3Q21 Net Income of $63.4 Million and Diluted Earnings Per Share (EPS)1 of $0.58
Utility Delivering Cost Efficiency Savings to Customers While
Advancing Climate Goals
Bank Results Reflect Solid Profitability and Strong Liquidity and Capital Position
HONOLULU - Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock of $63.4 million for the third quarter of 2021 and EPS of $0.58 compared to $65.0 million and EPS of $0.59 for the third quarter of 2020.
“We’re pleased with our consolidated third quarter results, with the utility achieving its efficiency targets and delivering good performance in line with expectations, and solid profitability at the bank,” said Constance H. Lau, HEI president and CEO. “Following a sharp decline in new COVID-19 case counts, the governor’s recent announcement encouraging visitors to return is a positive sign for our local economy. Working together, our state, our companies and our communities can continue to strengthen our economy and continue to show Hawaii’s leadership in confronting climate change.
“Our utility’s carbon reduction efforts go hand-in-hand with its work to provide affordable, equitable, reliable and resilient power for customers. We’re on track to deliver on our management audit savings commitment for this year, providing $3 million to customers in the third quarter and an additional $3 million by year end. Cost efficiency remains a key focus. We’re pleased with the collaboration with our policymakers, regulators and community to help move renewable energy and storage projects forward. We’re also confident that we can continue to provide reliable power when we eliminate coal in Hawaii next year.
“Our bank’s third quarter results reflect continued solid performance and good credit quality, the latter of which drove an additional release of reserves. We continue to build our
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1 Unless otherwise indicated, throughout this release earnings per share (EPS) refers to diluted earnings per share.
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capabilities to provide more value to customers by increasing digital banking services and customized financial solutions, while delivering the superior customer experience we’re known for,” said Lau.
HAWAIIAN ELECTRIC COMPANY EARNINGS
Hawaiian Electric Company’s (Hawaiian Electric) net income for the third quarter of 2021 was $50.3 million, compared to $60.1 million in the third quarter of 2020, with the difference primarily driven by the following after-tax items:
•$6 million lower revenues, including (i) $5 million related solely to a change in the timing for revenue recognition within the year that eliminates seasonality and results in recognizing revenues more evenly throughout the year, with target revenues recognized on an annual basis remaining unchanged, and (ii) $1 million relating to the annual revenue adjustment mechanism, which included $3 million of management audit savings delivered to customers;
•$4 million from higher operations and maintenance expenses primarily due to an increase in generating facility overhauls performed in the quarter and delayed from earlier in the year, higher costs for energy management system upgrades, and higher medical costs due to a one-time credit in 2020, partially offset by $1 million lower labor expense;
•$1 million from higher depreciation expense due to increasing investments to integrate more renewable energy and improve customer reliability and system efficiency;
•$1 million related to lower fuel efficiency due to planned maintenance outages of certain generation units; and
•$1 million higher interest expense due to higher borrowings.
These items were partially offset by the following after-tax items:
•$1 million lower non-service pension costs due to the reset of pension costs included in rates as part of a final rate case decision; and
•$1 million lower enterprise resource planning system implementation benefits passed on to customers in the third quarter of 2021 as compared to the same quarter last year.
AMERICAN SAVINGS BANK EARNINGS
American Savings Bank’s (American) third quarter of 2021 net income was $19.3 million, compared to $30.3 million in the second quarter of 2021 and $12.2 million in the third quarter of
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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.
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2020. The decrease in net income compared to the linked quarter was primarily due to the $12.2 million negative provision in the second quarter of 2021 compared to the negative provision of $1.7 million in the third quarter of 2021. The increase in net income compared to the prior year quarter was primarily due to the negative provision for credit losses of $1.7 million for the third quarter of 2021 compared to a provision for credit losses of $14.0 million in the third quarter of 2020.
Total earning assets as of September 30, 2021 were $8.4 billion, up 9.3% from December 31, 2020.
Total loans were $5.1 billion as of September 30, 2021, down 1.3% compared to June 30, 2021 and down 4.0% from December 31, 2020. The reduction in the loan portfolio during the quarter included approximately $111 million in forgiven Paycheck Protection Program (PPP) loans, as well as declines in the home equity line of credit and consumer portfolios. The decrease in these portfolios was partially offset by growth in the residential, commercial and commercial real estate loan portfolios. Excluding PPP loan forgiveness, the loan portfolio grew by $46 million or 0.9% compared to June 30, 2021.
The investment securities portfolio was $3.1 billion as of September 30, 2021, up 39.8% from December 31, 2020 as growth in deposits continued to outpace loan growth. The portfolio is primarily comprised of securities issued or guaranteed by U.S. government agencies or U.S. government sponsored agencies.
Total deposits were $8.0 billion as of September 30, 2021, an increase of 1.3% compared to June 30, 2021 and an increase of 8.0% from December 31, 2020. For the third quarter of 2021, the average cost of funds was 0.06%, down one basis point versus the linked quarter and down seven basis points versus the prior year quarter.
