HEI Reports Third Quarter 2020 Results

3Q 2020 Diluted Earnings Per Share (EPS)1 of $0.59

Utility Focused on Affordability and Clean Energy Progress

Bank Results Reflect Economic Dynamics and Improved Noninterest Income from Core Activities

Company Release - 11/6/2020 6:00 AM ET

HONOLULU, Nov. 6, 2020 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock for the third quarter of 2020 of $65.0 million and EPS of $0.59 compared to $63.4 million and EPS of $0.58 for the third quarter of 2019.

"I have been deeply impressed by the dedication of our employees and by the resilience of our customers and communities as we all adapt to the ongoing challenges of COVID-19," said Constance H. Lau, HEI president and CEO. "Our financial stability has enabled us to help our customers, our economy and our communities during this unprecedented time, and to continue to deliver solid financial results.

"Keeping customer rates down has been a central focus for our utility. Last month the Hawaii Public Utilities Commission approved our settlement with the Consumer Advocate to not increase base rates in our Oahu rate case. Our utility continues to implement efficiency improvements to deliver on its customer savings commitments, even as it continues to press forward aggressively on our clean energy goals.

"The reopening of Hawaii's tourism sector with pre-arrival testing is a positive step for Hawaii's economy. Even so, the timing of a sustained reopening remains uncertain and our bank's third quarter results again reflect elevated provision for potential credit losses. While low interest rates continue to compress net interest margin, in the third quarter we were able to reduce expenses and improve noninterest income from core activities, including strong mortgage banking income from our residential lending activity, replacing most of the prior quarter's gains on sales of securities," 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 third quarter of 2020 was $60.1 million, compared to $46.8 million in the third quarter of 2019, primarily driven by the following after-tax items:

  • $10 million lower operations and maintenance (O&M) expenses compared to the third quarter of 2019, primarily due to fewer generating unit overhauls, lower labor cost due to lower staffing levels and reduced overtime and elevated vegetation management work in the third quarter of 2019. The lower generation overhauls represented approximately $5 million of the $10 million total O&M variance; of that $5 million, $2 million was due to an elevated number of overhauls in the third quarter of 2019 and the remaining $3 million was timing related, as some overhaul work will be performed later in 4Q 2020 or in 2021;
  • $5 million revenue increase from higher rate adjustment mechanism (RAM) revenues; and
  • $1 million increase for recovery of the West Loch PV project and Grid Modernization projects under the major project interim recovery (MPIR) mechanism.
    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.

AMERICAN SAVINGS BANK EARNINGS
American Savings Bank's (American) third quarter 2020 net income was $12.2 million compared to $14.0 million in the second, or linked quarter of 2020, and $22.9 million in the third quarter of 2019. The decrease in net income compared to the linked quarter was primarily due to higher second quarter gains on sales of securities of $9.3 million. This was partially offset by improved noninterest income, including higher loan sales from increased mortgage banking originations, as well as by lower noninterest expense. The lower net income compared to the third quarter of 2019 primarily reflects lower asset yields within the loan and investment portfolios due to the lower interest rate environment and higher provision for credit losses in the third quarter of 2020, which included approximately $12.3 million in additional reserves related to economic impacts from the pandemic.






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.

Total loans were $5.5 billion as of September 30, 2020, up 7.3%2 from December 31, 2019, driven mainly by the addition of $370 million in Paycheck Protection Program loans, as well as increases in the commercial real estate and residential loan portfolios, offset by reductions in the home equity line of credit and consumer loan portfolios.

Total deposits were $7.0 billion as of September 30, 2020, an increase of 12.2%3 from December 31, 2019. The average cost of funds was 0.13% for the quarter, down five basis points versus the linked quarter and down 17 basis points versus the prior year quarter.

Overall, American's return on average equity4 for the third quarter of 2020 was 6.75%, compared to 8.00% in the linked quarter and 13.75% in the third quarter of 2019. Return on average assets was 0.61% for the third quarter of 2020, compared to 0.72% in the linked quarter and 1.29% in the same quarter last year.

In the third quarter of 2020, American retained capital and did not pay a dividend to HEI. American had a Tier 1 leverage ratio of 8.3% at September 30, 2020.

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

HOLDING AND OTHER COMPANIES
The holding and other companies' net loss was $7.2 million for the third quarter of 2020 compared to $6.2 million in the prior year quarter. The greater net loss was primarily due to lower income at Pacific Current reflecting lower energy sales and higher corporate interest expense from higher short-term borrowing.

