0000354707 he:OtherRevenueSourcesMember he:ElectricUtilitySegmentMember 2018-01-01 2018-06-30

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

New York Stock Exchange

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Hawaiian Electric Industries, Inc.o

Hawaiian Electric Company, Inc.o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.

This combined Form 10-Q is separately filed by HEI and Hawaiian Electric. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to the other registrant, except that information relating to Hawaiian Electric is also attributed to HEI.

Hawaiian Electric Industries, Inc. and Subsidiaries

Hawaiian Electric Company, Inc. and Subsidiaries

Form 10-Q—Quarter ended ~~September~~June 30, ~~2017~~2019

Hawaiian Electric Industries, Inc. and Subsidiaries

Hawaiian Electric Company, Inc. and Subsidiaries

Form 10-Q—Quarter ended ~~September~~June 30, ~~2017~~2019

~~GLOSSARY OF TERMS, continued~~

GLOSSARY OF TERMS, continued

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report and other presentations made by Hawaiian Electric Industries, Inc. (HEI) and Hawaiian Electric Company, Inc. (Hawaiian Electric) and their subsidiaries 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 (collectively, the Company), 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.

Risks, uncertainties and other important factors that could cause actual results to differ materially from those described in forward-looking statements and from historical results include, but are not limited to, the following:

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, Pacific Current and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether written or oral and whether as a result of new information, future events or otherwise.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Statements of Income (unaudited)

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2018 Form 10-K.

Condensed Consolidated Statements of Comprehensive Income (unaudited)

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2018 Form 10-K.

Condensed Consolidated Balance Sheets (unaudited)

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2018 Form 10-K.

Condensed Consolidated Statements of Cash Flows (unaudited)

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2018 Form 10-K.

Condensed Consolidated Statements of ~~Comprehensive~~ Income (unaudited)

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016 Form 10-K.~~

~~Condensed Consolidated Balance Sheets (unaudited)~~

~~Condensed Consolidated Statements of Income (unaudited)~~

HEI owns all of the common stock of Hawaiian Electric. Therefore, per share data with respect to shares of common stock of Hawaiian Electric are not meaningful.

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (unaudited)

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2018 Form 10-K.

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)


(dollars in thousands, except par value)	September 30, 2017			December 31, 2016			June 30, 2019			December 31, 2018
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	53,913		$	53,153		$	51,401		$	49,667
Plant and equipment	6,778,254			6,605,732			6,939,043			6,809,671
Less accumulated depreciation	(2,460,429		)	(2,369,282		)	(2,650,210		)	(2,577,342		)
Construction in progress	307,492			211,742			275,312			233,145
Utility property, plant and equipment, net	4,679,230			4,501,345			4,615,546			4,515,141
Nonutility property, plant and equipment, less accumulated depreciation of $1,233 as of September 30, 2017 and $1,232 as of December 31, 2016	7,409			7,407
Nonutility property, plant and equipment, less accumulated depreciation of $109 and $1,255 as of June 30, 2019 and December 31, 2018, respectively							6,959			6,961
Total property, plant and equipment, net	4,686,639			4,508,752			4,622,505			4,522,102
Current assets
Cash and cash equivalents	9,987			74,286			23,361			35,877
Customer accounts receivable, net	133,135			123,688			162,089			177,896
Accrued unbilled revenues, net	109,707			91,693			119,148			121,738
Other accounts receivable, net	4,097			5,233			8,489			6,215
Fuel oil stock, at average cost	60,253			66,430			121,641			79,935
Materials and supplies, at average cost	55,959			53,679			61,094			55,204
Prepayments and other	29,871			23,100			31,986			32,118
Regulatory assets	72,773			66,032			55,625			71,016
Total current assets	475,782			504,141			583,433			579,999
Other long-term assets
Operating lease right-of-use assets							207,132			—
Regulatory assets	864,191			891,419			732,140			762,410
Unamortized debt expense	661			208
Other	80,228			70,908			108,636			102,992
Total other long-term assets	945,080			962,535			1,047,908			865,402
Total assets	$	6,107,501		$	5,975,428		$	6,253,846		$	5,967,503
Capitalization and liabilities
Capitalization
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 16,019,785 shares at September 30, 2017 and December 31, 2016)	$	106,818		$	106,818
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 16,751,488 shares at June 30, 2019 and December 31, 2018)							$	111,696		$	111,696
Premium on capital stock	601,487			601,491			681,305			681,305
Retained earnings	1,120,571			1,091,800			1,178,615			1,164,541
Accumulated other comprehensive income (loss), net of taxes	199			(322		)
Accumulated other comprehensive income, net of taxes-retirement benefit plans							146			99
Common stock equity	1,829,075			1,799,787			1,971,762			1,957,641
Cumulative preferred stock — not subject to mandatory redemption	34,293			34,293			34,293			34,293
Long-term debt, net	1,318,623			1,319,260			1,335,978			1,418,802
Total capitalization	3,181,991			3,153,340			3,342,033			3,410,736
Commitments and contingencies (Note 3)
Current liabilities
Current portion of operating lease liabilities							62,063			—
Current portion of long-term debt							81,939			—
Short-term borrowings from non-affiliates	6,000			—			161,901			25,000
Accounts payable	124,240			117,814			154,505			171,791
Interest and preferred dividends payable	25,261			22,838			23,345			23,215
Taxes accrued	183,365			172,730
Taxes accrued, including revenue taxes							183,466			233,333
Regulatory liabilities	3,399			3,762			14,953			17,977
Other	59,611			55,221			62,052			60,003
Total current liabilities	401,876			372,365			744,224			531,319
Deferred credits and other liabilities
Operating lease liabilities							144,769			—
Deferred income taxes	767,611			733,659			382,564			383,197
Regulatory liabilities	462,817			406,931			937,593			932,259
Unamortized tax credits	88,827			88,961			91,614			91,522
Defined benefit pension and other postretirement benefit plans liability	581,713			599,726			504,247			503,659
Other	57,548			76,921			106,802			114,811
Total deferred credits and other liabilities	1,958,516			1,906,198			2,167,589			2,025,448
Contributions in aid of construction	565,118			543,525
Total capitalization and liabilities	$	6,107,501		$	5,975,428		$	6,253,846		$	5,967,503

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2018 Form 10-K.

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Common Stock Equity (unaudited)


	Common stock			Premium on capital			Retained			Accumulated other comprehensive						Common stock			Premium on capital			Retained			Accumulated other comprehensive
(in thousands)	Shares	Amount		stock			earnings			income (loss)			Total			Shares	Amount		stock			earnings			income (loss)			Total
Balance, December 31, 2016	16,020	$	106,818	$	601,491		$	1,091,800		$	(322	)	$	1,799,787
Balance, December 31, 2018																16,751	$	111,696	$	681,305		$	1,164,541		$	99		$	1,957,641
Net income for common stock																—	—		—			32,126			—			32,126
Other comprehensive income, net of taxes																—	—		—			—			24			24
Common stock dividends																—	—		—			(25,313		)	—			(25,313		)
Balance, March 31, 2019																16,751	$	111,696	$	681,305		$	1,171,354		$	123		$	1,964,478
Net income for common stock																—	—		—			32,574			—			32,574
Other comprehensive income, net of taxes																—	—		—			—			23			23
Common stock dividends																—	—		—			(25,313		)	—			(25,313		)
Balance, June 30, 2019																16,751	$	111,696	$	681,305		$	1,178,615		$	146		$	1,971,762
Balance, December 31, 2017																16,142	$	107,634	$	614,675		$	1,124,193		$	(1,219	)	$	1,845,283
Net income for common stock	—	—		—			94,596			—			94,596			—	—		—			27,475			—			27,475
Other comprehensive income, net of taxes	—	—		—			—			521			521			—	—		—			—			31			31
Common stock dividends	—	—		—			(65,825		)	—			(65,825		)	—	—		—			(25,826		)	—			(25,826		)
Common stock issuance expenses	—	—		(4		)	—			—			(4		)	—	—		(8		)	—			—			(8		)
Balance, September 30, 2017	16,020	$	106,818	$	601,487		$	1,120,571		$	199		$	1,829,075
Balance, December 31, 2015	15,805	$	105,388	$	578,930		$	1,043,082		$	925		$	1,728,325
Balance, March 31, 2018																16,142	$	107,634	$	614,667		$	1,125,842		$	(1,188	)	$	1,846,955
Net income for common stock	—	—		—			108,198			—			108,198			—	—		—			31,169			—			31,169
Other comprehensive income, net of taxes	—	—		—			—			412			412			—	—		—			—			26			26
Common stock dividends	—	—		—			(70,199		)	—			(70,199		)	—	—		—			(25,826		)	—			(25,826		)
Common stock issuance expenses	—	—		(9		)	—			—			(9		)
Balance, September 30, 2016	15,805	$	105,388	$	578,921		$	1,081,081		$	1,337		$	1,766,727
Balance, June 30, 2018																16,142	$	107,634	$	614,667		$	1,131,185		$	(1,162	)	$	1,852,324

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2018 Form 10-K.

