Strong Bank Results Reflect Continued Net Interest Margin Expansion, Strong Loan Growth and Favorable Credit Trends
HONOLULU - Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock for the third quarter of 2022 of $62.1 million and EPS of $0.57 compared to $63.4 million and EPS of $0.58 for the third quarter of 2021.
“Hawaii’s economy continues to show signs of strength, with unemployment, housing prices and tourism arrivals still trending favorably despite global macro uncertainties,” said Scott Seu, HEI president and CEO. “We’re pleased with our consolidated third quarter results, which reflect good performance across our enterprise and the benefits of our combination of companies. The utility successfully mitigated many of the impacts of the current higher cost environment and continued its strong progress in our clean energy transition.
“Our bank had another strong quarter. We again had broad-based loan growth, reflecting great work by our team along with the health of the local economy. We continued to see positive credit trends despite the inflationary environment, and rising interest rates continued to benefit our net interest margin and overall profitability,” said Seu.
HAWAIIAN ELECTRIC COMPANY (HAWAIIAN ELECTRIC) EARNINGS2
Hawaiian Electric’s net income for the third quarter of 2022 was $49.8 million, compared to $50.3 million in the third quarter of 2021, with the variance primarily driven by the following after-tax items:
•$6 million higher Annual Revenue Adjustment revenues; and
1 Unless otherwise indicated, throughout this release earnings per share (EPS) refers to diluted earnings per share.
2 Note: Utility amounts indicated as after-tax in this earnings release are based upon adjusting items using a current year composite statutory tax rate of 25.75%.
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•$1 million due to the reset of heat rate requirements leading to lower penalties for fuel efficiency at our Hawaii Island utility.
These items were partially offset by the following after-tax items:
•$2 million in net tax adjustments due to tax credit benefits recognized in the third quarter of last year;
•$2 million in higher operations and maintenance expenses, driven by increased generating station maintenance, increased preventative maintenance and higher bad debt expense, partially offset by higher expenses from generating station overhauls performed in the third quarter of last year;
•$1 million in lower revenues related solely to a change in the timing for revenue recognition within the year for Maui County operations that eliminates seasonality in recognizing target revenues and results in recognizing revenues evenly throughout the year, with target revenues recognized on an annual basis remaining unchanged;
•$1 million higher interest expense due to higher rates and balances; and
•$1 million higher depreciation expense due to increasing investments to integrate more renewable energy and improve customer reliability and system efficiency.
AMERICAN SAVINGS BANK (ASB) EARNINGS
ASB’s third quarter 2022 net income was $20.8 million, compared to $17.5 million in the second quarter of 2022 and $19.3 million in the third quarter of 2021. The increase in net income compared to the linked quarter primarily reflected higher net interest income due to the rising interest rate environment and a negative provision expense recorded in the third quarter. The increase in net income compared to the prior year quarter was primarily due to higher net interest income, partially offset by a smaller negative provision and lower noninterest income.
Total earning assets as of September 30, 2022 were $8.9 billion, up 4.7% from December 31, 2021.
Total loans were $5.7 billion as of September 30, 2022, up 9.3% from December 31, 2021, reflecting growth across nearly the entire portfolio year to date.
Total deposits were $8.3 billion as of September 30, 2022, an increase of 1.1% from December 31, 2021. For the third quarter of 2022, the average cost of funds was 0.13%, up 0.08% versus the linked quarter and up 0.07% versus the third quarter last year.
ASB’s return on average equity3 for the third quarter of 2022 was 15.1%, compared to 12.2% in the linked quarter and 10.3% in the third quarter of 2021. Return on average assets
3 Bank return on average equity calculated using daily average common equity.
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was 0.89% for the third quarter of 2022, compared to 0.76% in the linked quarter and 0.86% in the same quarter last year.
In the third quarter of 2022, ASB paid dividends of $5.0 million to HEI. ASB had a Tier 1 leverage ratio of 7.75% as of September 30, 2022.
HOLDING AND OTHER COMPANIES
The holding and other companies’ net loss was $8.4 million in the third quarter of 2022 compared to $6.2 million in the third quarter of 2021. The higher net loss was primarily due to higher interest expense and higher general and administrative expenses.
BOARD DECLARES QUARTERLY DIVIDEND
On November 3, 2022, HEI announced that the Board of Directors declared a quarterly cash dividend of $0.35 per share, payable on December 9, 2022 to shareholders of record at the close of business on November 22, 2022 (ex-dividend date is November 21, 2022). This quarterly dividend is equivalent to an annual rate of $1.40 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 3, 2022 of $37.27, HEI’s dividend yield is 3.8%.
WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2022 GUIDANCE
HEI will conduct a webcast and conference call to review its consolidated results and
2022 earnings guidance and outlook on Monday, November 7, 2022 at 11:15 a.m. Hawaii time (4:15 p.m. Eastern).