Overall, American’s return on average equity2 for the third quarter of 2021 was 10.3%, compared to 16.8% in the linked quarter and 6.8% in the third quarter of 2020. Return on average assets was 0.86% for the third quarter of 2021, compared to 1.38% in the linked quarter and 0.61% in the same quarter last year.
In the third quarter of 2021, American paid dividends of $12.0 million to HEI. American had a Tier 1 leverage ratio of 8.0% at September 30, 2021.
Please refer to American’s news release issued on October 29, 2021 for additional information on American.
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2 Bank return on average equity calculated using weighted average daily common equity.
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HOLDING AND OTHER COMPANIES
The holding and other companies’ net loss was $6.2 million in the third quarter of 2021
compared to $7.2 million in the third quarter of 2020. The lower net loss was primarily due to higher Pacific Current income and lower corporate expense.
BOARD DECLARES QUARTERLY DIVIDEND
On November 4, 2021, HEI announced that the Board of Directors declared a quarterly cash dividend of $0.34 per share, payable on December 10, 2021 to shareholders of record at the close of business on November 23, 2021 (ex-dividend date is November 22, 2021). This
quarterly dividend is equivalent to an annual rate of $1.36 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 4, 2021 of $41.14, HEI’s dividend yield is 3.3%.
WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2021 GUIDANCE
HEI will conduct a webcast and conference call to review its consolidated results and
2021 earnings guidance and outlook on Friday, November 5, 2021 at 10:15 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 181692. 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. The audio replay will also be available about two hours after the event through November 19, 2021. To access the audio replay, dial 1-866-813-9403 (U.S.) or 44-204-525-0658 (international) and enter passcode 965360.
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 Relations section of HEI’s website, 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
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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, American Savings Bank, 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 (which are incorporated by reference herein) set forth in HEI’s Annual Report on Form 10-K for the year ended December 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 report,
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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.
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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)
2021
2020
2021
2020
Revenues
Electric utility
$
679,499
$
562,568
$
1,846,242
$
1,694,225
Bank
76,208
78,644
230,599
233,096
Other
1,197
215
3,266
237
Total revenues
756,904
641,427
2,080,107
1,927,558
Expenses
Electric utility
604,307
474,050
1,634,252
1,493,948
Bank
51,151
63,144
130,440
189,700
Other
4,130
4,672
18,212
13,091
Total expenses
659,588
541,866
1,782,904
1,696,739
Operating income (loss)
Electric utility
75,192
88,518
211,990
200,277
Bank
25,057
15,500
100,159
43,396
Other
(2,933)
(4,457)
(14,946)
(12,854)
Total operating income
97,316
99,561
297,203
230,819
Retirement defined benefits credit (expense)—other than service costs
1,058
(1,102)
4,709
(2,970)
Interest expense, net—other than on deposit liabilities and other bank borrowings
(23,477)
(22,086)
(70,530)
(66,474)
Allowance for borrowed funds used during construction
827
801
2,386
2,241
Allowance for equity funds used during construction
2,427
2,347
6,995
6,556
Gain on sale of investment securities, net
—
—
528
9,275
Income before income taxes
78,151
79,521
241,291
179,447
Income taxes
14,265
14,018
48,229
30,691
Net income
63,886
65,503
193,062
148,756
Preferred stock dividends of subsidiaries
471
471
1,417
1,417
Net income for common stock
$
63,415
$
65,032
$
191,645
$
147,339
Basic earnings per common share
$
0.58
$
0.60
$
1.75
$
1.35
Diluted earnings per common share
$
0.58
$
0.59
$
1.75
$
1.35
Dividends declared per common share
$
0.34
$
0.33
$
1.02
$
0.99
Weighted-average number of common shares outstanding
109,311
109,181
109,272
109,126
Weighted-average shares assuming dilution
109,575
109,336
109,588
109,387
Net income (loss) for common stock by segment
Electric utility
$
50,342
$
60,065
$
135,601
$
126,299
Bank
19,265
12,150
79,105
41,925
Other
(6,192)
(7,183)
(23,061)
(20,885)
Net income for common stock
$
63,415
$
65,032
$
191,645
$
147,339
Comprehensive income attributable to Hawaiian Electric Industries, Inc.