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)


	Nine months ended September 30						Six months ended June 30
(in thousands)	2017			2016			2019			2018
Cash flows from operating activities
Net income	$	96,092		$	109,694		$	65,698		$	59,642
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property, plant and equipment	144,578			140,300			107,860			100,827
Other amortization	6,118			5,380			13,661			13,021
Deferred income taxes	29,537			55,648			(6,611		)	(8,343		)
Allowance for equity funds used during construction	(8,908		)	(6,010		)	(6,085		)	(6,277		)
Other	526			3,234			(3,553		)	978
Changes in assets and liabilities
Increase in accounts receivable	(8,087		)	(655		)
Increase in accrued unbilled revenues	(18,014		)	(10,658		)
Decrease in fuel oil stock	6,177			6,736
Decrease (increase) in accounts receivable							9,994			(34,068		)
Decrease (increase) in accrued unbilled revenues							2,590			(3,785		)
Increase in fuel oil stock							(41,706		)	(20,143		)
Increase in materials and supplies	(2,280		)	(2,927		)	(5,890		)	(3,544		)
Decrease (increase) in regulatory assets	3,922			(2,251		)	25,392			(19,600		)
Decrease in accounts payable	(22,841		)	(676		)
Increase (decrease) in accounts payable							(45		)	18,284
Change in prepaid and accrued income taxes, tax credits and revenue taxes	5,291			(9,595		)	(45,785		)	(31,061		)
Increase in defined benefit pension and other postretirement benefit plans liability	453			360
Decrease in defined benefit pension and other postretirement benefit plans liability							(1,899		)	(1,961		)
Change in other assets and liabilities	(2,662		)	(13,309		)	(12,805		)	5,866
Net cash provided by operating activities	229,902			275,271			100,816			69,836
Cash flows from investing activities
Capital expenditures	(278,004		)	(250,704		)	(199,896		)	(199,647		)
Contributions in aid of construction	40,603			23,568
Other	8,114			1,100			2,510			4,301
Net cash used in investing activities	(229,287		)	(226,036		)	(197,386		)	(195,346		)
Cash flows from financing activities
Common stock dividends	(65,825		)	(70,199		)	(50,626		)	(51,652		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(1,496		)	(1,496		)	(998		)	(998		)
Proceeds from issuance of special purpose revenue bonds	265,000			—
Funds transferred for redemption of special purpose revenue bonds	(265,000		)	—
Proceeds from issuance of short-term debt							25,000			—
Proceeds from issuance of long-term debt							50,000			100,000
Repayment of long-term debt							(51,546		)	—
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	6,000			21,000			111,901			86,881
Other	(3,593		)	(12		)	323			(378		)
Net cash used in financing activities	(64,914		)	(50,707		)
Net decrease in cash and cash equivalents	(64,299		)	(1,472		)
Net cash provided by financing activities							84,054			133,853
Net increase (decrease) in cash and cash equivalents							(12,516		)	8,343
Cash and cash equivalents, beginning of period	74,286			24,449			35,877			12,517
Cash and cash equivalents, end of period	$	9,987		$	22,977		$	23,361		$	20,860

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2018 Form 10-K.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 · Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, the instructions to SEC Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In preparing the unaudited condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenues and expenses for the period. Actual results could differ significantly from those estimates. The accompanying unaudited condensed consolidated financial statements and the following notes should be read in conjunction with the audited consolidated financial statements and the notes thereto in HEI’s and Hawaiian Electric’s Form 10-K for the year ended December 31, ~~2016~~2018.

In the opinion of HEI’s and Hawaiian Electric’s management, the accompanying unaudited condensed consolidated financial statements contain all material adjustments required by GAAP to fairly state consolidated HEI’s and Hawaiian Electric’s financial positions as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~,2018 and the results of their operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 and ~~their~~ cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016.~~2018. All such adjustments are of a normal recurring nature, unless otherwise disclosed below or in other referenced material. Results of operations for interim periods are not necessarily indicative of results for the full year.

Recent accounting pronouncements.

~~Stock compensation~~Leases. In ~~March~~February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting~~ ~~for share-based payment transactions.~~

The Company adopted ASU No. 2016-09 in the first quarter of 2017. From January 1, 2017, all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the income statement. From January 1, 2017, no excess tax benefits or deficiencies are included in determining the assumed proceeds under the treasury stock method of calculating diluted EPS. As of January 1, 2017, HEI adopted an accounting policy to account for forfeitures when they occur.

From January 1, 2017, HEI retrospectively applied the cashflow guidance for taxes paid (equivalent to the value of withheld shares for tax withholding purposes) and excess tax benefits. Excess tax benefits are classified along with other income tax cash flows as an operating activity and the cash payments made to taxing authorities on the employees’ behalf for withheld shares are classified as financing activities on the HEI unaudited condensed consolidated statements of cash flows for all periods that are presented.

~~Goodwill impairment~~. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” Prior to the adoption of ASU No. 2017-04, an entity was required to perform a two-step test to determine the amount, if any, of goodwill impairment. In Step 1, an entity compared the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeded its fair value, the entity performed Step 2 and compared the implied fair value of goodwill with the carrying amount of that goodwill for that reporting unit. An impairment charge equal to the amount by which the carrying amount of goodwill for the reporting unit exceeded the implied fair value of that goodwill would then be recorded. ASU No. 2017-04 removes the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value. ASU No. 2017-04 does not amend the optional qualitative assessment of goodwill impairment.

The Company plans to adopt ASU No. 2017-04 prospectively in the fourth quarter of 2017 and believes the impact of adoption will not be material to the Company’s and Hawaiian Electric’s consolidated financial statements.

~~Revenues from contracts with customers~~. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The core principle of the guidance in ASU No. 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should: (1) identify the contract/s with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when, or as, the entity satisfies a performance obligation. ASU No. 2014-09 also requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

As of September 30, 2017, the Company has identified its revenue streams from, and performance obligations related to, contracts with customers and has performed an analysis of these revenue streams for the impacts of Topic 606. The revenue

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

subject to Topic 606 is largely the Utilities’ electric sales revenue and the Utilities’ and ASB’s fee income. The Company and Hawaiian Electric do not expect a material impact on the timing or pattern of revenue recognition upon adoption of ASU No. 2014-09, but do expect to provide expanded disclosures around the amount, timing, nature and uncertainty of our revenues from contracts with customers. The Company plans to adopt ASU No. 2014-09 (and subsequently issued revenue-related ASUs) in the first quarter of 2018 using the modified retrospective approach.

~~Financial instruments~~. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which, among other things:

Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.

~~Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.~~

~~Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables).~~

Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.

The Company plans to adopt ASU No. 2016-01 in the first quarter of 2018 and expects changes to disclosures, but otherwise believes the impact of adoption will not be material to the Company’s and Hawaiian Electric’s consolidated financial statements.

~~Cash Flows~~. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which provides guidance on eight specific cash flow issues - debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies), distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle.

The Company plans to adopt ASU No. 2016-15 in the first quarter of 2018 using a retrospective transition method and believes the impact of adoption will not be material to the Company’s and Hawaiian Electric’s consolidated statements of cash flows.

~~Restricted cash~~. In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.

The Company plans to adopt ASU No. 2016-18 in the first quarter of 2018 using a retrospective transition method and believes the impact of adoption will not be material to the Company’s and Hawaiian Electric’s consolidated statements of cash flows.

~~Net periodic pension cost and net periodic postretirement benefit cost~~. In March 2017, the FASB issued ASU No. 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. It also requires the other components of net periodic pension cost (NPPC) and net periodic postretirement benefit cost (NPBC) as defined in paragraphs 715-30-35-4 and 715-60-35-9 to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. Additionally, only the service cost component is eligible for capitalization under GAAP, when applicable.