To listen to the conference call, dial 1-844-200-6205 (U.S.) or +1-929-526-1599 (international) and enter passcode 162868. Parties may also access presentation materials and/or listen to the conference call by visiting the conference call link on HEI’s website at www.hei.com under “Investor Relations,” sub-heading “News and Events — Events and Presentations.”
A replay will be available online and via phone. The online replay will be available on HEI’s website about two hours after the event. An audio replay will also be available about two hours after the event through November 21, 2022. To access the audio replay, dial 1-866-813-9403 (U.S.) or +44-204-525-0658 (international) and enter passcode 881525.
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 in the Investor Relations section of the website. Accordingly, investors should routinely monitor the Investor
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Relations section of HEI’s website, in addition to following HEI’s, Hawaiian Electric’s and ASB’s press releases, HEI’s and Hawaiian Electric’s Securities and Exchange Commission (SEC) filings and HEI’s public conference calls and webcasts. Investors may sign up to receive e-mail alerts via the “Investor Relations” section of the website. The information on HEI’s website is not incorporated by reference into this document or into 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 to review documents filed with, and issued by, the PUC. No information on the PUC website is incorporated by reference into this document or into HEI’s and Hawaiian Electric’s SEC filings.
ABOUT HEI
The HEI family of companies provides the energy and financial services that empower much of the economic and community activity of Hawaii. HEI’s electric utility, Hawaiian Electric, supplies power to approximately 95% of Hawaii’s population and is undertaking an ambitious effort to decarbonize its operations and the broader state economy. Its banking subsidiary, ASB, is one of Hawaii’s largest financial institutions, providing a wide array of banking and other financial services and working to advance economic growth, affordability and financial fitness. HEI also helps advance Hawaii’s sustainability goals through investments by its non-regulated subsidiary, Pacific Current. For more information, visit www.hei.com.
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
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(which are incorporated by reference herein) set forth in HEI’s Annual Report on Form 10-K for the year ended December 31, 2021 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 report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric, ASB 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.
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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)
2022
2021
2022
2021
Revenues
Electric utility
$
955,971
$
679,499
$
2,483,636
$
1,846,242
Bank
81,411
76,208
231,850
230,599
Other
4,815
1,197
7,386
3,266
Total revenues
1,042,197
756,904
2,722,872
2,080,107
Expenses
Electric utility
876,922
604,307
2,259,838
1,634,252
Bank
54,311
51,151
152,797
130,440
Other
8,849
4,130
22,178
18,212
Total expenses
940,082
659,588
2,434,813
1,782,904
Operating income (loss)
Electric utility
79,049
75,192
223,798
211,990
Bank
27,100
25,057
79,053
100,159
Other
(4,034)
(2,933)
(14,792)
(14,946)
Total operating income
102,115
97,316
288,059
297,203
Retirement defined benefits credit—other than service costs
1,039
1,058
3,528
4,709
Interest expense, net—other than on deposit liabilities and other bank borrowings
(26,626)
(23,477)
(75,940)
(70,530)
Allowance for borrowed funds used during construction
825
827
2,401
2,386
Allowance for equity funds used during construction
2,552
2,427
7,431
6,995
Gain on sales of investment securities, net and equity-method investment
—
—
8,123
528
Income before income taxes
79,905
78,151
233,602
241,291
Income taxes
17,352
14,265
48,395
48,229
Net income
62,553
63,886
185,207
193,062
Preferred stock dividends of subsidiaries
471
471
1,417
1,417
Net income for common stock
$
62,082
$
63,415
$
183,790
$
191,645
Basic earnings per common share
$
0.57
$
0.58
$
1.68
$
1.75
Diluted earnings per common share
$
0.57
$
0.58
$
1.68
$
1.75
Dividends declared per common share
$
0.35
$
0.34
$
1.05
$
1.02
Weighted-average number of common shares outstanding
109,470
109,311
109,421
109,272
Weighted-average shares assuming dilution
109,705
109,575
109,712
109,588
Net income (loss) for common stock by segment
Electric utility
$
49,764
$
50,342
$
140,308
$
135,601
Bank
20,756
19,265
62,092
79,105
Other
(8,438)
(6,192)
(18,610)
(23,061)
Net income for common stock
$
62,082
$
63,415
$
183,790
$
191,645
Comprehensive income (loss) attributable to HEI
$
(33,930)
$
52,110
$
(117,221)
$
152,796
Return on average common equity (%) (twelve months ended)
10.5
10.3
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.
