Hawaiian Electric Industries Reports Third Quarter 2014 Earnings

Consolidated Earnings Per Share of $0.46

Utility and Bank Deliver Solid Results In Line with Expectations

Board Declares Dividend of $0.31 Per Share

Company Release - 11/6/2014 4:15 PM ET

HONOLULU, Nov. 6, 2014 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock for the third quarter of 2014 of $47.8 million, or $0.46 diluted earnings per share (EPS), compared to $48.2 million, or $0.48 diluted EPS for the third quarter of 2013.

"At the utility, we continue to work aggressively to lower customer bills by reducing Hawaii's dependence on imported oil.  The recent energy plans we filed with the PUC are providing the starting point to launch important initiatives with a broad set of stakeholders to achieve our shared vision for Hawaii's clean energy future," said Constance H. Lau, HEI president and chief executive officer.  "In addition, we are proud of our dedicated utility company employees who worked tirelessly to restore power and help customers after Tropical Storm Iselle while completing our energy plans on time," added Lau.

"American Savings Bank continued to deliver profitable growth with year-to-date annualized loan growth of 5.9% and strong credit quality.  American paid dividends of $9 million to HEI in the quarter while maintaining strong capital levels," said Lau.

HAWAIIAN ELECTRIC COMPANY CONTINUES INVESTMENTS FOR IMPROVED RELIABILITY TO BETTER SERVE OUR CUSTOMERS

Hawaiian Electric Company's1 net income for the third quarter of 2014 was $38.9 million compared to $37.8 million in the third quarter of 2013.  The $1.1 million increase from the prior year was driven by the following items (on an after-tax basis):

  • Net revenues2 were $8 million higher compared to the third quarter of 2013 primarily due to $7 million in 2014 revenues attributable to the recovery of costs for clean energy and reliability investments and $1 million for better fuel efficiency performance.

These increases were partially offset by the following (on an after-tax basis):

  • Operations and maintenance (O&M) expenses3 were $2 million higher in the third quarter of 2014 compared to the same quarter last year.  This is largely due to consulting costs associated with recent regulatory filings, storm restoration expenses and the initial phase of our smart grid installations as part of our grid modernization program, partially offset by lower customer service expenses, lower overhaul costs and savings from the deactivation of generating units;
  • Depreciation expense for the third quarter of 2014 was $2 million higher as a result of increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency; and
  • A favorable deferred income tax adjustment of $3 million recorded in the third quarter of 2013 related to prior years.

1 Hawaiian Electric Company, unless otherwise defined, refers to the three utilities, Hawaiian Electric Company, Inc. on Oahu, Maui Electric Company, Limited, and Hawaii Electric Light Company, Inc.

2 Net revenues represent the after-tax impact of "Revenues" less the following expenses which are largely pass through items in revenues: "fuel oil", "purchased power" and "taxes, other than income taxes" as shown on the Hawaiian Electric Company Consolidated Statements of Income.

3 Excludes net income neutral expenses covered by surcharges or by third parties of $3 million in the third quarter of 2014 and $2 million in the third quarter of 2013. See "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.

Note: Amounts indicated as "after-tax" in this earnings release are based upon adjusting items for the composite statutory tax rates of 39% for the utilities and 40% for the bank.

AMERICAN SAVINGS BANK CONTINUES TO DELIVER SOLID PERFORMANCE

American Savings Bank's (American) net income for the third quarter of 2014 was $13.3 million compared to $11.7 million in the second, or linked, quarter of 2014 and $15.3 million in the third quarter of 2013.

Third quarter 2014 net income was $1.6 million higher than the linked quarter primarily driven by (on an after-tax basis) higher mortgage banking and fee income of $1 million and higher net interest income of $1 million due to higher loan balances and the recognition of interest associated with the payoff of a non-performing commercial loan. 

Compared to the third quarter of 2013, net income decreased by $2.0 million.  The decrease was primarily driven by (on an after-tax basis):  $1 million higher provision for loan losses, $1 million lower fee income on other financial products and mortgage banking income and $1 million net gain on the strategic sale of the credit card portfolio in the third quarter of 2013, partially offset by $1 million higher net interest income.

Overall, American achieved solid profitability with a year-to-date annualized return on average equity of 9.9% and a return on average assets of 0.98%.

Please also refer to the American news release issued on October 30, 2014.

