HONOLULU, Nov. 7, 2018 /PRNewswire/ — Hawaiian Electric Industries, Inc. (NYSE – HE) (HEI) today reported consolidated net income for common stock for the third quarter of 2018 of $65.9 million and diluted earnings per share (EPS) of $0.60 compared to $60.1 million and EPS of $0.55 for the third quarter of 2017. 

“We are pleased to report solid third quarter results from both our utility and bank and are excited about the progress we’re making on our strategies across the company,” said Constance H. Lau, president and CEO of HEI.

“Our utilities are quickly advancing Hawaii’s clean energy transition now that key foundational frameworks are in place, including for 100% renewable power and grid modernization. For example, we’re negotiating contracts for seven solar-plus-storage projects across our three utilities to add 260 megawatts of solar and more than a gigawatt-hour of storage in the state’s largest-ever renewable energy procurement. As we advance toward 100% clean energy, we’re focused on ensuring we all move forward together, and that all customers have access to affordable, reliable renewable energy.”

“Our bank delivered strong financial performance in the third quarter, expanding its margin and improving profitability, while at the same time continuing its focus on making banking easier for customers and improving operational efficiency.”

HAWAIIAN ELECTRIC COMPANY EARNINGS
Hawaiian Electric Company’s1 net income for the third quarter of 2018 was $49.7 million compared to $47.5 million in the third quarter of 2017, an increase of $2.2 million primarily driven by the following after-tax items:

  • $12 million higher revenues from rate adjustment mechanism (RAM) revenues, major projects interim recovery (MPIR) revenues for the Schofield Generating Station that was completed in June and rate relief from the interim decision in Maui Electric’s 2018 test year rate case and final decisions in Hawaiian Electric’s 2017 and Hawaii Electric Light’s 2016 test year rate cases;
  • $5 million higher net income from net favorable tax adjustments primarily related to differences between the 2017 year-end tax accrual and the filing of the 2017 tax return (differences are largely related to the acceleration of the deduction of 2018 pension contributions into the 2017 tax year); and
  • $1 million higher net income for the quarter, representing the difference between actual third quarter tax savings and the reduction in revenue requirement from tax reform, which was based on test-year projections. Year to date, the reduction in revenue requirement from tax reform was approximately $3 million higher than actual tax savings.

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

  • $11 million higher O&M expenses2 compared to 2017, primarily due to the reset of pension costs as part of rate case decisions, and higher costs for underground circuit repair work, generating station operation and maintenance, and workers’ compensation claims;
  • $2 million higher depreciation expense as a result of increasing investments for the integration of more renewable energy, improved reliability and greater system efficiency;
  • $2 million lower allowance for funds used during construction; and
  • $1 million higher interest expense from higher interest rates and increased borrowings.

 

___________________

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.

1

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

2

Excludes net income neutral expenses covered by surcharges or by third parties.  See the “Explanation of HEI’s Use of Certain Unaudited Non-GAAP Measures” and the related reconciliation accompanying this release.

AMERICAN SAVINGS BANK EARNINGS
American Savings Bank’s (American) third quarter of 2018 net income was $21.2 million compared to $20.6 million in the second, or linked, quarter and $17.6 million in the prior year quarter. 

Compared to the linked quarter of 2018, the $0.7 million net income increase in the third quarter was primarily driven by higher net interest income, mainly due to higher yields on interest earning assets, higher bank-owned life insurance income and lower noninterest expense, which offset higher provision expense that was primarily due to additional loan loss reserves for the consumer loan portfolio.  

Compared to the third quarter of 2017, the $3.6 million higher net income in the third quarter of 2018 was primarily driven by higher net interest income and $3.6 million lower income tax expense in the third quarter of 2018 compared to the third quarter of 2017, primarily due to the benefits of the lower federal corporate tax rate from tax reform. These items were partially offset by higher provision for loan losses due to increased reserves for loan growth and additional loan loss reserves for the consumer loan portfolio.  

Total loans were $4.8 billion at September 30, 2018, up $83 million or 2.4% annualized from December 31, 2017, driven mainly by increases in home equity lines of credit and commercial and consumer loans of $90 million.  