The Company plans to adopt ASU No. 2017-07 in the first quarter of 2018 and has not yet determined the impact of adoption. HEI and ASB do not capitalize pension and OPEB costs. The Utilities are seeking recovery of their defined benefit costs as reflected under the requirements of ASU No. 2017-07 (i.e., only the service cost components of NPPC and NPBC will be eligible for capitalization) in their rate cases.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

The Hawaii Electric Light 2016 test year and the Hawaiian Electric consolidated 2014 and 2017 test year revenue requirements were based on their current accounting for retirement benefits, and reflect the capitalization of a portion of the total pension and OPEB costs and the amortization of the pension and OPEB regulatory assets or liabilities (based on the difference between total pension and OPEB costs and the pension and OPEB costs included in rates). In Hawaii Electric Light’s (2016 test year) and Hawaiian Electric’s (consolidated 2014 and 2017 test years) on-going rate cases, each utility proposed that for 2018 and until its next rate case, the non-service cost portion of the test year pension and OPEB costs that are estimated to be capitalized, be deferred and included in the pension and OPEB tracking mechanisms, and amortized beginning with the next rate case. Maui Electric proposed in its consolidated 2015 and 2018 test year rate case filing to adopt the accounting prescribed by ASU No. 2017-07.

~~The impact of adoption will largely be dependent on the PUC's decisions.~~

~~Leases~~. ~~In February 2016, the FASB issued ASU~~ No. 2016-02, “Leases (Topic 842),” which requires that lessees recognize a liability to make lease payments (the lease liability) and a right-of-use (ROU) asset, representing its right to use the underlying asset for the lease term, for all leases (except short-term leases) at the commencement date. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election and recognize lease expense for such leases generally on a straight-line basis over the lease term. For finance leases, a lessee is required to recognize interest on the lease liability separately from amortization of the ~~right-of-use~~ROU asset in the ~~condensed~~ consolidated ~~statement~~statements of income. For operating leases, a lessee is required to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis.

The Company ~~plans to adopt~~adopted ASU No. 2016-02 on January 1, 2019 and used the effective date as the date of initial application. Consequently, financial information for dates and periods before January 1, 2019 will not be updated and the disclosures required under the new standard will not be provided (i.e., the Company will continue to report prior comparative periods presented in the ~~first quarter~~financial statements under Accounting Standards Codification (ASC) 840, including the required disclosures under ASC 840).

The most significant effect of ~~2019~~the new standard relates to the recognition of new ROU assets and ~~has not yet determined~~lease liabilities on the ~~method or impact~~Company’s balance sheet for purchase power agreements and real estate operating leases. On adoption, the Company recognized lease liabilities of ~~adoption.~~approximately $257 million for the Company and approximately $236 million for the Utilities ($215 million related to PPAs), based on the present value of the remaining minimum rental payments, with corresponding ROU assets for existing operating leases, under current leasing standards. In determining the lease liability upon transition, the Company used the incremental borrowing rates as of the adoption date based on the remaining lease term and remaining lease payments. See Note 6 for more information.

Credit ~~Losses~~losses. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU No. 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date (based on historical experience, current conditions and reasonable and supportable forecasts) and enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU No. 2016-13 amends the accounting for credit losses on available-for-sale ~~(AFS)~~ debt securities and purchased financial assets with credit deterioration. The other-than-temporary impairment model of accounting for credit losses on ~~AFS~~available-for-sale debt securities will be replaced with an estimate of expected credit losses only when the fair value is below the amortized cost of the asset. The length of time the fair value of an ~~AFS~~available-for-sale debt security has been below the amortized cost will no longer impact the determination of whether a credit loss exists. The ~~AFS~~available-for-sale debt security model will also require the use of an allowance to record the estimated losses (and subsequent recoveries). The accounting for the initial recognition of the estimated expected credit losses for purchased financial assets with credit deterioration would be recognized through an allowance for credit losses with an offset to the cost basis of the related financial asset at acquisition (i.e., there is no impact to net income at initial recognition).

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

The Company plans to adopt ASU No. 2016-13 in the first quarter of 2020. The guidance is to be applied on a modified retrospective basis with the cumulative effect of initially applying the amendments recognized in retained earnings at the date of initial application. The Company has assembled a cross-functional team that continues to work through its implementation plan, including the assessment and documentation of processes, internal controls and data requirements as well as model development. The Company is evaluating the effect that this ASU will have on the consolidated financial statements and disclosures. Economic conditions and the composition of the Company’s loan portfolio at the time of adoption will influence the extent of the adopting accounting adjustment.

Codification Improvements. In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” which is intended to clarify certain issues related to the accounting for financial instruments.

•

With respect to Topic 326, Financial Instruments - Credit Losses, ASU No. 2019-04 allows entities to measure the allowance for credit losses on accrued interest receivable balances separately from other components of the amortized cost basis of associated financial assets, or to make an accounting policy election not to measure an allowance for credit losses on accrued interest receivable amounts if an entity writes off the uncollectible accrued interest receivable balance in a timely manner and makes certain disclosures. ASU No. 2019-04 also allows an entity to make an accounting policy election regarding the presentation and disclosure of accrued interest receivables and the related allowance for credit losses for those accrued interest receivables. ASU No. 2019-04 also clarifies certain issues related to transfers between classifications or categories for loans and debt securities, recoveries, variable interest rates and prepayments, vintage disclosures, and contractual extensions and renewal options.


•	With respect to Topic 815, Derivatives and Hedging, ASU No. 2019-04 provides amendments, among others, that address partial-term fair value hedges, fair value hedge basis adjustments, and certain transition requirements.


•	With respect to Topic 825, Financial Instruments, ASU No. 2019-04 clarifies the scope of the guidance and disclosure requirements with respect to recognizing and measuring financial instruments.

The amended guidance in ASU No. 2019-04 will be effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted. The Company plans to adopt ASU No. 2019-04 in the first quarter of 2020 and ~~has not yet determined~~is currently evaluating the impact of ~~adoption.~~the ASU on the Company’s consolidated financial statements.

12Reclassifications. Reclassifications made to prior year financial statements to conform to the 2019 presentation include classifying contributions in aid of construction with capital expenditures in the cash flows from investing activities section of the condensed consolidated statements of cash flows for HEI and Hawaiian Electric. In addition, prior period disclosure of proceeds and repayments of other bank borrowings and the net increase in retail repurchase agreements contained in the “Net cash provided by financing activities” section of the consolidated statements of cash flows have been combined to conform to the current period presentation.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Note 2 · Segment financial information



(in thousands)	Electric utility		Bank		Other			Total
Three months ended June 30, 2019
Revenues from external customers	$	633,771	$	81,687	$	27		$	715,485
Intersegment revenues (eliminations)	13		—		(13		)	—
Revenues	$	633,784	$	81,687	$	14		$	715,485
Income (loss) before income taxes	$	40,817	$	21,292	$	(9,415	)	$	52,694
Income taxes (benefit)	7,744		4,276		(2,311		)	9,709
Net income (loss)	33,073		17,016		(7,104		)	42,985
Preferred stock dividends of subsidiaries	499		—		(26		)	473
Net income (loss) for common stock	$	32,574	$	17,016	$	(7,078	)	$	42,512
Six months ended June 30, 2019
Revenues from external customers	$	1,212,253	$	164,739	$	108		$	1,377,100
Intersegment revenues (eliminations)	26		—		(26		)	—
Revenues	$	1,212,279	$	164,739	$	82		$	1,377,100
Income (loss) before income taxes	$	82,676	$	47,454	$	(19,397	)	$	110,733
Income taxes (benefit)	16,978		9,599		(4,990		)	21,587
Net income (loss)	65,698		37,855		(14,407		)	89,146
Preferred stock dividends of subsidiaries	998		—		(52		)	946
Net income (loss) for common stock	$	64,700	$	37,855	$	(14,355	)	$	88,200
Total assets (at June 30, 2019)	$	6,253,846	$	7,164,054	$	119,866		$	13,537,766
Three months ended June 30, 2018
Revenues from external customers	$	608,112	$	77,104	$	61		$	685,277
Intersegment revenues (eliminations)	14		—		(14		)	—
Revenues	$	608,126	$	77,104	$	47		$	685,277
Income (loss) before income taxes	$	40,344	$	26,514	$	(7,276	)	$	59,582
Income taxes (benefit)	8,676		5,953		(1,574		)	13,055
Net income (loss)	31,668		20,561		(5,702		)	46,527
Preferred stock dividends of subsidiaries	499		—		(26		)	473
Net income (loss) for common stock	$	31,169	$	20,561	$	(5,676	)	$	46,054
Six months ended June 30, 2018
Revenues from external customers	$	1,178,526	$	152,523	$	102		$	1,331,151
Intersegment revenues (eliminations)	27		—		(27		)	—
Revenues	$	1,178,553	$	152,523	$	75		$	1,331,151
Income (loss) before income taxes	$	77,493	$	51,014	$	(15,649	)	$	112,858
Income taxes (benefit)	17,851		11,493		(3,733		)	25,611
Net income (loss)	59,642		39,521		(11,916		)	87,247
Preferred stock dividends of subsidiaries	998		—		(52		)	946
Net income (loss) for common stock	$	58,644	$	39,521	$	(11,864	)	$	86,301
Total assets (at December 31, 2018)	$	5,967,503	$	7,027,894	$	108,654		$	13,104,051