$
52,110
$
66,472
$
152,796
$
166,659
Return on average common equity (%) (twelve months ended)
10.3
9.4
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)
2021
2020
2021
2020
Revenues
$
679,499
$
562,568
$
1,846,242
$
1,694,225
Expenses
Fuel oil
180,682
105,042
447,245
390,714
Purchased power
185,759
149,025
490,520
425,679
Other operation and maintenance
116,468
111,243
349,180
348,831
Depreciation
57,386
55,689
172,122
167,235
Taxes, other than income taxes
64,012
53,051
175,185
161,489
Total expenses
604,307
474,050
1,634,252
1,493,948
Operating income
75,192
88,518
211,990
200,277
Allowance for equity funds used during construction
2,427
2,347
6,995
6,556
Retirement defined benefits credit (expense)—other than service costs
877
(432)
2,918
(1,195)
Interest expense and other charges, net
(18,148)
(16,836)
(54,126)
(50,768)
Allowance for borrowed funds used during construction
827
801
2,386
2,241
Income before income taxes
61,175
74,398
170,163
157,111
Income taxes
10,335
13,835
33,066
29,316
Net income
50,840
60,563
137,097
127,795
Preferred stock dividends of subsidiaries
228
228
686
686
Net income attributable to Hawaiian Electric
50,612
60,335
136,411
127,109
Preferred stock dividends of Hawaiian Electric
270
270
810
810
Net income for common stock
$
50,342
$
60,065
$
135,601
$
126,299
Comprehensive income attributable to Hawaiian Electric
$
50,448
$
60,113
$
135,776
$
126,398
OTHER ELECTRIC UTILITY INFORMATION
Kilowatthour sales (millions)
Hawaiian Electric
1,636
1,620
4,578
4,559
Hawaii Electric Light
273
244
774
721
Maui Electric
282
235
774
699
2,191
2,099
6,126
5,979
Average fuel oil cost per barrel
$
86.77
$
49.71
$
74.93
$
64.70
Return on average common equity (%) (twelve months ended)1
8.3
8.4
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, 2021
June 30, 2021
September 30, 2020
2021
2020
Interest and dividend income
Interest and fees on loans
$
49,445
$
51,026
$
52,419
$
150,418
$
161,505
Interest and dividends on investment securities
11,996
11,040
7,221
31,709
22,939
Total interest and dividend income
61,441
62,066
59,640
182,127
184,444
Interest expense
Interest on deposit liabilities
1,176
1,281
2,287
3,919
8,945
Interest on other borrowings
5
23
61
55
449
Total interest expense
1,181
1,304
2,348
3,974
9,394
Net interest income
60,260
60,762
57,292
178,153
175,050
Provision for credit losses
(1,725)
(12,207)
13,970
(22,367)
39,504
Net interest income after provision for credit losses
61,985
72,969
43,322
200,520
135,546
Noninterest income
Fees from other financial services
4,800
5,464
4,233
15,337
11,906
Fee income on deposit liabilities
4,262
3,904
3,832
12,029
11,842
Fee income on other financial products
2,124
2,201
1,524
6,767
4,608
Bank-owned life insurance
2,026
1,624
1,965
6,211
4,432
Mortgage banking income
1,272
1,925
7,681
7,497
15,933
Gain on sale of investment securities, net
—
—
—
528
9,275
Other income, net
283
76
(231)
631
(69)
Total noninterest income
14,767
15,194
19,004
49,000
57,927
Noninterest expense
Compensation and employee benefits
30,888
27,670
26,431
86,595
77,287
Occupancy
5,157
5,100
5,693
15,226
16,402
Data processing
4,278
4,533
3,366
13,162
11,052
Services
2,272
2,475
2,624
7,609
7,907
Equipment
2,373
2,394
2,001
6,989
6,630
Office supplies, printing and postage
1,072
978
1,187
3,094
3,577
Marketing
995
665
727
2,308
1,908
FDIC insurance
808
788
714
2,412
1,567
Other expense1
3,668
3,568
4,556
9,790
15,813
Total noninterest expense
51,511
48,171
47,299
147,185
142,143
Income before income taxes
25,241
39,992
15,027
102,335
51,330
Income taxes
5,976
9,708
2,877
23,230
9,405
Net income
$
19,265
$
30,284
$
12,150
$
79,105
$
41,925
Comprehensive income
$
7,581
$
47,283
$
13,543
$
38,666
$
62,885
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets
0.86
1.38
0.61
1.21
0.73
Return on average equity
10.26
16.76
6.75
14.31
7.95
Return on average tangible common equity
11.52
18.92
7.62
16.11
9.00
Net interest margin
2.90
2.98
3.12
2.94
3.34
Efficiency ratio
68.66
63.42
61.99
64.80
61.01
Net charge-offs to average loans outstanding
0.03
0.04
0.32
0.08
0.41
As of period end
Nonaccrual loans to loans receivable held for investment
0.97
1.03
0.77
Allowance for credit losses to loans outstanding
1.48
1.51
1.67
Tangible common equity to tangible assets
7.3
7.5
8.0
Tier-1 leverage ratio
8.0
8.0
8.3
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)
$
12.0
$
23.0
$
—
$
40.0
$
28.0
1 The three- and nine-month periods ended September 30, 2021 include approximately $0.1 million and $0.5 million, respectively, of certain direct and incremental COVID-19 related costs. The three- and nine-month periods ended September 30, 2020 include approximately $0.7 million and $4.5 million, respectively, of certain significant direct and incremental COVID-19 related costs. These costs for the first nine months of 2020, 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.
NEWS RELEASE
