HEI Reports Third Quarter 2021 Results

3Q21 Net Income of $63.4 Million and Diluted Earnings Per Share (EPS)1 of $0.58
Published: Oct. 5, 2021 at 5:06 PM EDT|Updated: Nov. 5, 2021 at 6:00 AM EDT

HONOLULU, Nov. 5, 2021 /PRNewswire/ -- 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 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.

_____________

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 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 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.

_________________

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 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.

_________________

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

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 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, 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)


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.

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.

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




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.

Contact:  

Julie R. Smolinski

Telephone: (808) 543-7300





Vice President, Investor Relations & Corporate Sustainability   

E-mail: ir@hei.com

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

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