(in thousands) Electric utility Bank Other Total
Three months ended September 30, 2017

Revenues from external customers $ 598,756
$ 74,289
$ 140
$ 673,185
Intersegment revenues (eliminations) 13
—
(13 ) —
Revenues $ 598,769
$ 74,289
$ 127
$ 673,185
Income (loss) before income taxes $ 74,990
$ 26,764
$ (6,615 ) $ 95,139
Income taxes (benefit) 27,005
9,172
(1,582 ) 34,595
Net income (loss) 47,985
17,592
(5,033 ) 60,544
Preferred stock dividends of subsidiaries 498
—
(27 ) 471
Net income (loss) for common stock $ 47,487
$ 17,592
$ (5,006 ) $ 60,073
Nine months ended September 30, 2017

Revenues from external customers $ 1,674,158
$ 222,474
$ 396
$ 1,897,028
Intersegment revenues (eliminations) 97
—
(97 ) —
Revenues $ 1,674,255
$ 222,474
$ 299
$ 1,897,028
Income (loss) before income taxes $ 150,715
$ 75,720
$ (20,088 ) $ 206,347
Income taxes (benefit) 54,623
25,582
(8,202 ) 72,003
Net income (loss) 96,092
50,138
(11,886 ) 134,344
Preferred stock dividends of subsidiaries 1,496
—
(79 ) 1,417
Net income (loss) for common stock $ 94,596
$ 50,138
$ (11,807 ) $ 132,927
Total assets (at September 30, 2017) $ 6,107,501
$ 6,618,907
$ 16,442
$ 12,742,850
Three months ended September 30, 2016

Revenues from external customers $ 572,208
$ 73,708
$ 139
$ 646,055
Intersegment revenues (eliminations) 45
—
(45 ) —
Revenues $ 572,253
$ 73,708
$ 94
$ 646,055
Income before income taxes $ 75,617
$ 22,727
$ 80,861
$ 179,205
Income taxes 28,145
7,623
15,824
51,592
Net income 47,472
15,104
65,037
127,613
Preferred stock dividends of subsidiaries 498
—
(27 ) 471
Net income for common stock $ 46,974
$ 15,104
$ 65,064
$ 127,142
Nine months ended September 30, 2016

Revenues from external customers $ 1,549,602
$ 213,297
$ 360
$ 1,763,259
Intersegment revenues (eliminations) 98
—
(98 ) —
Revenues $ 1,549,700
$ 213,297
$ 262
$ 1,763,259
Income before income taxes $ 174,376
$ 62,545
$ 64,321
$ 301,242
Income taxes 64,682
21,483
10,038
96,203
Net income 109,694
41,062
54,283
205,039
Preferred stock dividends of subsidiaries 1,496
—
(79 ) 1,417
Net income for common stock $ 108,198
$ 41,062
$ 54,362
$ 203,622
Total assets (at December 31, 2016) $ 5,975,428
$ 6,421,357
$ 28,721
$ 12,425,506

Intercompany electricity sales of the Utilities to the bank and “other” segments are not eliminated because those segments would need to purchase electricity from another source if it were not provided by the Utilities and the profit on such sales is nominal.

Bank fees that ASB charges the Utilities and “other” segments are not eliminated because those segments would pay fees to another financial institution if they were to bank with another institution and the profit on such fees is nominal.

~~Pending acquisition of Hamakua power plant.~~ ~~In September 2017, HEI formed new 100% owned subsidiaries--Pacific Current, LLC and its subsidiary Hamakua Holdings, LLC and its subsidiary,~~ Hamakua Energy, ~~LLC. Hamakua Energy, LLC has agreed~~LLC’s (Hamakua Energy’s) sales to acquire Hamakua Energy Partners, L.P.’s (HEP’s) 60-megawatt power plant from an affiliate of ArcLight Capital Partners, a Boston-based private equity firm focused on energy infrastructure investments. The plant sells power to Hawaii Electric Light (a regulated affiliate) are eliminated in consolidation.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Note 3 · Electric Light under an existing power purchase agreement (PPA) that expires in 2030, the terms of which will remain the same upon completion of the acquisition. Closing of the transaction is expected later in 2017.utility segment

3 · ~~Electric utility segment~~

~~Revenue taxes.~~ The Utilities’ revenues include amounts for the recovery of various Hawaii state revenue taxes. Revenue taxes are generally recorded as an expense in the period the related revenues are recognized. However, the Utilities’ revenue tax payments to the taxing authorities in the period are based on the prior year’s billed revenues (in the case of public service company taxes and PUC fees) or on the current year’s cash collections from electric sales (in the case of franchise taxes). The Utilities included in the third quarters of 2017 and 2016 and nine months ended September 30, 2017 and 2016 approximately $54 million, $51 million, ~~$150 million~~ ~~and~~ ~~$138 million, respectively, of revenue taxes in “revenues” and in “taxes, other than income taxes” expense, in the unaudited condensed consolidated statements of income.~~

~~Unconsolidated variable interest entities.~~

HECO Capital Trust ~~III~~. ~~HECO Capital~~III. Trust III, ~~(Trust III)~~a statutory trust, which was ~~created and exists for~~formed to effect the ~~exclusive purposes~~issuance of ~~(i) issuing~~$50 million of cumulative quarterly income trust preferred securities in ~~March 2004 2,000,000 6.50% Cumulative Quarterly Income Preferred Securities, Series~~ 2004 (2004 Trust Preferred Securities) ~~($50 million aggregate liquidation preference) to the public~~, and ~~trust common securities ($1.5 million aggregate liquidation preference) to~~had at all times been a wholly-owned unconsolidated subsidiary of Hawaiian Electric, ~~(ii) investing the proceeds~~redeemed $50 million of these trust securities in 2004 Debentures issued by Hawaiian Electric in the principal amount of $31.5 million and issued by Hawaii Electric Light and Maui Electric each in the principal amount of $10 million, (iii) making distributions on these trust securities and (iv) engaging in only those other activities necessary or incidental thereto. Theits outstanding 2004 Trust Preferred Securities are mandatorily redeemable at the maturity of the underlying debt on March 18, 2034, which maturity may be extended to no later than March 18, 2053; and are currently redeemable at the issuer’s option without premium. The 2004 Debentures, together with the obligations of the Utilities under an expense agreement and Hawaiian Electric’s obligations under its trust guarantee and its guarantee of the obligations of Hawaii Electric Light and Maui Electric under their respective debentures, are the sole assets of Trust III. Taken together, Hawaiian Electric’s obligations under the Hawaiian Electric debentures, the Hawaiian Electric indenture, the subsidiary guarantees, the trust agreement, the expense agreement and trust guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of amounts due on the Trust Preferred Securities. Trust III has at all times been an unconsolidated subsidiary of Hawaiian Electric. Since Hawaiian Electric, as the holder of 100% of the trust common securities, does not absorb the majority of the variability of Trust III, Hawaiian Electric is not the primary beneficiary and does not consolidate Trust III in accordance with accounting rules on the consolidation of VIEs. Trust III’s balance sheets as of September 30, 2017 and December 31, 2016 each consisted of $51.5 million of 2004 Debentures; $50.0 million of 2004 Trust Preferred Securities; and $1.5 million of trust common ~~securities.~~securities on May 15, 2019. Subsequently, a Certificate of Cancellation of Statutory Trust was filed with the Delaware Secretary of State in order to cancel the Trust III, which became effective on June 10, 2019.