HOLDING AND OTHER COMPANIES

The holding and other companies' net losses were $4.3 million in the third quarter of 2014 compared to $4.9 million in the third quarter of 2013. The lower net loss was primarily due to lower interest expense.

BOARD DECLARES QUARTERLY DIVIDEND

On November 5, 2014, the board of directors maintained HEI's quarterly cash dividend of 31 cents per share, payable on December 10, 2014, to shareholders of record at the close of business on November 21, 2014 (ex-dividend date is November 19, 2014).  The dividend is equivalent to an annual rate of $1.24 per share.

Dividends have been paid continuously since 1901.  At the indicated annual dividend rate and the closing share price on November 5, 2014 of $28.12, HEI's yield is 4.41%.

HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE

Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its third quarter 2014 earnings and 2014 EPS guidance on Thursday, November 6, 2014 at 12:00 p.m. Hawaii time (5:00 p.m. Eastern time).  The event can be accessed through HEI's website at www.hei.com or by dialing (800) 299-9086, passcode: 92619059 for the teleconference call.  The presentation for the webcast will be on HEI's website under the heading "Investor Relations."  HEI and Hawaiian Electric Company 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 such portions of HEI's website, in addition to following HEI's, Hawaiian Electric Company's and American's press releases, HEI's and Hawaiian Electric Company's Securities and Exchange Commission (SEC) filings and HEI's public conference calls and webcasts.  Also, at the Investor Relations section of HEI's website, investors may sign up to receive e-mail alerts (based on each investor's selected preferences).  The information on HEI's website is not incorporated by reference in this document or in HEI's and Hawaiian Electric Company'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 Company's SEC filings.

An on-line replay of the webcast will be available on HEI's website beginning about two hours after the event.  Audio replays of the teleconference will also be available approximately two hours after the event through November 20, 2014, by dialing (888) 286-8010, passcode:  41279979.

HEI supplies power to approximately 450,000 customers or 95% of Hawaii's population through its electric utilities, Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited and provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, one of Hawaii's largest financial institutions.

NON-GAAP MEASURES

See "Explanation of HEI's Use of Certain Unaudited Non-GAAP Measures" and related reconciliations on pages 14 to 15 of this release.

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 "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 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 "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, 2013, HEI's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 and HEI's future 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 Company, 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

(Unaudited)


Three months ended September 30


Nine months ended September 30

(in thousands, except per share amounts)

2014


2013


2014


2013

Revenues








Electric utility

$

803,565


$

764,054


$

2,262,056


$

2,210,020

Bank

63,536


65,058


187,771


195,841

Other

(5)


56


(325)


106

Total revenues

867,096


829,168


2,449,502


2,405,967

Expenses








Electric utility

727,409


694,201


2,045,166


2,030,071

Bank

43,964


42,223


129,528


126,550

Other

4,621


4,706


13,125


12,276

Total expenses

775,994


741,130


2,187,819


2,168,897

Operating income (loss)








Electric utility

76,156


69,853


216,890


179,949

Bank

19,572


22,835


58,243


69,291

Other

(4,626)


(4,650)


(13,450)


(12,170)

Total operating income

91,102


88,038


261,683


237,070

Interest expense, net—other than on deposit liabilities and other bank borrowings

(19,170)


(19,043)


(58,648)


(56,216)

Allowance for borrowed funds used during construction

740


498


1,877


1,626

Allowance for equity funds used during construction

1,937


1,255


4,933


4,030

Income before income taxes

74,609


70,748


209,845


186,510

Income taxes

26,323


22,041


73,265


62,590

Net income

48,286


48,707


136,580


123,920

Preferred stock dividends of subsidiaries

471


471


1,417


1,417

Net income for common stock

$

47,815


$

48,236


$

135,163


$

122,503

Basic earnings per common share

$

0.47


$

0.49


$

1.33


$

1.24

Diluted earnings per common share

$

0.46


$

0.48


$

1.32


$

1.23

Dividends per common share

$

0.31


$

0.31


$

0.93


$

0.93

Weighted-average number of common shares outstanding

102,416


99,204


101,768


98,670

Adjusted weighted-average shares

103,026


99,818


102,478


99,290

Net income (loss) for common stock by segment








Electric utility

$

38,879


$

37,817


$

108,529


$

90,939

Bank

13,260


15,276


39,475


45,350

Other

(4,324)


(4,857)


(12,841)


(13,786)

Net income for common stock

$

47,815


$

48,236


$

135,163


$

122,503

Comprehensive income attributable to Hawaiian Electric Industries, Inc.