Total deposits were $6.1 billion at September 30, 2018, an increase of $240 million or 5.4% annualized from December 31, 2017, including $100 million in repurchase agreements that were transferred into deposit accounts.  Excluding such transfer, total deposits increased by 3.1% annualized.  Cost of funds was 26 basis points for the third quarter of 2018, up 2 basis points from the linked quarter and up 6 basis points from the prior year quarter.

American’s return on average equity3 for the third quarter of 2018 was 13.80%, compared to 13.56% in the linked quarter and 11.64% in the third quarter of 2017.  Return on average assets was 1.22% for the third quarter of 2018, compared to 1.20% in the linked quarter and 1.07% in the same quarter last year.

Please refer to American’s news release issued on October 30, 2018 for additional information on American.

____________________

3

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

HOLDING AND OTHER COMPANIES
The holding and other companies’ net loss was $5.0 million in both the third quarter of 2018 and the prior year quarter.    

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 2018 earnings and 2018 EPS guidance on Wednesday, November 7, 2018, at 11:00 a.m. Hawaii time (4:00 p.m. Eastern time).

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 or by accessing the webcast on HEI’s website at www.hei.com under the “Investor Relations” section, sub-heading “News and Events.”  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 at www.hei.com 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. 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 online replay of the webcast will be available at www.hei.com beginning about two hours after the event. Replays of the conference call will also be available approximately two hours after the event through November 21, 2018, by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10125059.

HEI supplies power to approximately 95% of Hawaii’s population through its electric utilities, Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited; 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; and helps advance Hawaii’s clean energy and sustainability goals through investments by its non-regulated subsidiary, Pacific Current, LLC.

NON-GAAP MEASURES
See “Explanation of HEI’s Use of Certain Unaudited Non-GAAP Measures” and related reconciliations on page 8 of this release.

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)

2018

2017

2018

2017

Revenues

Electric utility

$

687,409

$

598,769

$

1,865,962

$

1,674,255

Bank

80,496

74,289

233,019

222,474

Other

143

127

218

299

Total revenues

768,048

673,185

2,099,199

1,897,028

Expenses

Electric utility

613,373

510,272

1,685,413

1,478,915

Bank

53,232

47,313

153,951

146,146

Other

3,379

4,127

11,083

12,954

Total expenses

669,984

561,712

1,850,447

1,638,015

Operating income (loss)

Electric utility

74,036

88,497

180,549

195,340

Bank

27,264

26,976

79,068

76,328

Other

(3,236)

(4,000)

(10,865)

(12,655)

Total operating income

98,064

111,473

248,752

259,013

Retirement defined benefits expense—other than service costs

(1,276)

(1,928)

(4,673)

(5,710)

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

(22,523)

(19,227)

(66,042)

(59,235)

Allowance for borrowed funds used during construction

1,006

1,339

3,815

3,371

Allowance for equity funds used during construction

1,962

3,482

8,239

8,908

Income before income taxes

77,233

95,139

190,091

206,347

Income taxes

10,862

34,595

36,473

72,003

Net income

66,371

60,544

153,618

134,344

Preferred stock dividends of subsidiaries

471

471

1,417

1,417

Net income for common stock

$

65,900

$

60,073

$

152,201

$

132,927

Basic earnings per common share

$

0.61

$

0.55

$

1.40

$

1.22

Diluted earnings per common share

$

0.60

$

0.55

$

1.40

$

1.22

Dividends declared per common share

$

0.31

$

0.31

$

0.93

$

0.93

Weighted-average number of common shares outstanding

108,879

108,786

108,847

108,737

Weighted-average shares assuming dilution

109,055

108,865

109,090

108,909

Net income (loss) for common stock by segment

Electric utility

$

49,712

$

47,487

$

108,356

$

94,596

Bank

21,221

17,592

60,742

50,138

Other

(5,033)

(5,006)

(16,897)

(11,807)

Net income for common stock

$

65,900

$

60,073

$

152,201

$

132,927

Comprehensive income attributable to Hawaiian Electric Industries, Inc.

$

61,311

$

60,627

$

131,014

$

136,836

Return on average common equity (twelve months ended)1

8.7

%

8.5

%

The Consolidated Statements of Income Data reflects the retrospective application of ASU No. 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which was adopted in the first quarter of 2018. Nonservice cost was reclassified from “Expenses” to “Retirement defined benefits expense—other than service costs.”