For the six months ended June 30, 2019 and 2018, Trust III’s income statements ~~for the nine months ended September 30, 2017~~ consisted of ~~$2.5~~$1.2 million and $1.7 million, respectively, of interest income received from the 2004 Debentures; ~~$2.4~~$1.2 million and $1.6 million, respectively, of distributions to holders of the Trust Preferred Securities; $37,000 and ~~$75,000~~$50,000, respectively, of common dividends on the trust common securities to Hawaiian Electric. As long as the 2004 Trust Preferred Securities are outstanding, Hawaiian Electric is not entitled to receive any funds from Trust III other than pro-rata distributions, subject to certain subordination provisions, on the trust common securities. In the event of a default by Hawaiian Electric in the performance of its obligations under the 2004 Debentures or under its Guarantees, or in the event any of the Utilities elect to defer payment of

Unconsolidated variable interest ~~on any of their respective 2004 Debentures, then Hawaiian Electric will be subject to a number of restrictions, including a prohibition on the payment of dividends on its common stock.~~entities.

Power purchase agreements. As of ~~September~~June 30, ~~2017~~,2019, the Utilities had ~~five~~four PPAs for firm capacity (excluding the PGV PPA as PGV has been offline since May 2018 due to lava flow on Hawaii Island) and other PPAs with independent power producers (IPPs) and Schedule Q providers ~~(e.g.~~(i.e., customers with cogeneration and/or power production facilities who buy power from or sell power to the Utilities), none of which isare currently required to be consolidated as VIEs.

Pursuant to the current accounting standards for VIEs, the Utilities are deemed to have a variable interest in Kalaeloa Partners, L.P. (Kalaeloa), AES Hawaii, Inc. (AES Hawaii) and ~~HEP~~Hamakua Energy by reason of the provisions of the ~~PPAs~~PPA that the Utilities have with the three IPPs. However, management has concluded that the Utilities are not the primary beneficiary of Kalaeloa, AES Hawaii ~~or HEP~~and Hamakua Energy because the Utilities do not have the power to direct the activities that most significantly impact the three IPPs’ economic performance nor the obligation to absorb their expected losses, if any, that could potentially be significant to the IPPs. Thus, the Utilities have not consolidated Kalaeloa, AES Hawaii ~~or HEP~~and Hamakua Energy in its ~~unaudited~~condensed consolidated financial statements. Hamakua Energy is an indirect subsidiary of Pacific Current and is consolidated in HEI’s condensed consolidated financial statements.

For the other PPAs with IPPs, the Utilities have concluded that the consolidation of the IPPs was not required because either the Utilities do not have variable interests in the IPPs due to the absence of an obligation in the PPAs for the Utilities to absorb any variability of the IPPs, or the ~~IPPs were either~~IPP was considered a ~~“business” or~~ “governmental organization,” and thus excluded from the scope of accounting standards for VIEs. Two IPPs of as-available energy declined to provide the information necessary for Utilities to determine the applicability of accounting standards for VIEs. If information is ultimately received from the IPPs, a possible

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

outcome of future analyses of such information is the consolidation of one or both of such IPPs in the unaudited condensed consolidated financial statements. The consolidation of any significant IPP could have a material effect on the unaudited condensed consolidated financial statements, including the recognition of a significant amount of assets and liabilities and, if such a consolidated IPP were operating at a loss and had insufficient equity, the potential recognition of such losses. If the Utilities determine they are required to consolidate the financial statements of such an IPP and the consolidation has a material effect, the Utilities would retrospectively apply accounting standards for ~~VIEs.~~VIEs to the IPP.

Commitments and contingencies.

~~Contingencies~~Fuel Contracts. The fuel contract entered into in January 2019, by the Utilities and PAR Hawaii Refining, LLC, for the Utilities' low sulfur fuel oil, high sulfur fuel oil, No. 2 diesel, and ultra-low sulfur diesel requirements was approved by the PUC, and became effective on April 28, 2019 and terminates on December 31, 2022. The existing fuel contracts with Island Energy Services, LLC (IES), terminated on April 27, 2019, as agreed with IES under a mutual termination and release agreement entered into in November 2018.

Contingencies. The Utilities are subject in the normal course of business to pending and threatened legal proceedings. Management does not anticipate that the aggregate ultimate liability arising out of these pending or threatened legal proceedings will be material to its financial position. However, the Utilities cannot rule out the possibility that such outcomes could have a material effect on the results of operations or liquidity for a particular reporting period in the future.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Power purchase agreements. Purchases from all IPPs were as follows:


	Three months ended September 30				Nine months ended September 30				Three months ended June 30				Six months ended June 30
(in millions)	2017		2016		2017		2016		2019		2018		2019		2018
Kalaeloa	$	48	$	44	$	136	$	109	$	61	$	52	$	101	$	92
AES Hawaii	39		38		103		112		32		32		64		69
HPOWER	18		19		51		52		19		17		37		32
Puna Geothermal Venture	10		7		28		19		—		4		—		15
HEP	8		8		25		23
Hamakua Energy									18		15		34		22
Wind IPPs									23		31		43		53
Solar IPPs									8		8		15		14
Other IPPs ¹	38		42		98		98		1		2		2		4
Total IPPs	$	161	$	158	$	441	$	413	$	162	$	161	$	296	$	301


¹	Includes ~~wind~~hydro power ~~solar power, feed-in tariff projects~~ and other ~~PPAs.~~PPAs

Kalaeloa Partners, L.P. ~~In October~~ Under a 1988 PPA, as amended, Hawaiian Electric ~~entered into a PPA with Kalaeloa, subsequently approved by the PUC, which provided that Hawaiian Electric would~~is committed to purchase ~~180 megawatts (MW)~~208 MW of firm capacity ~~for a period of 25 years beginning in May 1991. In October 2004,~~from Kalaeloa. Hawaiian Electric and Kalaeloa entered into amendments to the PPA, subsequently approved by the PUC, which together effectively increased the firm capacity from 180 MW to 208 MW. The energy payments that Hawaiian Electric makes to Kalaeloa include: (1) a fuel component, with a fuel price adjustment based on the cost of low sulfur fuel oil, (2) a fuel additives cost component and (3) a non-fuel component, with an adjustment based on changes in the Gross National Product Implicit Price Deflator. The capacity payments that Hawaiian Electric makes to Kalaeloa are fixed in accordance with the PPA. Kalaeloa also has a steam delivery cogeneration contract with another customer, the term of which coincides with the PPA. The facility has been certified by the Federal Energy Regulatory Commission as a Qualifying Facility under the Public Utility Regulatory Policies Act of 1978.

~~Hawaiian Electric and Kalaeloa are~~currently in negotiations to address the PPA term that ended on May 23, 2016. The PPA automatically extends on a month-to-month basis as long as the parties are still negotiating in good ~~faith, but would end 60 days after either party notifies the other in writing that negotiations have terminated.~~faith. Hawaiian Electric and Kalaeloa have agreed that neither party will terminate the PPA (which has been subject to automatic extension on a month-to-month basis) prior to October 31, ~~2018.~~2019, to allow for a negotiated resolution and PUC approval.

AES Hawaii, Inc. Under a PPA entered into in March 1988, as amended (through Amendment No. 2) for a period of 30 years ~~beginning~~ending September ~~1992,~~2022, Hawaiian Electric agreed to purchase 180 MW of firm capacity from AES Hawaii. In August 2012, Hawaiian Electric filed an application with the PUC seeking an exemption from the PUC’s Competitive Bidding Framework to negotiate an amendment to the PPA to purchase 186 MW of firm capacity, and amend the energy pricing formula in the PPA. The PUC approved the exemption in April 2013, but Hawaiian Electric and AES Hawaii ~~were not able to reach~~have been in dispute over an ~~agreement on the amendment. In June 2015, AES Hawaii filed an arbitration demand regarding a dispute about whether Hawaiian Electric was obligated to buy up to~~additional 9 MW of ~~additional capacity based on a 1992 letter.~~capacity. In February 2018, Hawaiian Electric ~~responded to the arbitration demand and in October 2015,~~reached agreement with AES Hawaii and Hawaiian Electric entered into a Settlement Agreement to stay the arbitration proceeding. The Settlement Agreement included certain conditions precedent which, if satisfied, would have released the parties from the claims under the arbitration proceeding. Among the conditions precedent was the successful negotiation and PUC approval ofon an amendment to the ~~existing~~ PPA.