$

46,504


$

47,339


$

137,919


$

113,240

Return on average common equity (twelve months ended)1





10.1%


8.4%

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

1  On a core basis, 2014 and 2013 return on average common equity (twelve months ended September 30) were 10.1% and 9.9%, respectively.  See reconciliation of GAAP to non-GAAP measures.



Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(dollars in thousands)

September 30, 2014


December 31, 2013

Assets




Cash and cash equivalents

$

192,555


$

220,036

Accounts receivable and unbilled revenues, net

365,728


346,785

Available-for-sale investment and mortgage-related securities

531,603


529,007

Investment in stock of Federal Home Loan Bank of Seattle

75,063


92,546

Loans receivable held for investment, net

4,291,960


4,110,113

Loans held for sale, at lower of cost or fair value

2,328


5,302

Property, plant and equipment, net of accumulated depreciation of $2,241,677 and $2,192,422 at the respective dates

4,048,106


3,865,514

Regulatory assets

575,712


575,924

Other

505,226


512,627

Goodwill

82,190


82,190

Total assets

$

10,670,471


$

10,340,044

Liabilities and shareholders' equity




Liabilities




Accounts payable

$

177,495


$

212,331

Interest and dividends payable

26,051


26,716

Deposit liabilities

4,533,797


4,372,477

Short-term borrowings—other than bank

150,576


105,482

Other bank borrowings

263,204


244,514

Long-term debt, net—other than bank

1,517,946


1,492,945

Deferred income taxes

585,432


529,260

Regulatory liabilities

357,090


349,299

Contributions in aid of construction

448,811


432,894

Defined benefit pension and other postretirement benefit plans liability

274,909


288,539

Other

499,459


524,224

Total liabilities

8,834,770


8,578,681

Preferred stock of subsidiaries - not subject to mandatory redemption

34,293


34,293

Shareholders' equity




Preferred stock, no par value, authorized 10,000,000 shares; issued: none


Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 102,562,464 shares and 101,259,800 shares at the respective dates

1,519,256


1,488,126

Retained earnings

296,146


255,694

Accumulated other comprehensive loss, net of tax benefits

(13,994)


(16,750)

Total shareholders' equity

1,801,408


1,727,070

Total liabilities and shareholders' equity

$

10,670,471


$

10,340,044

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014 (when filed), as updated by SEC Forms 8-K.



Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Nine months ended September 30

2014


2013

(in thousands)




Cash flows from operating activities




Net income

$

136,580


$

123,920

Adjustments to reconcile net income to net cash provided by operating activities




Depreciation of property, plant and equipment

129,574


120,355

Other amortization

5,454


2,352

Provision for loan losses

3,566


953

Loans receivable originated and purchased, held for sale

(102,523)


(199,772)

Proceeds from sale of loans receivable, held for sale

106,918


223,221

Gain on sale of credit card portfolio


(2,251)

Increase in deferred income taxes

48,900


60,580

Excess tax benefits from share-based payment arrangements

(271)


(469)

Allowance for equity funds used during construction

(4,933)


(4,030)

Change in cash overdraft

(1,038)


Changes in assets and liabilities




Decrease (increase) in accounts receivable and unbilled revenues, net

(18,943)


12,740

Decrease in fuel oil stock

15,784


24,332

Increase in regulatory assets

(17,531)


(53,314)

Decrease in accounts, interest and dividends payable

(75,812)


(21,708)

Change in prepaid and accrued income taxes and utility revenue taxes

(2,044)


(19,212)

Decrease in defined benefit pension and other postretirement benefit plans liability

(2,594)


(509)

Change in other assets and liabilities

(47,677)


(20,462)

Net cash provided by operating activities

173,410


246,726

Cash flows from investing activities




Available-for-sale investment and mortgage-related securities purchased

(130,578)


(39,721)

Principal repayments on available-for-sale investment and mortgage-related securities

52,678


84,487

Proceeds from sale of available-for-sale investment securities

79,564


71,367

Redemption of stock from Federal Home Loan Bank of Seattle

17,482


2,609

Net increase in loans held for investment

(184,766)


(293,996)

Proceeds from sale of real estate acquired in settlement of loans

2,930


8,777

Capital expenditures

(236,003)


(247,392)

Contributions in aid of construction

21,740


23,633

Proceeds from sale of credit card portfolio


26,386

Other

(39)