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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)
2022
2021
2022
2021
Revenues
$
955,971
$
679,499
$
2,483,636
$
1,846,242
Expenses
Fuel oil
383,602
180,682
874,543
447,245
Purchased power
225,209
185,759
606,827
490,520
Other operation and maintenance
121,110
116,468
371,259
349,180
Depreciation
58,711
57,386
175,921
172,122
Taxes, other than income taxes
88,290
64,012
231,288
175,185
Total expenses
876,922
604,307
2,259,838
1,634,252
Operating income
79,049
75,192
223,798
211,990
Allowance for equity funds used during construction
2,552
2,427
7,431
6,995
Retirement defined benefits credit—other than service costs
895
877
2,876
2,918
Interest expense and other charges, net
(19,609)
(18,148)
(56,735)
(54,126)
Allowance for borrowed funds used during construction
825
827
2,401
2,386
Income before income taxes
63,712
61,175
179,771
170,163
Income taxes
13,450
10,335
37,967
33,066
Net income
50,262
50,840
141,804
137,097
Preferred stock dividends of subsidiaries
228
228
686
686
Net income attributable to Hawaiian Electric
50,034
50,612
141,118
136,411
Preferred stock dividends of Hawaiian Electric
270
270
810
810
Net income for common stock
$
49,764
$
50,342
$
140,308
$
135,601
Comprehensive income attributable to Hawaiian Electric
$
49,872
$
50,448
$
140,518
$
135,776
OTHER ELECTRIC UTILITY INFORMATION
Kilowatthour sales (millions)
Hawaiian Electric
1,655
1,636
4,609
4,578
Hawaii Electric Light
269
273
784
774
Maui Electric
288
282
807
774
2,212
2,191
6,200
6,126
Average fuel oil cost per barrel
$
166.79
$
86.77
$
137.23
$
74.93
Return on average common equity (%) (twelve months ended)1
8.1
8.3
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.
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American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)
Three months ended
Nine months ended September 30
(in thousands)
September 30, 2022
June 30, 2022
September 30, 2021
2022
2021
Interest and dividend income
Interest and fees on loans
$
53,365
$
48,129
$
49,445
$
147,499
$
150,418
Interest and dividends on investment securities
15,052
14,693
11,996
43,729
31,709
Total interest and dividend income
68,417
62,822
61,441
191,228
182,127
Interest expense
Interest on deposit liabilities
1,704
921
1,176
3,572
3,919
Interest on other borrowings
1,055
139
5
1,199
55
Total interest expense
2,759
1,060
1,181
4,771
3,974
Net interest income
65,658
61,762
60,260
186,457
178,153
Provision for credit losses
(186)
2,757
(1,725)
(692)
(22,367)
Net interest income after provision for credit losses
65,844
59,005
61,985
187,149
200,520
Noninterest income
Fees from other financial services
4,763
4,716
4,800
15,066
15,337
Fee income on deposit liabilities
4,879
4,552
4,262
14,122
12,029
Fee income on other financial products
2,416
2,529
2,124
7,663
6,767
Bank-owned life insurance
122
(142)
2,026
661
6,211
Mortgage banking income
181
372
1,272
1,630
7,497
Gain on sale of real estate
—
—
—
1,002
—
Gain on sale of investment securities, net
—
—
—
—
528
Other income, net
633
475
283
1,480
631
Total noninterest income
12,994
12,502
14,767
41,624
49,000
Noninterest expense
Compensation and employee benefits
28,597
27,666
30,888
83,478
86,595
Occupancy
5,577
5,467
5,157
16,996
15,226
Data processing
4,509
4,484
4,278
13,144
13,162
Services
2,751
2,522
2,272
7,712
7,609
Equipment
2,432
2,402
2,373
7,163
6,989
Office supplies, printing and postage
1,123
1,073
1,072
3,256
3,094
Marketing
925
934
995
2,877
2,308
FDIC insurance
914
891
808
2,613
2,412
Other expense
4,729
3,959
3,668
11,929
9,790
Total noninterest expense
51,557
49,398
51,511
149,168
147,185
Income before income taxes
27,281
22,109
25,241
79,605
102,335
Income taxes
6,525
4,643
5,976
17,513
23,230
Net income
$
20,756
$
17,466
$
19,265
$
62,092
$
79,105
Comprehensive income (loss)
$
(78,186)
$
(71,369)
$
7,581
$
(248,126)
$
38,666
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets
0.89
0.76
0.86
0.90
1.21
Return on average equity
15.11
12.17
10.26
13.65
14.31
Return on average tangible common equity
17.77
14.20
11.52
15.79
16.11
Net interest margin
2.96
2.85
2.90
2.87
2.94
Efficiency ratio
65.55
66.52
68.66
65.40
64.80
Net charge-offs to average loans outstanding
0.03
—
0.03
0.01
0.08
As of period end
Nonaccrual loans to loans receivable held for investment
0.35
0.40
0.97
Allowance for credit losses to loans outstanding
1.24
1.28
1.48
Tangible common equity to tangible assets
4.0
4.9
7.3
Tier-1 leverage ratio
7.7
7.7
8.0
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)
$
5.0
$
12.0
$
12.0
$
32.0
$
40.0
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.
