PR Newswire | Nov 6, 2020 06:01AM EST

11/06 05:00 CST

HEI Reports Third Quarter 2020 Results3Q 2020 Diluted Earnings Per Share (EPS)1 of $0.59Utility Focused on Affordability and Clean Energy ProgressBank Results Reflect Economic Dynamics and Improved Noninterest Income from Core Activities HONOLULU, Nov. 6, 2020

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 EARNINGSHawaiian 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 EARNINGSAmerican 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 uponadjusting 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 COMPANIESThe 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 DIVIDENDOn 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, 2020increased 9.7%

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

^4 Bank return on average equity calculated using annualized third quarter2020 bank net income and weighted average daily common equity.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2020 GUIDANCEHEI 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's Securities and Exchange Commission (SEC) filings and HEI's public conference calls and webcasts. The information on HEI's website is not incorporated by reference in this document or in HEI's and Hawaiian Electric's SEC filings unless, and except to the extent, specifically incorporated by reference. Investors may also wish to refer to the Public Utilities Commission of the State of Hawaii (PUC) website at dms.puc.hawaii.gov/dms 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's SEC 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 STATEMENTSThis 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 30Nine 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 (22,086) (22,425) (66,474) (69,081) borrowings

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 2020 2019 2020 2019 barrel amounts)

Revenues $562,568 $688,330 $ 1,694,225$ 1,900,609

Expenses

Fuel oil 105,042 199,093 390,714 541,322

Purchased 149,025 175,037 425,679 472,336 power

Other operation and111,243 124,415 348,831 361,805 maintenance

Depreciation 55,689 53,935 167,235 161,795

Taxes, other than income 53,051 64,057 161,489 179,304 taxes

Total 474,050 616,537 1,493,948 1,716,562 expenses

Operating 88,518 71,793 200,277 184,047 income

Allowance for equity funds 2,347 3,250 6,556 9,335 used during construction

Retirement defined benefits (432) (723) (1,195) (2,127) expense-other than service costs

Interest expense and (16,836) (17,429) (50,768) (53,945) other charges, net

Allowance for borrowed funds used 801 1,208 2,241 3,465 during construction

Income before74,398 58,099 157,111 140,775 income taxes

Income taxes 13,835 10,822 29,316 27,800

Net income 60,563 47,277 127,795 112,975

Preferred stock 228 228 686 686 dividends of subsidiaries

Net income attributable 60,335 47,049 127,109 112,289 to Hawaiian Electric

Preferred stock dividends of 270 270 810 810 Hawaiian Electric

Net income for common $60,065 $46,779 $ 126,299 $ 111,479 stock

Comprehensive income attributable $60,113 $46,805 $ 126,398 $ 111,552 to Hawaiian Electric

OTHER ELECTRIC UTILITY INFORMATION

Kilowatthour sales (millions)

Hawaiian 1,620 1,823 4,559 4,840 Electric

Hawaii Electric 244 279 721 777 Light

Maui 235 312 699 832 Electric

2,099 2,414 5,979 6,449

Average fuel oil cost per $49.71 $82.30 $ 64.70 $ 83.64 barrel

Return on average common equity 8.4 7.6 (%) (twelve months ended) ^1



^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

($ SeptemberJune 30, September in thousands)30, 2020 30, 2020 2019 2020 2019

Interest and dividend income

Interest and $52,419$53,541$59,260$ 161,505 $ 175,740 fees on loans

Interest and dividends on 7,221 6,288 7,599 22,939 25,762 investment securities

Total interest and 59,640 59,829 66,859 184,444 201,502 dividend income

Interest expense

Interest on deposit 2,287 3,071 4,384 8,945 12,923 liabilities

Interest on other 61 75 422 449 1,361 borrowings

Total interest 2,348 3,146 4,806 9,394 14,284 expense

Net interest 57,292 56,683 62,053 175,050 187,218 income

Provision for13,970 15,133 3,315 39,504 17,873 credit losses

Net interest income after 43,322 41,550 58,738 135,546 169,345 provision for credit losses

Noninterest income

Fees from other 4,233 3,102 5,085 11,906 14,445 financial services

Fee income on deposit 3,832 2,897 5,320 11,842 15,402 liabilities

Fee income on other 1,524 1,212 1,706 4,608 5,129 financial products

Bank-owned life 1,965 1,673 1,660 4,432 6,309 insurance

Mortgage banking 7,681 6,252 1,490 15,933 3,080 income

Gain on sale of - 9,275 653 9,275 653 securities, net

Other income,(231) (251) 428 (69) 1,420 net

Total noninterest 19,004 24,160 16,342 57,927 46,438 income

Noninterest expense

Compensation and employee 26,431 25,079 25,364 77,287 76,626 benefits

Occupancy 5,693 5,442 5,694 16,402 15,843

Data 3,366 3,849 3,763 11,052 11,353 processing

Services 2,624 2,474 2,829 7,907 7,861

Equipment 2,001 2,290 2,163 6,630 6,416

Office supplies, 1,187 1,049 1,297 3,577 4,320 printing and postage

Marketing 727 379 1,142 1,908 3,455

FDIC 714 751 (5) 1,567 1,249 insurance

Other expense4,556 7,063 3,676 15,813 12,049 ^1

Total noninterest 47,299 48,376 45,923 142,143 139,172 expense

Income before15,027 17,334 29,157 51,330 76,611 income taxes

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$13,543$13,734$26,697$ 62,885 $ 85,079 income

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

Return on average 0.61 0.72 1.29 0.73 1.14 assets

Return on average 6.75 8.00 13.75 7.95 12.44 equity

Return on average 7.62 9.07 15.68 9.00 14.23 tangible common equity

Net interest 3.12 3.21 3.82 3.34 3.87 margin

Efficiency 61.99 59.84 58.58 61.01 59.56 ratio

Net charge-offs to average 0.32 0.49 0.69 0.41 0.46 loans outstanding

As of period end

Nonaccrual loans to loans 0.77 0.86 0.63 receivable held for investment

Allowance for credit losses1.67 1.50 1.04 to loans outstanding

Tangible common equity8.0 7.9 8.4 to tangible assets

Tier-1 leverage 8.3 8.4 8.8 ratio

Dividend paid to HEI (via ASB Hawaii, $- $- $14.0 $ 28.0 $ 47.0 Inc.) ($ in millions)



^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 RelationsE-mail: ir@hei.com

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SOURCE Hawaiian Electric Industries, Inc.