426

Net cash used in investing activities

(376,992)


(363,424)

Cash flows from financing activities




Net increase in deposit liabilities

161,320


80,926

Net increase in short-term borrowings with original maturities of three months or less

45,094


47,648

Net decrease in retail repurchase agreements

(6,306)


(6,314)

Proceeds from other bank borrowings

90,000


120,000

Repayments of other bank borrowings

(65,000)


(70,000)

Proceeds from issuance of long-term debt

125,000


50,000

Repayment of long-term debt

(100,000)


(50,000)

Excess tax benefits from share-based payment arrangements

271


469

Net proceeds from issuance of common stock

26,910


18,383

Common stock dividends

(94,674)


(73,584)

Preferred stock dividends of subsidiaries

(1,417)


(1,417)

Other

(5,097)


(4,033)

Net cash provided by financing activities

176,101


112,078

Net decrease in cash and cash equivalents

(27,481)


(4,620)

Cash and cash equivalents, beginning of period

220,036


219,662

Cash and cash equivalents, end of period

$

192,555


$

215,042

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014 (when filed), as updated by SEC Forms 8-K. Cash flows for interim periods are not necessarily indicative of cash flows to be expected for future interim periods or the full year.



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

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



Three months ended September 30


Nine months ended September 30

(dollars in thousands, except per barrel amounts)

2014


2013


2014


2013

Revenues

$

803,565


$

764,054


$

2,262,056


$

2,210,020

Expenses








Fuel oil

309,432


283,360


865,989


877,738

Purchased power

192,882


194,861


546,121


526,669

Other operation and maintenance

108,313


104,513


295,483


300,723

Depreciation

41,594


38,995


124,790


115,865

Taxes, other than income taxes

75,188


72,472


212,783


209,076

Total expenses

727,409


694,201


2,045,166


2,030,071

Operating income

76,156


69,853


216,890


179,949

Allowance for equity funds used during construction

1,937


1,255


4,933


4,030

Interest expense and other charges, net

(16,414)


(15,033)


(48,989)


(43,960)

Allowance for borrowed funds used during construction

740


498


1,877


1,626

Income before income taxes

62,419


56,573


174,711


141,645

Income taxes

23,042


18,258


64,686


49,210

Net income

39,377


38,315


110,025


92,435

Preferred stock dividends of subsidiaries

228


228


686


686

Net income attributable to Hawaiian Electric

39,149


38,087


109,339


91,749

Preferred stock dividends of Hawaiian Electric

270


270


810


810

Net income for common stock

$          38,879


$         37,817


$

108,529


$

90,939

Comprehensive income attributable to Hawaiian Electric

$

38,889


$

37,834


$

108,561


$

90,991

OTHER ELECTRIC UTILITY INFORMATION








Kilowatthour sales (millions)








   Hawaiian Electric

1,815


1,807


5,062


5,100

   Hawaii Electric Light

273


275


793


803

   Maui Electric

296


294


844


843


2,384


2,376


6,699


6,746

Wet-bulb temperature (Oahu average; degrees Fahrenheit)

72.2


70.6


69.5


68.6

Cooling degree days (Oahu)

1,631


1,468


3,703


3,371

Average fuel oil cost per barrel

$

133.26


$

127.42


$

132.19


$

130.15









Twelve months ended September 30


2014


2013

Return on average common equity (%) (simple average)1





   Hawaiian Electric



9.63


6.69

   Hawaii Electric Light



6.77


5.41

   Maui Electric



8.55


6.79

   Hawaiian Electric Consolidated



8.96


6.46

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in Hawaiian Electric's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and the consolidated financial statements and the notes thereto in Hawaiian Electric's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

1    On a core basis, the 2014 and 2013 return on average common equity (twelve months ended September 30) were 9.6% and 8.5%, respectively for Hawaiian Electric; 6.8% and 6.6%, respectively for Hawaii Electric Light; 8.6% and 8.2%, respectively for Maui Electric and 9.0% and 8.1% respectively, for Hawaiian Electric Consolidated.  See reconciliation of GAAP to non-GAAP measures.



