HEI Reports First Quarter 2020 Results

1Q 2020 Diluted Earnings Per Share (EPS)[1] of $0.31

Focused on Supporting Our Customers and Communities, Contributing to Hawaii's Recovery

Solid Liquidity Enterprise-wide

Company Release - 5/5/2020 6:00 AM ET

HONOLULU, May 5, 2020 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock for the first quarter of 2020 of $33.4 million and EPS of $0.31 compared to $45.7 million and EPS of $0.42 for the first quarter of 2019.

"Hawaii is facing an unprecedented challenge from the COVID-19 pandemic, and we're especially mindful of the essential roles our companies play," said Constance H. Lau, president and CEO of HEI.  "Through our utility, we provide reliable electricity to keep our hospitals, homes and essential businesses running, and through our bank, we help ensure that money keeps flowing through our economy. I'm proud of the dedication of our employees in continuing to provide these essential services to our customers and communities throughout this challenging time, even with personal risk to themselves and their families.

"HEI entered this crisis in a strong financial position, and that has served us well to weather the challenges of COVID-19. We've also taken steps to further enhance our strong liquidity position, which has further enabled our companies to implement a number of programs to support our customers and communities through this uncertain time. We're also focused on how we can help support and advance our state's recovery, and we continue to partner with stakeholders to progress clean energy projects and identify opportunities to rebuild our economy with Hawaii's green economy goals in mind.

"American Savings Bank's results reflect solid execution and good loan and deposit growth as the team kicked off 2020, however an increase in the allowance for credit losses was necessary to reflect the challenges customers face due to the economic crisis that began towards quarter end. The bank's healthy capital and liquidity position has enabled it to help customers and the community move toward recovery, particularly through helping customers and non-customers obtain needed funding under the Small Business Administration's Paycheck Protection Program. We are proud that American secured over $300 million in federal loans to approximately 2,500 small businesses employing roughly 40,000 in the first authorization, and that Hawaii banks in total obtained funding for 78% of our state's eligible payrolls. American remains focused on helping our customers through this challenging time and supporting our state as we move toward recovery." said Lau.

_____________

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

HAWAIIAN ELECTRIC COMPANY EARNINGS

Hawaiian Electric Company's (Hawaiian Electric) net income for the first quarter of 2020 was $23.9 million, compared to $32.1 million in the first quarter of 2019, primarily driven by the following after-tax items:

  • $3 million revenue increase resulting from higher rate adjustment mechanism (RAM) revenues, including $2 million from Hawaiian Electric (Oahu), and $1 million total from Maui Electric (Maui County) and Hawaii Electric Light (Hawaii Island);
  • $1 million revenue increase from recovery of the West Loch project and Grid Modernization projects under the major project interim recovery (MPIR) mechanism; and
  • $1 million lower interest expense due to debt refinancings in 2019 at lower rates.

These items were more than offset by the following after-tax items:

  • $7 million higher operations and maintenance expenses compared to the first quarter of 2019, primarily due to $2 million higher bad debt expense due to the economic impact of the COVID-19 pandemic on customers, the absence of a one-time net income benefit recorded in the first quarter of 2019 related to the Public Utilities Commission granting deferral treatment of certain previously-incurred expenses to modify existing generating units on Maui, an increase in vegetation management work, and higher outside services costs related to customer service operations and energy management systems; 
  • $1 million higher depreciation expense due to increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency;
  • $1 million due to the absence of the performance incentive received in 2019 for procurement of renewable resources;
  • $1 million due to revenues received for mutual assistance work reimbursement in 2019; and
  • $1 million due to lower allowance for funds used during construction as there were fewer long-duration projects in construction work in progress in 2020.

_________________

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) first quarter 2020 net income was $15.8 million compared to $28.2 million in the fourth, or linked quarter of 2019, which included an after tax gain of $7.7 million2 related to the sales of former properties, net of exit costs to transition to American's new campus, and $20.8 million in the first quarter of 2019. The decrease in net income compared to the linked and prior year quarters reflects a higher provision for credit losses due to additional credit loss reserves related to COVID-19, and, compared to the linked quarter, lower noninterest income due to the aforementioned gain on sale of properties.