BOARD MAINTAINS QUARTERLY DIVIDEND
On November 4, 2020, HEI announced that the Board of Directors maintained HEI's quarterly cash dividend of $0.33 per share payable on December 10, 2020, to shareholders of record at the close of business on November 20, 2020 (ex-dividend date is November 19, 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 November 5, 2020 of $33.05, HEI's dividend yield is 4.0%.






2   Annualized from December 31, 2019, total loans as of September 30, 2020 increased 9.7%

3   Annualized from December 31, 2019, total deposits as of September 30, 2020 increased 16.3%.

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

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 11:15 a.m.Hawaii time (4:15 p.m. Eastern time) on Friday, November 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. HEI's website also contains other materials about the company, such as HEI's Environmental, Social and Governance report, which was published during the quarter. 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 November 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 November 20, 2020 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode 10148946.

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 September 30


Nine months ended September 30

(in thousands, except per share amounts)


2020


2019


2020


2019

Revenues









Electric utility


$

562,568



$

688,330



$

1,694,225



$

1,900,609


Bank


78,644



82,548



233,096



247,287


Other


215



4



237



86


Total revenues


641,427



770,882



1,927,558



2,147,982


Expenses









Electric utility


474,050



616,537



1,493,948



1,716,562


Bank


63,144



54,240



189,700



171,605


Other


4,672



3,450



13,091



12,589


Total expenses


541,866



674,227



1,696,739



1,900,756


Operating income (loss)









Electric utility


88,518



71,793



200,277



184,047


Bank


15,500



28,308



43,396



75,682


Other


(4,457)



(3,446)



(12,854)



(12,503)


Total operating income


99,561



96,655



230,819



247,226


Retirement defined benefits expense—other than service costs


(1,102)



(648)



(2,970)



(2,172)


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


(22,086)



(22,425)



(66,474)



(69,081)


Allowance for borrowed funds used during construction


801



1,208



2,241



3,465


Allowance for equity funds used during construction


2,347



3,250



6,556



9,335


Gain on sale of investment securities, net




653



9,275



653


Income before income taxes


79,521



78,693



179,447



189,426


Income taxes


14,018



14,803



30,691



36,390


Net income


65,503



63,890



148,756



153,036


Preferred stock dividends of subsidiaries


471



471



1,417



1,417


Net income for common stock


$

65,032



$

63,419



$

147,339



$

151,619


Basic earnings per common share


$

0.60



$

0.58



$

1.35



$

1.39


Diluted earnings per common share


$

0.59



$

0.58



$

1.35



$

1.39


Dividends declared per common share


$

0.33



$

0.32



$

0.99



$

0.96


Weighted-average number of common shares outstanding


109,181



108,973



109,126



108,941


Weighted-average shares assuming dilution


109,336



109,363



109,387



109,378


Net income (loss) for common stock by segment









Electric utility


$

60,065



$

46,779



$

126,299



$

111,479


Bank


12,150



22,888



41,925



60,743


Other


(7,183)



(6,248)



(20,885)



(20,603)


Net income for common stock


$

65,032



$

63,419



$

147,339



$

151,619


Comprehensive income attributable to Hawaiian Electric Industries, Inc.


$

66,472



$

66,716



$

166,659



$

177,856


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






9.4



9.2


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 September 30


Nine months ended September 30

($ in thousands, except per barrel amounts)


2020


2019


2020


2019

Revenues


$

562,568



$

688,330



$

1,694,225



$

1,900,609


Expenses









Fuel oil


105,042



199,093



390,714



541,322


Purchased power


149,025



175,037



425,679



472,336


Other operation and maintenance


111,243



124,415



348,831



361,805


Depreciation


55,689



53,935



167,235



161,795


Taxes, other than income taxes


53,051



64,057



161,489



179,304


Total expenses


474,050



616,537



1,493,948



1,716,562


Operating income


88,518



71,793



200,277



184,047


Allowance for equity funds used during construction


2,347



3,250



6,556



9,335


Retirement defined benefits expense—other than service costs


(432)



(723)



(1,195)



(2,127)


Interest expense and other charges, net


(16,836)



(17,429)



(50,768)



(53,945)