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

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(dollars in thousands, except par value)

September 30, 2014


December 31, 2013

Assets




Property, plant and equipment




Utility property, plant and equipment




Land

$

52,344


$

51,883

Plant and equipment

5,902,397


5,701,875

Less accumulated depreciation

(2,167,545)


(2,111,229)

Construction in progress

179,190


143,233

Utility property, plant and equipment, net

3,966,386


3,785,762

Nonutility property, plant and equipment, less accumulated depreciation of $1,229 and $1,223 at respective dates

6,561


6,567

Total property, plant and equipment, net

3,972,947


3,792,329

Current assets




Cash and cash equivalents

18,387


62,825

Customer accounts receivable, net

189,733


175,448

Accrued unbilled revenues, net

143,153


144,124

Other accounts receivable, net

19,508


14,062

Fuel oil stock, at average cost

118,303


134,087

Materials and supplies, at average cost

60,639


59,044

Prepayments and other

50,270


52,857

Regulatory assets

54,700


69,738

Total current assets

654,693


712,185

Other long-term assets




Regulatory assets

521,012


506,186

Unamortized debt expense

8,619


9,003

Other

67,891


67,426

Total other long-term assets

597,522


582,615

Total assets

$

5,225,162


$

5,087,129

Capitalization and liabilities




Capitalization




Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 15,429,105 shares)

$

102,880


$

102,880

Premium on capital stock

541,447


541,452

Retained earnings

990,784


948,624

Accumulated other comprehensive income, net of income taxes-retirement benefit plans

640


608

Common stock equity

1,635,751


1,593,564

Cumulative preferred stock — not subject to mandatory redemption

34,293


34,293

Long-term debt, net

1,206,546


1,206,545

Total capitalization

2,876,590


2,834,402

Current liabilities




Current portion of long-term debt

11,400


11,400

Short-term borrowings from non-affiliates

84,987


Accounts payable

151,978


189,559

Interest and preferred dividends payable

24,401


21,652

Taxes accrued

236,481


249,445

Regulatory liabilities

528


1,916

Other

62,400


63,881

Total current liabilities

572,175


537,853

Deferred credits and other liabilities




Deferred income taxes

565,499


507,161

Regulatory liabilities

356,562


347,383

Unamortized tax credits

79,268


73,539

Defined benefit pension and other postretirement benefit plans liability

248,338


262,162

Other

77,919


91,735

Total deferred credits and other liabilities

1,327,586


1,281,980

Contributions in aid of construction

448,811


432,894

Total capitalization and liabilities

$

5,225,162


$

5,087,129

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in Hawaiian Electric's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and the consolidated financial statements and the notes thereto in Hawaiian Electric's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014 (when filed), as updated by SEC Forms 8-K.



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

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Nine months ended September 30

2014


2013

(in thousands)




Cash flows from operating activities




Net income

$

110,025


$

92,435

Adjustments to reconcile net income to net cash provided by operating activities




Depreciation of property, plant and equipment

124,790


115,865

Other amortization

4,662


2,470

Increase in deferred income taxes

67,392


48,014

Change in tax credits, net

5,816


4,510

Allowance for equity funds used during construction

(4,933)


(4,030)

Change in cash overdraft

(1,038)


Changes in assets and liabilities




Decrease (increase) in accounts receivable

(19,731)


42,077

Decrease (increase) in accrued unbilled revenues

971


(5,603)

Decrease in fuel oil stock

15,784


24,332

Increase in materials and supplies

(1,595)


(8,349)

Increase in regulatory assets

(17,531)


(53,314)

Decrease in accounts payable

(77,893)


(22,974)

Change in prepaid and accrued income taxes and utility revenue taxes

(18,075)


(15,416)

Increase (decrease) in defined benefit pension and other postretirement benefit plans liability

(748)


1,488

Change in other assets and liabilities

(41,629)


(10,195)

Net cash provided by operating activities

146,267


211,310

Cash flows from investing activities




Capital expenditures

(229,105)


(237,869)

Contributions in aid of construction

21,740


23,633

Other


427

Net cash used in investing activities

(207,365)


(213,809)

Cash flows from financing activities




Common stock dividends

(66,369)


(61,183)

Preferred stock dividends of Hawaiian Electric and subsidiaries

(1,496)


(1,496)

Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less

84,987


73,246

Other

(462)


(42)

Net cash provided by financing activities

16,660


10,525

Net increase (decrease) in cash and cash equivalents

(44,438)


8,026

Cash and cash equivalents, beginning of period

62,825


17,159

Cash and cash equivalents, end of period

$

18,387


$

25,185

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in Hawaiian Electric's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and the consolidated financial statements and the notes thereto in Hawaiian Electric's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014 (when filed), as updated by SEC Forms 8-K. Cash flows for interim periods are not necessarily indicative of cash flows 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