Total loans were $5.2 billion as of March 31, 2020, up 4.7% annualized from December 31, 2019, driven mainly by increases in the commercial and commercial real estate portfolios, offset by reductions in the retail loan portfolios.

Total deposits were $6.4 billion as of March 31, 2020, an increase of 7.1% annualized from December 31, 2019. The average cost of funds was 0.24% for the quarter, down two basis points versus the linked quarter and down seven basis points versus the prior year quarter.

Overall, American's return on average equity3 for the first quarter of 2020 was 9.1%, compared to 16.5% in the linked quarter and 13.1% in the first quarter of 2019. Return on average assets was 0.87% for the first quarter of 2020, compared to 1.58% in the linked quarter and 1.18% in the same quarter last year. Return on average equity and return on average assets for the linked quarter were elevated as a result of the previously mentioned net gain on sale of properties.

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

HOLDING AND OTHER COMPANIES

The holding and other companies' net loss was $6.2 million for the first quarter of 2020 compared to $7.3 million in the prior year quarter. The lower net loss was primarily due to lower corporate expenses.

_____________

2 The after-tax gain on sale of properties and the after-tax campus transition costs for the fourth quarter of 2019 were $7.9 million and $0.2 million, respectively.

3 Bank return on average equity calculated using weighted average daily common equity.

BOARD MAINTAINS QUARTERLY DIVIDEND

On May 4, 2020, the Board of Directors maintained HEI's quarterly cash dividend of $0.33 per share payable on June 10, 2020, to shareholders of record at the close of business on May 22, 2020 (ex-dividend date is May 21, 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 May 4, 2020 of $38.32, HEI's dividend yield is 3.4%.

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 earnings, including American's earnings, and 2020 earnings guidance and outlook at 7:30 a.m.Hawaii time (1:30 p.m. Eastern time) on Tuesday, May 5, 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'sSecurities 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'sSEC 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'sSEC filings.

An on-line replay of the May 5, 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 May 19, 2020 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode 10142250.

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 and Hawaiian Electric's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 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 March 31,

(in thousands, except per share amounts)



2020


2019

Revenues






Electric utility



$

597,442



$

578,495


Bank



79,738



83,052


Other



6



68


Total revenues



677,186



661,615


Expenses






Electric utility



553,484



521,935


Bank



60,335



56,930


Other



3,665



4,813


Total expenses



617,484



583,678


Operating income (loss)






Electric utility



43,958



56,560


Bank



19,403



26,122


Other



(3,659)



(4,745)


Total operating income



59,702



77,937


Retirement defined benefits expense—other than service costs



(934)



(763)


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



(21,775)



(23,123)


Allowance for borrowed funds used during construction



688



1,078


Allowance for equity funds used during construction



2,015



2,910


Income before income taxes



39,696



58,039


Income taxes



5,803



11,878


Net income



33,893



46,161


Preferred stock dividends of subsidiaries



473



473


Net income for common stock



$

33,420



$

45,688


Basic earnings per common share



$

0.31



$

0.42


Diluted earnings per common share



$

0.31



$

0.42


Dividends declared per common share



$

0.33



$

0.32


Weighted-average number of common shares outstanding



109,051



108,913


Weighted-average shares assuming dilution



109,365



109,268


Net income (loss) for common stock by segment






Electric utility



$

23,905



$

32,126


Bank



15,761



20,839


Other



(6,246)



(7,277)


Net income for common stock



$

33,420



$

45,688


Comprehensive income attributable to Hawaiian Electric Industries, Inc.