Allowance for borrowed funds used during construction


801



1,208



2,241



3,465


Income before income taxes


74,398



58,099



157,111



140,775


Income taxes


13,835



10,822



29,316



27,800


Net income


60,563



47,277



127,795



112,975


Preferred stock dividends of subsidiaries


228



228



686



686


Net income attributable to Hawaiian Electric


60,335



47,049



127,109



112,289


Preferred stock dividends of Hawaiian Electric


270



270



810



810


Net income for common stock


$

60,065



$

46,779



$

126,299



$

111,479


Comprehensive income attributable to Hawaiian Electric


$

60,113



$

46,805



$

126,398



$

111,552


OTHER ELECTRIC UTILITY INFORMATION









Kilowatthour sales (millions)









   Hawaiian Electric


1,620



1,823



4,559



4,840


   Hawaii Electric Light


244



279



721



777


   Maui Electric


235



312



699



832




2,099



2,414



5,979



6,449


Average fuel oil cost per barrel


$

49.71



$

82.30



$

64.70



$

83.64


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






8.4



7.6



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 


Nine months ended September 30

($ in thousands)


September 30,
2020


June 30,
2020


September 30,
2019


2020


2019

Interest and dividend income











Interest and fees on loans


$

52,419



$

53,541



$

59,260



$

161,505



$

175,740


Interest and dividends on investment securities


7,221



6,288



7,599



22,939



25,762


Total interest and dividend income


59,640



59,829



66,859



184,444



201,502


Interest expense











Interest on deposit liabilities


2,287



3,071



4,384



8,945



12,923


Interest on other borrowings


61



75



422



449



1,361


Total interest expense


2,348



3,146



4,806



9,394



14,284


Net interest income


57,292



56,683



62,053



175,050



187,218


Provision for credit losses


13,970



15,133



3,315



39,504



17,873


Net interest income after provision for credit losses


43,322



41,550



58,738



135,546



169,345


Noninterest income











Fees from other financial services


4,233



3,102



5,085



11,906



14,445


Fee income on deposit liabilities


3,832



2,897



5,320



11,842



15,402


Fee income on other financial products


1,524



1,212



1,706



4,608



5,129


Bank-owned life insurance


1,965



1,673



1,660



4,432



6,309


Mortgage banking income


7,681



6,252



1,490



15,933



3,080


Gain on sale of securities, net




9,275



653



9,275



653


Other income, net


(231)



(251)



428



(69)



1,420


Total noninterest income


19,004



24,160



16,342



57,927



46,438


Noninterest expense











Compensation and employee benefits


26,431



25,079



25,364



77,287



76,626


Occupancy


5,693



5,442



5,694



16,402



15,843


Data processing


3,366



3,849



3,763



11,052



11,353


Services


2,624



2,474



2,829



7,907



7,861


Equipment


2,001



2,290



2,163



6,630



6,416


Office supplies, printing and postage


1,187



1,049



1,297



3,577



4,320


Marketing


727



379



1,142



1,908



3,455


FDIC insurance


714



751



(5)



1,567



1,249


Other expense1


4,556



7,063



3,676



15,813



12,049


Total noninterest expense


47,299



48,376



45,923



142,143



139,172


Income before income taxes


15,027



17,334



29,157



51,330



76,611


Income taxes


2,877



3,320



6,269



9,405



15,868


Net income


$

12,150



$

14,014



$

22,888



$

41,925



$

60,743


Comprehensive income


$

13,543



$

13,734



$

26,697



$

62,885



$

85,079


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









Return on average assets


0.61



0.72



1.29



0.73



1.14


Return on average equity


6.75



8.00



13.75



7.95



12.44


Return on average tangible common equity


7.62



9.07



15.68



9.00



14.23


Net interest margin


3.12



3.21



3.82



3.34



3.87


Efficiency ratio


61.99



59.84



58.58



61.01



59.56


Net charge-offs to average loans outstanding


0.32



0.49



0.69



0.41



0.46


As of period end











Nonaccrual loans to loans receivable held for investment


0.77



0.86



0.63






Allowance for credit losses to loans outstanding


1.67



1.50



1.04






Tangible common equity to tangible assets


8.0



7.9



8.4






Tier-1 leverage ratio


8.3



8.4



8.8






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


$



$



$

14.0



$

28.0



$

47.0



1    The three and nine-month periods ended September 30, 2020 include approximately $0.7 million and $4.5 million, respectively, of certain direct and incremental COVID-19 related costs. For the nine months ended September 30, 2020, these costs, which have been recorded in Other expense, include $2.4 million of compensation expense and $1.7 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

 

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

 

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SOURCE Hawaiian Electric Industries, Inc.