Nine months ended September30

(in thousands)

September 30, 2014


June 30, 2014


September 30, 2013


2014


2013

Interest and dividend income










Interest and fees on loans

$

45,532


$

43,851


$

43,337


$

133,065


$

129,564

Interest and dividends on investment and mortgage-related securities

2,773


2,950


3,025


8,758


9,723

Total interest and dividend income

48,305


46,801


46,362


141,823


139,287

Interest expense










Interest on deposit liabilities

1,312


1,237


1,262


3,774


3,870

Interest on other borrowings

1,438


1,420


1,206


4,263


3,548

Total interest expense

2,750


2,657


2,468


8,037


7,418

Net interest income

45,555


44,144


43,894


133,786


131,869

Provision for loan losses

1,550


1,021


54


3,566


953

Net interest income after provision for loan losses

44,005


43,123


43,840


130,220


130,916

Noninterest income










Fees from other financial services

5,642


5,217


5,728


15,987


21,367

Fee income on deposit liabilities

5,109


4,645


4,819


14,175


13,566

Fee income on other financial products

1,971


2,064


2,714


6,325


6,288

Mortgage banking income

875


246


1,547


1,749


6,896

Gain on sale of securities




2,847


1,226

Other income, net

1,634


1,643


3,888


4,865


7,211

Total noninterest income

15,231


13,815


18,696


45,948


56,554

Noninterest expense










Compensation and employee benefits

19,892


19,872


20,564


60,050


60,715

Occupancy

4,517


4,489


4,208


12,959


12,550

Data processing

2,684


2,971


2,168


8,715


7,982

Services

2,580


2,855


2,424


7,708


6,855

Equipment

1,672


1,609


1,825


4,926


5,469

Office supplies, printing and postage

1,415


1,456


907


4,487


2,806

Marketing

948


1,031


692


2,690


2,054

Communication

412


448


479


1,363


1,374

Other expense

5,544


5,159


6,461


15,026


18,400

Total noninterest expense

39,664


39,890


39,728


117,924


118,205

Income before income taxes

19,572


17,048


22,808


58,244


69,265

Income taxes

6,312


5,372


7,532


18,769


23,915

Net income

$

13,260


$

11,676


$

15,276


$

39,475


$

45,350

Comprehensive income

$

11,811


$

14,434


$

14,107


$

41,808


$

36,931

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



Return on average assets

0.98


0.87


1.20


0.98


1.19

Return on average equity

9.87


8.78


12.13


9.89


11.99

Return on average tangible common equity

11.65


10.39


14.50


11.70


14.33

Net interest margin

3.62


3.55


3.73


3.60


3.77

Net charge-offs (recoveries) to average loans outstanding

0.04


(0.04)



0.01


0.06

As of period end










Nonperforming assets to loans outstanding and real estate owned *

0.88


1.05


1.33





Allowance for loan losses to loans outstanding

1.00


0.99


1.01





Tier-1 leverage ratio *

9.1


9.0


9.3





Total risk-based capital ratio *

12.6


12.6


12.5





Tangible common equity to total assets

8.49


8.46


8.36





Dividend paid to HEI (via ASHI) ($ in millions)

9


10


10





*  Regulatory basis

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014 (when filed), as updated by SEC Forms 8-K. 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.

BALANCE SHEETS DATA

(Unaudited)


(in thousands)

September 30, 2014


December 31, 2013

Assets








Cash and due from banks



$

98,879




$

108,998

Interest-bearing deposits



74,654




47,605

Available-for-sale investment and mortgage-related securities



531,603




529,007

Investment in stock of Federal Home Loan Bank of Seattle



75,063




92,546

Loans receivable held for investment



4,335,421




4,150,229

Allowance for loan losses



(43,461)




(40,116)

Loans receivable held for investment, net



4,291,960




4,110,113

Loans held for sale, at lower of cost or fair value



2,328




5,302

Other



285,659




268,063

Goodwill



82,190




82,190

Total assets



$

5,442,336




$

5,243,824









Liabilities and shareholder's equity








Deposit liabilities—noninterest-bearing



$

1,298,726




$

1,214,418

Deposit liabilities—interest-bearing



3,235,071




3,158,059

Other borrowings



263,204




244,514

Other



107,814




105,679

Total liabilities



4,904,815




4,722,670

Common stock



1




1

Additional paid in capital



337,862




336,053

Retained earnings



209,522




197,297

Accumulated other comprehensive loss, net of tax benefits








Net unrealized losses on securities

$

(1,972)




$

(3,663)



Retirement benefit plans

(7,892)


(9,864)


(8,534)


(12,197)

Total shareholder's equity



537,521




521,154

Total liabilities and shareholder's equity



$

5,442,336




$

5,243,824













This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014 (when filed), as updated by SEC Forms 8-K.

