,418 38,305
---
Net income 43,540 45,860 171,335 158,835
Preferred stock dividends of
subsidiaries 229 229 915 915
---
Net income attributable to Hawaiian
Electric 43,311 45,631 170,420 157,920
Preferred stock dividends of
Hawaiian Electric 270 270 1,080 1,080
---
Net income for common stock $
43,041 $
45,361 $
169,340 $
156,840
===
Comprehensive income attributable
to Hawaiian Electric $
41,302 $
43,910 $
167,700 $
155,462
===
OTHER ELECTRIC UTILITY INFORMATION
Kilowatthour sales (millions)
Hawaiian Electric 1,624 1,723 6,183 6,563
Hawaii Electric Light 257 272 978 1,050
Maui Electric 260 296 959 1,127
---
2,141 2,291 8,120 8,740
Average fuel oil cost per barrel $
58.19 $
78.04 $
63.00 $
82.17
Return on average common equity (%)
(twelve months ended)(1) 8.1 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.
American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)
Three months ended
Years ended December 31
($ in thousands) December 31, September 30, December 31,
2020 2020 2019 2020 2019
---
Interest and dividend income
Interest and fees on loans $
52,629 $
52,419 $
57,892 $
214,134 $
233,632
Interest and dividends on investment securities 7,590 7,221 7,160 30,529 32,922
---
Total interest and dividend income 60,219 59,640 65,052 244,663 266,554
---
Interest expense
Interest on deposit liabilities 1,709 2,287 3,907 10,654 16,830
Interest on other borrowings 11 61 249 460 1,610
---
Total interest expense 1,720 2,348 4,156 11,114 18,440
---
Net interest income 58,499 57,292 60,896 233,549 248,114
Provision for credit losses 11,307 13,970 5,607 50,811 23,480
---
Net interest income after provision for credit losses 47,192 43,322 55,289 182,738 224,634
---
Noninterest income
Fees from other financial services 4,541 4,233 4,830 16,447 19,275
Fee income on deposit liabilities 4,217 3,832 5,475 16,059 20,877
Fee income on other financial products 1,773 1,524 1,378 6,381 6,507
Bank-owned life insurance 2,051 1,965 1,378 6,483 7,687
Mortgage banking income 7,801 7,681 1,863 23,734 4,943
Gain on sale of real estate 10,762 10,762
Gain on sale of securities, net 9,275 653
Other income, net (187) (231) 654 (256) 2,074
---
Total noninterest income 20,196 19,004 26,340 78,123 72,778
---
Noninterest expense
Compensation and employee benefits 27,156 26,431 26,383 104,443 103,009
Occupancy 5,171 5,693 5,429 21,573 21,272
Data processing 3,717 3,366 3,953 14,769 15,306
Services 3,214 2,624 2,378 11,121 10,239
Equipment 2,371 2,001 2,344 9,001 8,760
Office supplies, printing and postage 1,046 1,187 1,192 4,623 5,512
Marketing 1,527 727 1,035 3,435 4,490
FDIC insurance 775 714 (45) 2,342 1,204
Other expense(1) 4,470 4,556 3,537 20,283 15,586
---
Total noninterest expense 49,447 47,299 46,206 191,590 185,378
---
Income before income taxes 17,941 15,027 35,423 69,271 112,034
Income taxes 2,283 2,877 7,193 11,688 23,061
---
Net income $
15,658 $
12,150 $
28,230 $
57,583 $
88,973
===
Comprehensive income $
18,306 $
13,543 $
33,300 $
81,191 $
118,379
===
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets 0.77 0.61 1.58 0.74 1.25
Return on average equity 8.58 6.75 16.45 8.11 13.48
Return on average tangible common equity 9.67 7.62 18.69 9.17 15.39
Net interest margin 3.12 3.12 3.74 3.29 3.85
Efficiency ratio 62.83 61.99 52.97 61.47 57.77
Net charge-offs to average loans outstanding 0.36 0.32 0.41 0.40 0.45
As of period end
Nonaccrual loans to loans receivable held for investment 0.89 0.77 0.58
Allowance for credit losses to loans outstanding 1.90 1.67 1.04
Tangible common equity to tangible assets 7.9 8.0 8.6
Tier-1 leverage ratio 8.4 8.3 9.1
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions) $
3.0
$ $
9.0 $
31.0 $
56.0
1 The fourth quarter of 2020, third
quarter of 2020 and year ended
December 31, 2020 include
approximately $0.6 million, $0.7
million and $5.1 million,
respectively, of certain direct
and incremental COVID-19 related
costs. For 2020, these costs,
which have been recorded in Other
expense, include $2.5 million of
compensation expense and $2.0
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.
Contact:
Julie R. Smolinski Telephone: (808) 543-7300
Vice President, Investor
Relations & Corporate
Sustainability
E-mail: ir@hei.com
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SOURCE Hawaiian Electric Industries, Inc.