~~In November 2015, Hawaiian Electric entered into Amendment No. 3 for which~~ However, in June 2018, the PUC ~~approval was requested and subsequently denied in January 2017. Approval of Amendment No. 3 would have satisfied the final condition for effectiveness~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

issued an order suspending review of the ~~Settlement Agreement~~amendment pending a DOH decision on AES’ request for approval of its Emission Reduction Plan and ~~resolved~~partnership with Hawaiian Electric. If approved by the PUC, the amendment will resolve AES ~~Hawaii's claims. Following~~Hawaii’s claims related to the ~~PUC's decision, the parties agreed to extend the stay of the arbitration proceeding, while settlement discussions continue.~~additional capacity.

Hu Honua Bioenergy, ~~LLC.~~ LLC (Hu Honua). In May 2012, Hawaii Electric Light signed a PPA, which the PUC approved in December 2013, with Hu Honua ~~Bioenergy, LLC (Hu Honua)~~ for 21.5 MW of renewable, dispatchable firm capacity fueled by locally grown biomass from a facility on the island of Hawaii. ~~Per~~Under the terms of the PPA, the Hu Honua plant was scheduled to be in service in 2016. However, Hu Honua encountered construction and litigation delays, failed to meet its obligations under the PPA and failed to provide adequate assurances that it could perform or had the financial means to perform. Hawaii Electric Light terminated the PPA on March 1, 2016. On November 30, 2016, Hu Honua filed a civil complaintwhich resulted in the United States District Court for the District of Hawaii that included claims purportedly arising out of the termination of Hu Honua’s PPA. On May 26, 2017, Hawaii Electric Light and Hu Honua entered into a settlement agreement that will settle all claims related to the termination of the original PPA. The settlement agreement was contingent on the PUC’s approval of an amended and restated PPA between Hawaii Electric Light and Hu Honua dated May 5, 2017. In July 2017, the PUC approved the amended and restated ~~PPA. On~~PPA, which becomes effective once the PUC’s order is final and non-appealable. In August ~~25,~~ 2017, the PUC’s approval was appealed by a third party. On May 10, 2019, the Hawaii Supreme Court issued a decision remanding the matter to the PUC for further proceedings consistent with the court’s decision which must include express consideration of Green House Gas emissions that would result from approving the PPA, whether the cost of energy under the PPA is reasonable in light of the potential for GHG emissions, and whether the terms of the PPA are prudent and in the public interest, in light of its potential hidden and long-term consequences. On June 20, 2019, the PUC issued an order reopening the docket for further proceedings. The ~~appeal is still pending.~~parties have submitted updated status reports and the PUC will be establishing a procedural schedule. Hu Honua ~~is expected~~expects to ~~be on-line by~~complete construction of the ~~end~~plant in the fourth quarter of ~~2018.~~2019.

Utility projects. Many public utility projects require PUC approval and various permits from other governmental agencies. Difficulties in obtaining, or the inability to obtain, the necessary approvals or permits can result in significantly increased project costs or even cancellation of projects. In the event a project does not proceed, or if it becomes probable the PUC will disallow cost recovery for all or part of a project, or if ~~PUC imposed~~PUC-imposed caps on project costs are expected to be exceeded, project costs may need to be written off in amounts that could result in significant reductions in Hawaiian Electric’s consolidated net income.

Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM) implementation project. The ERP/EAM Implementation Project went live in October 2018. In the Hawaiian Electric 2017 rate case, a settlement agreement approved by the PUC included authorization for the deferred project costs to accrue a return at 1.75% after the project went into service and until the deferred project costs are included in rate base, and for amortization of the deferred costs to not begin until the amortization expense is incorporated in rates and the unamortized deferred project costs are included in rate base. As of June 30, 2019, the total deferred project costs and accrued carrying costs after the project went into service amounted to $58.9 million.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

In February 2019, the PUC approved a methodology for passing the future cost saving benefits of the new ERP/EAM system to customers developed by the Utilities in collaboration with the Consumer Advocate. The Utilities filed a benefits clarification document on June 10, 2019, reflecting $150 million in future net O&M expense reductions and cost avoidance, and $96 million in capital cost reductions and tax savings over the 12-year service life. To the extent the reduction in O&M expense relates to amounts reflected in electric rates, the Utilities would reduce future rates for such amounts. As of June 2019, the Utilities recorded $0.5 million as a regulatory liability for amounts to be returned to customers for reduction in O&M expense included in rates.

West Loch PV Project. ~~On August 11, 2016,~~In June 2017, the PUC approved the Utilities’ request to commence the ERP/EAM Implementation Project, subject to certain conditions, including a $77.6 million cap on cost recovery as well as a requirement that the Utilities pass onto customers a minimumexpenditure of ~~$244 million in savings associated with the system over its 12-year service life. The decision and order (D&O) approved the deferral of certain project costs and allowed the accrual of allowance~~funds for funds used during construction (AFUDC), but limited the AFUDC rate to 1.75%. Pursuant to the D&O and subsequent orders, in September 2017, the Utilities filed a bottom-up, low-level analysis of the project’s benefits and performance metrics and tracking mechanism for passing the project’s benefits on to customers. Monthly reports on the status and costs of the project continue to be filed.

The ERP/EAM Implementation Project is on schedule. The project is expected to go live by October 1, 2018. As of September 30, 2017, the Project incurred costs of $23.6 million of which $4.6 million were charged to other operation and maintenance (O&M) expense, $1.4 million relate to capital costs and $17.6 million are deferred costs.

~~Schofield Generating Station Project.~~ ~~In August 2012, the PUC approved a waiver from the competitive bidding framework to allow~~ Hawaiian Electric to negotiate with the U.S. Army for the construction of a 50 MW utility owned and operated firm, renewable and dispatchable generation facility at Schofield Barracks. In September 2015, the PUC approved Hawaiian Electric’s application to expend $167 million for the project. In approving the project, the PUC placed a cost cap of $167 million for the project, stated 90% of the cap is allowed for cost recovery through cost recovery mechanisms other than base rates, and stated the $167 million cap will be adjusted downward due to any reduction in the cost of the engine contract due to a reduction in the foreign exchange rate. Hawaiian Electric was required to take all necessary steps to lock in the lowest possible exchange rate. On January 5, 2016, Hawaiian Electric executed window forward contracts, which lowered the cost of the engine contract by $9.7 million, resulting in a revised project cost cap of $157.3 million. Hawaiian Electric has received all of the major permits for the project, including a 35 year site lease from the U.S. Army. Construction of the facility began in October 2016, and the facility is expected to be placed in service in the second quarter of 2018. A request to recover the costs of the project and related operations and maintenance expense through the newly-established Major Project Interim Recovery (MPIR) adjustment mechanism is pending PUC approval. (See “Decoupling” section below for MPIR guidelines and capital cost recovery discussion.) Project costs incurred as of September 30, 2017 amounted to $105.7 million.

~~West Loch PV Project.~~ ~~In July 2016, Hawaiian Electric announced plans~~ to build, own and operate a utility-owned, grid-tied 20-MW (ac) solar facility ~~in conjunction with~~on property owned by the Department of the Navy, atincluding a ~~Navy/Air Force joint base. In June 2017, the PUC approved the expenditure of funds for the project, including Hawaiian Electric’s~~ proposed project cost cap of $67 million and a performance guarantee to provide energy at 9.56 cents/~~KWH~~kWh or ~~less. Project costs incurred as of September 30, 2017 amounted~~less to ~~$0.7 million.~~the system.

In approving the project, the PUC agreed that the project is eligible for recovery of costs offset by related net benefits under the newly-established ~~MPIR~~major project interim recovery (MPIR) adjustment mechanism. (See “Decoupling” section below for MPIR guidelines and ~~capital~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

cost recovery discussion.) Hawaiian Electric has provided supplemental materials, ~~in August 2017,~~ as requested by the PUC, to support meeting the MPIR guidelines, accompanied by system performance guarantee and cost savings sharing mechanisms.

~~Hawaiian Telcom~~. The Utilities each have separate agreements for the joint ownership and maintenance of utility poles with Hawaiian Telcom, Inc. (Hawaiian Telcom), the respective county or counties in which each utility operates and other third parties, such as the State of Hawaii. The agreements set forth various circumstances requiring pole removal/installation/replacement and the sharing of costs among the joint pole owners. The agreements allow for the cost of work done by one joint pole owner to be shared by the other joint pole owners basedA decision on the apportionment of costs in the agreements. The Utilities have maintained, replaced and installed the majority of the jointly-owned poles in each of the respective service territories, and have billed the other joint pole owners for their respective share of the costs. The counties and the State have been reimbursing the Utilities for their share of the costs. However, Hawaiian Telcom has been delinquent in reimbursing the Utilities for its share of the costs.these matters is pending.