EXPLANATION OF HEI'S USE OF CERTAIN UNAUDITED NON-GAAP MEASURES

HEI and Hawaiian Electric Company management use certain non-GAAP measures to evaluate the performance of the utility and HEI.  Management believes these non-GAAP measures provide useful information and are a better indicator of the companies' core operating activities.  Core earnings and other financial measures as presented here may not be comparable to similarly titled measures used by other companies.  The accompanying tables provide a reconciliation of reported GAAP1 earnings to non-GAAP core earnings for both the utility and HEI consolidated and the corresponding adjusted return on average common equity (ROACE).

The reconciling adjustments from GAAP earnings to core earnings are limited to the settlement charge for the partial write-off of utility assets in the fourth quarter of 2012.  For more information on the settlement charge recorded in 2012, see the Form 8-K filed on March 20, 2013.  Management does not consider these items to be representative of the company's fundamental core earnings.

The accompanying table also provides the calculation of utility GAAP O&M adjusted for "O&M-related net income neutral items" which are O&M expenses covered by specific surcharges or by third parties.  This item is grossed-up in revenue and expense and does not impact net income.

RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES

Hawaiian Electric Industries, Inc. and Subsidiaries (HEI)

Unaudited




($ in millions)








Twelve months ended September 30

2014


2013

HEI CONSOLIDATED NET INCOME




GAAP (as reported)

$

174.2


$

136.3

Excluding special items (after-tax):




Settlement agreement for the partial writedown of certain utility assets


24.4

Non-GAAP (core)

$

174.2


$

160.8

HEI CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average)

Based on GAAP

10.1%


8.4%

Based on non-GAAP (core)2

10.1%


9.9%

Note:  Columns may not foot due to rounding


1  Accounting principles generally accepted in the United States of America


2 Calculated as core net income divided by average GAAP common equity



RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES

Hawaiian Electric Company, Inc. and Subsidiaries

Unaudited


($ in millions)




Twelve months ended September 30

2014


2013

HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME




GAAP (as reported)

$

140.5


$

95.2

Excluding special items (after-tax):




Settlement agreement for the partial writedown of certain utility assets


24.4

Non-GAAP (core)

$

140.5


$

119.6





HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average):




Based on GAAP

9.0%


6.5%

Based on non-GAAP (core)2

9.0%


8.1%















Hawaiian Electric


Hawaii Electric Light


Maui Electric

Twelve months ended September 30

2014


2013



2014


2013



2014


2013

NET INCOME














GAAP (as reported)

$

101.0


$

63.9



$

18.7


$

15.1



$

20.8


$

16.1

Excluding special items (after-tax):














Settlement agreement for the partial writedown of certain utility assets


17.7




3.4




3.4

Non-GAAP (core)

$

101.0


$

81.6



$

18.7


$

18.5



$

20.8


$

19.5













RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average):







Based on GAAP

9.6%


6.7%



6.8%


5.4%



8.6%


6.8%

Based on non-GAAP (core)2

9.6%


8.5%



6.8%


6.6%



8.6%


8.2%

















Three months ended September 30











2014


2013

HAWAIIAN ELECTRIC CONSOLIDATED OTHER OPERATION AND MAINTENANCE (O&M) EXPENSE

GAAP (as reported)











$

108.3


$

104.5

Excluding O&M-related net income neutral items3











(2.5)


(1.5)

Adjusted O&M expense (Non-GAAP measure)











$

105.8


$

103.0

Note:  Columns may not foot due to rounding



Accounting principles generally accepted in the United States of America



2 Calculated as core net income divided by average GAAP common equity



3 Expenses covered by surcharges or by third parties recorded in revenues






Contact:

Clifford H. Chen



Manager, Investor Relations &

Telephone: (808) 543-7384


Strategic Planning

E-mail: cchen@hei.com







Logo - http://photos.prnewswire.com/prnh/20110411/LA80136LOGO

SOURCE Hawaiian Electric Industries, Inc.