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

1  On a core basis, 2018 and 2017 returns on average common equity (twelve months ended September 30) were 9.4% and 8.5%, respectively.  See reconciliation of GAAP to non-GAAP measures.

 

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

CONSOLIDATED STATEMENTS OF INCOME DATA

(Unaudited)

Three months ended
September 30

Nine months ended September 30

(dollars in thousands, except per barrel amounts)

2018

2017

2018

2017

Revenues

$

687,409

$

598,769

$

1,865,962

$

1,674,255

Expenses

Fuel oil

206,551

146,258

545,236

431,787

Purchased power

177,590

160,347

478,238

440,538

Other operation and maintenance

113,553

98,681

333,805

302,437

Depreciation

50,983

48,206

151,810

144,578

Taxes, other than income taxes

64,696

56,780

176,324

159,575

Total expenses

613,373

510,272

1,685,413

1,478,915

Operating income

74,036

88,497

180,549

195,340

Allowance for equity funds used during construction

1,962

3,482

8,239

8,908

Retirement defined benefits expense—other than service costs

(682)

(1,421)

(2,934)

(4,279)

Interest expense and other charges, net

(18,968)

(16,907)

(54,822)

(52,625)

Allowance for borrowed funds used during construction

1,006

1,339

3,815

3,371

Income before income taxes

57,354

74,990

134,847

150,715

Income taxes

7,144

27,005

24,995

54,623

Net income

50,210

47,985

109,852

96,092

Preferred stock dividends of subsidiaries

228

228

686

686

Net income attributable to Hawaiian Electric

49,982

47,757

109,166

95,406

Preferred stock dividends of Hawaiian Electric

270

270

810

810

Net income for common stock

$

49,712

$

47,487

$

108,356

$

94,596

Comprehensive income attributable to Hawaiian Electric

$

49,740

$

47,509

$

108,441

$

95,117

OTHER ELECTRIC UTILITY INFORMATION

Kilowatthour sales (millions)

   Hawaiian Electric

1,761

1,775

4,855

4,924

   Hawaii Electric Light

277

272

796

782

   Maui Electric

291

293

818

822

2,329

2,340

6,469

6,528

Average fuel oil cost per barrel

$

90.93

$

66.73

$

84.67

$

67.42

Return on average common equity (twelve months ended)1

7.22

%

7.16

%

The Consolidated Statements of Income Data reflects the retrospective application of ASU No. 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which was adopted in the first quarter of 2018. Nonservice cost was reclassified from “Other operation and maintenance” to “Retirement defined benefits expense—other than service costs.”

This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC.

1  Simple average. On a core basis, 2018 and 2017 returns on average common equity (twelve months ended September 30) were 7.7% and  7.2%, respectively.  See reconciliation of GAAP to non-GAAP measures.

 

American Savings Bank, F.S.B.

STATEMENTS OF INCOME DATA

(Unaudited)

Three months ended

Nine months ended September 30

(in thousands)