Hawaiian Electric ~~has initiated~~executed a ~~dispute resolution process to collect~~fixed-price Engineering, Procurement, and Construction (EPC) contract for the unpaid amounts from Hawaiian Telcom as specified by the joint pole agreement. This dispute resolution process is stayed pending settlement negotiations. For Hawaii Electric Light, the agreement does not specify an alternative dispute resolution process, and thus a complaint for payment was filed with the Circuit Court in June 2016. This complaint is stayed pending settlement negotiations. Maui Electric has not yet commenced any legal action to recover the delinquent amounts. The Utilities and Hawaiian Telcom have entered into a non-binding memorandum of understanding to endeavor to negotiate agreements, subject to PUC approval, for purchase by the Utilities of Hawaiian Telcom’s interest in all the joint poles, with paymentproject on December 6, 2017. Construction of the ~~purchase price of such interest~~facility began in the ~~poles~~second quarter of 2018, and the facility is expected to be ~~offset~~placed in ~~part by the receivables owed by Hawaiian Telcom~~service no later than October 2019. Project costs incurred as of June 30, 2019 amounted to the Utilities. As of September 30, 2017, total receivables under the joint pole agreement, including interest, from Hawaiian Telcom are $22.2 million ($14.9 million at Hawaiian Electric, $6.0 million at Hawaii Electric Light, and $1.3 million at Maui Electric). Management expects to prevail on these claims but has reserved for the accrued interest of $4.9 million on the receivables.$46.5 million.

Environmental regulation. The Utilities are subject to environmental laws and regulations that regulate the operation of existing facilities, the construction and operation of new facilities and the proper cleanup and disposal of hazardous waste and toxic substances.

Hawaiian Electric, Hawaii Electric Light and Maui Electric, like other utilities, periodically encounter petroleum or other chemical releases ~~into the environment~~ associated with current or previous operations. The Utilities report and take action on these releases when and as required by applicable law and regulations. The Utilities believe the costs of responding to such releases identified to date will not have a material effect, individually or in the aggregate, on Hawaiian Electric’s consolidated results of operations, financial condition or liquidity.

Former Molokai Electric Company generation site. In 1989, Maui Electric acquired by merger Molokai Electric Company. Molokai Electric Company had sold its former generation site (Site) in 1983, but continued to operate at the Site under a lease until 1985. The Environmental Protection Agency (EPA) has since identified environmental impacts in the subsurface soil at the Site. ~~Although Maui Electric never operated at the Site or owned the Site property, after discussions~~In cooperation with ~~the EPA and~~ the Hawaii Department of Health (DOH), Maui Electric agreed to undertake additional investigations at the Site and an adjacent parcel that Molokai Electric Company had used for equipment storage (the Adjacent Parcel) to determine the extent of environmental contamination. A 2011 assessment by a Maui Electric contractor of the Adjacent Parcel identified environmental impacts, including elevated polychlorinated biphenyls (PCBs) in the subsurface soils. In cooperation with the DOH and EPA, Maui Electric is further ~~investigating~~investigated the Site and the Adjacent Parcel to determine the extent of impacts of ~~PCBs,~~polychlorinated biphenyls (PCBs), residual fuel oils and other subsurface contaminants. Maui Electric has a reserve balance of ~~$3.1~~$2.7 million as of ~~September~~June 30, ~~2017,~~2019, representing the probable and reasonably ~~estimated~~estimable cost ~~to complete the additional investigation and estimated cleanup costs at~~for remediation of the Site and the Adjacent Parcel; however, final costs of remediation will depend on ~~the results of continued investigation.~~cleanup approach implemented.

Pearl Harbor sediment study. In July 2014, the U.S. Navy notified Hawaiian Electric of the Navy’s determination that Hawaiian Electric is a Potentially Responsible Party responsible for the costs of investigation and cleanup of PCB contamination in sediment in the area offshore of the Waiau Power Plant as part of the Pearl Harbor Superfund Site. ~~The Navy has also requested that~~ Hawaiian Electric ~~reimburse the costs incurred~~was also required by the Navy to investigate the area. The Navy has completed a remedial investigation and a feasibility study (FS) for the remediation of contaminated sediment at several locations in Pearl Harbor and issued its Final FS Report on June 29, 2015. On February 2, 2016, the Navy released the Proposed Plan for Pearl Harbor Sediment Remediation and Hawaiian Electric submitted comments. The extent of the contamination, the appropriate remedial measures to address it and Hawaiian Electric’s potential responsibility for any associated costs have not been determined.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

~~On March 23, 2015, Hawaiian Electric received a letter from the~~ EPA ~~requesting that Hawaiian Electric submit a work plan~~ to assess potential sources and extent of PCB contamination onshore at ~~the~~ Waiau Power Plant. Hawaiian Electric submitted a sampling and analysis (SAP) work plan to the EPA and the DOH. Onshore sampling at the Waiau Power Plant was completed in two phases in December 2015 and June 2016. The extent of the onshore contamination, the appropriate remedial measures to address it and any associated costs have not yet been determined.

As of ~~September~~June 30, ~~2017,~~2019, the reserve account balance recorded by Hawaiian Electric to address the PCB contamination was ~~$4.9~~$4.7 million. The reserve balance represents the probable and reasonably estimable cost ~~to complete~~for the onshore ~~and offshore investigations~~investigation and the remediation of PCB contamination in the offshore sediment. The final remediation costs will depend on the ~~results of the~~potential onshore ~~investigation and assessment of potential~~ source control requirements ~~as well as the further investigation of contaminated sediment~~and actual offshore ~~from the Waiau Power Plant.~~

~~Asset retirement obligations~~. The Utilities recorded Asset Retirement Obligations (AROs) related to removing retired generating units at Hawaiian Electric’s Honolulu and Waiau power plants and removing certain types of transformers. The transformer removal projects are on-going. The retired generating unit removal projects are expected to be completed by the end of 2017, and the related AROs have been reassessed. Hawaiian Electric has determined that the AROs for the retired generating units should be minimal, and thus $24.4 million of the remaining AROs related to those projects were reversed in the third quarter of 2017 to reflect the revision in estimated cash flows (with no impact on the Utilities’ net income). The ARO balances as of September 30, 2017 and 2016, amounted to $0.7 million and $26.2 million, respectively. cleanup costs.

Regulatory proceedings

Decoupling.Decoupling is a regulatory model that is intended to provide the Utilities with financial stability and facilitate meeting the State of Hawaii’s goals to transition to a clean energy economy and achieve an aggressive renewable portfolio standard. The decoupling ~~model implemented in Hawaii~~mechanism has the following major components: (1) monthly revenue balancing account (RBA) revenues or refunds for the difference between PUC-approved target revenues and recorded adjusted revenues, which delinks revenues from kilowatthour sales, (2) RAM revenues for escalation in certain O&M expenses and ~~includes annual~~ rate ~~adjustments. The decoupling mechanism has three components: (1) a sales decoupling~~base changes, (3) MPIR component, ~~via a revenue balancing account (RBA)~~(4) performance incentive mechanisms (PIMs), ~~(2) a revenue escalation component via a rate adjustment mechanism (RAM)~~ and ~~(3)~~(5) an earnings sharing mechanism, which would

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

provide for a reduction of revenues between rate cases in the event the utility exceeds the return on average common equity (ROACE) allowed in its most recent rate case. ~~Decoupling provides for more timely cost recovery and earning on investments.~~

For the RAM years 2014 - 2016, Hawaiian Electric was allowed to record RAM revenue beginning on January 1 and to bill such amounts from June 1 of the applicable year through May 31 of the following year. Subsequent to 2016, Hawaiian Electric reverted to the RAM provisions initially approved in March 2011—i.e., RAM is both accrued and billed from June 1 of each year through May 31 of the following year.

~~2015 decoupling order. On March 31, 2015, the PUC issued an Order (the 2015 Decoupling Order) that modified the RAM portion of~~Under the decoupling mechanism, ~~to be capped at~~triennial general rate cases are required.