$

51,632



$

54,929


Return on average common equity (twelve months ended)



9.2

%


9.7

%


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 March 31,

($ in thousands, except per barrel amounts)


2020


2019

Revenues


$

597,442



$

578,495


Expenses





Fuel oil


173,221



160,609


Purchased power


139,816



134,445


Other operation and maintenance


127,547



118,130


Depreciation


55,850



53,947


Taxes, other than income taxes


57,050



54,804


Total expenses


553,484



521,935


Operating income


43,958



56,560


Allowance for equity funds used during construction


2,015



2,910


Retirement defined benefits expense—other than service costs


(381)



(703)


Interest expense and other charges, net


(16,594)



(17,986)


Allowance for borrowed funds used during construction


688



1,078


Income before income taxes


29,686



41,859


Income taxes


5,282



9,234


Net income


24,404



32,625


Preferred stock dividends of subsidiaries


229



229


Net income attributable to Hawaiian Electric


24,175



32,396


Preferred stock dividends of Hawaiian Electric


270



270


Net income for common stock


$

23,905



$

32,126


Comprehensive income attributable to Hawaiian Electric


$

23,931



$

32,150


OTHER ELECTRIC UTILITY INFORMATION





Kilowatthour sales (millions)





   Hawaiian Electric


1,496



1,424


   Hawaii Electric Light


252



245


   Maui Electric


258



247




2,006



1,916


Average fuel oil cost per barrel


$

80.78



$

80.39


Return on average common equity (twelve months ended)1


7.4

%


7.8

%


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.


1  Simple average.

 

American Savings Bank, F.S.B.

STATEMENTS OF INCOME DATA

(Unaudited)




Three months ended 

($ in thousands)


March 31, 2020


December 31, 2019


March 31, 2019

Interest and dividend income







Interest and fees on loans


$

55,545



$

57,892



$

57,860


Interest and dividends on investment securities


9,430



7,160



10,628


Total interest and dividend income


64,975



65,052



68,488


Interest expense







Interest on deposit liabilities


3,587



3,907



4,252


Interest on other borrowings


313



249



528


Total interest expense


3,900



4,156



4,780


Net interest income


61,075



60,896



63,708


Provision for credit losses


10,401



5,607



6,870


Net interest income after provision for credit losses


50,674



55,289



56,838


Noninterest income







Fees from other financial services


4,571



4,830



4,562


Fee income on deposit liabilities


5,113



5,475



5,078


Fee income on other financial products


1,872



1,378



1,593


Bank-owned life insurance


794



1,378



2,259


Mortgage banking income


2,000



1,863



614


Gain on sale of real estate




10,762




Other income, net


413



654



458


Total noninterest income


14,763



26,340



14,564


Noninterest expense







Compensation and employee benefits


25,777



26,383



25,512


Occupancy


5,267



5,429



4,670


Data processing


3,837



3,953



3,738


Services


2,809



2,378



2,426


Equipment


2,339



2,344



2,064


Office supplies, printing and postage


1,341



1,192



1,360


Marketing


802



1,035



990


FDIC insurance


102



(45)



626


Other expense


4,194



3,537



3,854


Total noninterest expense


46,468



46,206



45,240


Income before income taxes


18,969



35,423



26,162


Income taxes


3,208



7,193



5,323


Net income


$

15,761



$

28,230



$

20,839


Comprehensive income


$

35,608



$

33,300



$

27,091


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





Return on average assets


0.87



1.58



1.18


Return on average equity


9.15



16.45



13.09


Return on average tangible common equity


10.39



18.69



15.03


Net interest margin


3.72



3.74



3.99


Efficiency ratio


61.27



52.97



57.80


Net charge-offs to average loans outstanding


0.44



0.41



0.39


As of period end







Nonaccrual loans to loans receivable held for investment


0.90



0.58



0.83


Allowance for loan losses to loans outstanding


1.49



1.04



1.12


Tangible common equity to tangible assets


8.3



8.6



8.1


Tier-1 leverage ratio


8.8



9.1



8.7


Total capital ratio


13.9



14.3



13.9


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


$

28.0



$

9.0



$

18.0



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 & Strategic Planning

           E-mail: ir@hei.com

 

Hawaiian Electric Industries, Inc. (PRNewsFoto/Hawaiian Electric Industries, Inc.)

 

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SOURCE Hawaiian Electric Industries, Inc.