September 30,
2018

June 30,
2018

September 30,
2017

2018

2017

Interest and dividend income

Interest and fees on loans

$

55,885

$

54,633

$

52,210

$

163,318

$

155,269

Interest and dividends on investment securities

9,300

8,628

6,850

27,130

20,593

Total interest and dividend income

65,185

63,261

59,060

190,448

175,862

Interest expense

Interest on deposit liabilities

3,635

3,284

2,444

9,876

6,858

Interest on other borrowings

404

393

470

1,293

2,110

Total interest expense

4,039

3,677

2,914

11,169

8,968

Net interest income

61,146

59,584

56,146

179,279

166,894

Provision for loan losses

6,033

2,763

490

12,337

7,231

Net interest income after provision for loan losses

55,113

56,821

55,656

166,942

159,663

Noninterest income

Fees from other financial services

4,543

4,744

5,635

13,941

17,055

Fee income on deposit liabilities

5,454

5,138

5,533

15,781

16,526

Fee income on other financial products

1,746

1,675

1,904

5,075

5,741

Bank-owned life insurance

2,663

1,133

1,257

4,667

4,165

Mortgage banking income

169

617

520

1,399

1,896

Other income, net

736

536

380

1,708

1,229

Total noninterest income

15,311

13,843

15,229

42,571

46,612

Noninterest expense

Compensation and employee benefits

23,952

23,655

23,512

72,047

71,095

Occupancy

4,363

4,194

4,284

12,837

12,623

Data processing

3,583

3,540

3,262

10,587

9,749

Services

2,485

3,028

2,863

8,560

7,989

Equipment

1,783

1,874

1,814

5,385

5,333

Office supplies, printing and postage

1,556

1,491

1,444

4,554

4,506

Marketing

993

1,085

934

2,723

2,290

FDIC insurance

638

727

746

2,078

2,296

Other expense

4,240

4,556

5,262

12,897

14,674

Total noninterest expense

43,593

44,150

44,121

131,668

130,555

Income before income taxes

26,831

26,514

26,764

77,845

75,720

Income taxes

5,610

5,953

9,172

17,103

25,582

Net income

$

21,221

$

20,561

$

17,592

$

60,742

$

50,138

Comprehensive income

$

16,480

$

16,579

$

18,009

$

39,944

$

53,613

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

Return on average assets

1.22

1.20

1.07

1.18

1.02

Return on average equity

13.80

13.56

11.64

13.32

11.24

Return on average tangible common equity

15.93

15.68

13.47

15.40

13.04

Net interest margin

3.81

3.76

3.69

3.78

3.68

Efficiency ratio

57.02

60.13

61.82

59.35

61.15

Net charge-offs to average loans outstanding

0.40

0.32

0.32

0.33

0.27

As of period end

Nonaccrual loans to loans receivable held for investment

0.59

0.57

0.50

Allowance for loan losses to loans outstanding

1.14

1.11

1.13

Tangible common equity to tangible assets

7.75

7.64

8.01

Tier-1 leverage ratio

8.6

8.6

8.7

Total capital ratio

13.8

13.9

13.9

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

$

14.0

$

11.1

$

9.4

$

36.0

$

28.1

The Statements of Income Data reflects the retrospective application of ASU No. 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which was adopted in the first quarter of 2018. Nonservice cost was reclassified from “Compensation and employee benefits” to “Other expense.”

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

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 HEI and the utility.  Management believes these non-GAAP measures provide useful information and are a better indicator of the companies’ core operating activities than the corresponding GAAP measures given the non-recurring nature of certain items.  Non-GAAP core measures presented here may not be comparable to similarly titled measures used by other companies.  The accompanying tables provide the return on average common equity (ROACE) and adjusted non-GAAP core ROACE for HEI and the utility.

The reconciling adjustments from GAAP earnings to core earnings used in the calculation of the twelve months ended September 30, 2018 ROACE exclude the impact of the federal tax reform act recorded in the fourth quarter of 2017 due to the adjustment of deferred tax balances and the $1,000 employee bonuses paid by the bank related to federal tax reform.  Management does not consider these items to be representative of the company’s fundamental core earnings and has shown the non-GAAP (core) ROACE in order to provide better comparability between periods.

The accompanying table also provides the calculation of utility GAAP other operation and maintenance (O&M) expense adjusted for “O&M-related net income neutral items,” which are O&M expenses covered by specific surcharges or by third parties.  These “O&M-related net income neutral items” are grossed-up in revenue and expense and do not impact net income.

RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES

Hawaiian Electric Industries, Inc. and Subsidiaries (HEI)

(Unaudited)

Twelve months ended September 30

2018

2017

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

Based on GAAP

8.7

%

8.5

%

Based on non-GAAP (core)2

9.4

%

8.5

%

Hawaiian Electric Company, Inc. and Subsidiaries

Twelve months ended September 30

2018

2017

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

Based on GAAP

7.22

%

7.16

%

Based on non-GAAP (core)2

7.71

%

7.16

%

Three months ended September 30

Nine months ended September 30

($ in millions)

2018

2017

2018

2017

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

GAAP (as reported)

$

113.6

$

98.7

$

333.8

$

302.4

Excluding other O&M-related net income neutral items3

0.2

0.7

0.7

2.7

Non-GAAP (Adjusted other O&M expense)

$

113.3

$

98.0

$

333.1

$

299.7

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

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

 

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.