Rate adjustment mechanism. The RAM is based on the lesser ~~of the RAM revenue adjustment as then determined (based on~~of: a) an inflationary adjustment for certain O&M expenses and return on investment for certain rate base ~~changes) and a RAM revenue adjustment calculated based on the~~changes, or b) cumulative annual compounded increase in Gross Domestic Product Price Index applied to annualized target revenues (the RAM Cap). ~~The 2015 Decoupling Order provided a specific basis for calculating the~~Annualized target revenues ~~until the next rate case, at which time the target revenues will~~ reset upon the issuance of an interim or final ~~D&O~~decision and order (D&O) in a rate case. ~~The triennial rate case cycle required under~~Each of the ~~decoupling mechanism continues to serve as the maximum period between the filing of general rate cases.~~

~~The RAM Cap impacted the Utilities' recovery of capital investments as follows:~~

~~Hawaiian Electric's~~Utilities’ RAM revenues ~~were limited to the~~was below its respective RAM Cap in ~~2015, 2016~~2019. The 2019 RAM also incorporated additional amortization of the regulatory liability associated with certain excess deferred taxes resulting from the 2017 Tax Cuts and ~~2017.~~

~~Maui Electric's~~Jobs Act decrease in tax rates. The reduction in the RAM revenues ~~were limited to~~will be counterbalanced by the ~~RAM Cap in 2015 and 2016; however, the 2017 RAM revenues were below the RAM Cap.~~lower income tax expense, therefore will have no net income impact.

~~Hawaii Electric Light’s RAM revenues were below the RAM Cap in 2015, 2016 and 2017.~~

~~2017 decoupling order~~Major project interim recovery. On April 27, 2017, the PUC issued an ~~Order (the 2017 Decoupling Order)~~order that ~~requires the establishment of specific performance incentive mechanisms and provides~~provided guidelines for interim recovery of revenues to support major projects placed in service between general rate cases.

The PUC approved recovery of capital costs under the MPIR for Schofield Generating Station, which increased revenues in 2018 by $3.6 million and will be collected in customer bills beginning in June 2019. In February 2019, Hawaiian Electric submitted an MPIR filing of $19.8 million for 2019 (which accrued effective January 1, 2019) that included the 2019 return on project amount (up to the capped amount) in rate base, depreciation and incremental O&M expenses, for collection from June 2020 through May ~~2017,~~2021. The PUC has also indicated that it intends to approve MPIR recovery for the ~~Utilities filed their proposed initial tariffs to implement conventional stand-alone performance~~West Loch PV Project.

Performance incentive mechanisms ~~namely for:~~. The PUC has ordered the following PIMs.

Service Quality performance incentives are measured on a calendar-year basis. The PIM tariff requires the performance targets, deadbands and the amount of maximum financial incentives used to determine the PIM financial incentive levels for each of the PIMs to be re-determined upon issuance of an interim or final order in a general rate case for each utility.

Service Reliability Performance measured by System Average Interruption Duration and Frequency Indexes (penalties only). Target performance is based on each utility’s historical 10-year average performance with a deadband of one

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

standard deviation. The maximum penalty for each performance index is 20 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties of approximately $6$6.7 million ~~penalty~~- for both indices in total for the three utilities).

Call Center Performance measured by the percentage of calls answered within 30 seconds. Target performance is based on the annual average performance for each utility for the most recent 8 quarters with a deadband of 3% above and below the target. The maximum penalty or incentive is 8 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties or incentives of approximately ~~$1.2~~$1.3 million ~~penalty or incentive~~- in total for the three utilities).

~~The 2017 Decoupling Order also established guidelines~~In 2018, the Utilities accrued $2.1 million in estimated penalties for ~~MPIR. Projects eligible for recovery through the MPIR adjustment mechanism are major projects (i.e., projects with capital expenditures~~service reliability net of ~~customer contributions~~call center performance incentives for 2018. As a result of a PUC order denying the exclusion of the impact of a specific project on the service reliability performance, in excess of $2.5 million), including but not restricted to renewable energy, energy efficiency, utility scale generation, grid modernization and smaller qualifying projects grouped into programs for review. The MPIR adjustment mechanism provides the opportunity to recover revenues for net costs of approved eligible projects placedMay 2019, Hawaiian Electric accrued an additional $1.3 million in service ~~between general rate cases wherein cost recovery is limited by a revenue cap and is not provided by other effective recovery mechanisms.~~reliability penalties related to 2018. The ~~request for PUC approval must include a business case and all costs that are allowed~~net service quality performance penalties related to be recovered through the MPIR adjustment mechanism shall be offset by any related benefits. The guidelines provide for accrual of revenues approved for recovery upon in-service date to be collected from customers through the annual RBA tariff. Capital projects which are not recovered through the MPIR would be included2018 were reflected in the ~~RAM and be subject to the RAM cap, until the next rate case when the utilities would request recovery in base rates.~~

In the 2017 Decoupling Order, the PUC indicated that in pending and subsequent rate cases, the PUC intends to require all fuel expenses and purchased energy expenses be recovered through an appropriately modified energy cost adjustment mechanism rather than through base rates, and will consider adopting processes to periodically reset fuel efficiency measures embedded in the energy cost adjustment mechanism to account for changes in the generating system.

~~Annual decoupling filings. On March 31, 2017, the Utilities submitted to the PUC, their annual decoupling filings. Maui Electric amended its~~2019 annual decoupling filing ~~on May 22, 2017, to update~~ and ~~revise certain cost information. On~~will reduce customer rates in the period June 1, 2019 through May 31, ~~2017,~~2020.

In May 2019, the Utilities filed an application for approval to among other things, modify the measurement of performance for the System Average Interruption Duration and Frequency Indexes, adjust the PIM targets, deadbands, and financial incentive levels for each of the PIMs upon issuance of a final order in a general rate case, and adjust the call center performance PIM level for Hawaii Electric Light.

Procurement of low-cost variable renewable resources through the request for proposal process in 2018 is measured by comparison of the procurement price to target prices. The incentive is a percentage of the savings determined by comparing procured price to a target of 11.5 cents per kilowatt-hour for renewable projects with storage capability and 9.5 cents per kilowatt-hour for energy-only renewable projects. For PPAs filed by December 31, 2018 and subsequently approved by the PUC, the incentive is 20% of the savings, with a cap of $3.5 million for the three utilities in total. For PPAs filed in January, February, and March 2019 and subsequently approved by the PUC, scaled incentives are 15%, 10% and 5%, respectively, of the savings for PPAs, with a cap of $3 million for the three utilities in total. There are no penalties. On March 25, 2019, the PUC approved six contracts, which were filed by December 31, 2018 and qualified for incentives. Half of the incentive is earned upon PUC approval of the contract and the other half is eligible to be earned in the year following the in-service date of the projects. The Utilities accrued $1.7 million in incentives in March 2019, which were reflected in the 2019 annual decoupling ~~filings for tariffed rates that~~filing and will be ~~effective from~~recovered in rates in the period June 1, ~~2017~~2019 through May 31, ~~2018.~~2020.

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Annual decoupling filings. The net annual incremental amounts approved to be collected (refunded) from June 1, 2019 through May 31, 2020 are as follows:

($ in millions) Hawaiian Electric Hawaii Electric Light Maui Electric
2017 Annual incremental RAM adjusted revenues $ 12.7
$ 3.2
$ 1.6
Annual change in accrued earnings sharing credits $ —
$ —
$ —
Annual change in accrued RBA balance as of December 31, 2016 (and associated revenue taxes) (refunded) $ (2.4 ) $ (2.5 ) $ (0.2 )
Net annual incremental amount to be collected under the tariffs $ 10.3
$ 0.7
$ 1.4



(in millions)	Hawaiian Electric			Hawaii Electric Light			Maui Electric			Total
2019 Annual incremental RAM adjusted revenues, net of changes in Tax Act adjustment*	$	6.5		$	1.1		$	5.4		$	13.0
Annual change in accrued RBA balance as of December 31, 2018 (and associated revenue taxes) which incorporates MPIR recovery	(12.2		)	(2.0		)	0.8			(13.4		)
Performance Incentive Mechanisms (net)	(1.3		)	—			(0.4		)	(1.7		)
Net annual incremental amount to be collected (refunded) under the tariffs	$	(7.0	)	$	(0.9	)	$	5.8		$	(2.1	)

* The 2017 Tax Cuts and Jobs Act (the Tax Act) had two incremental impacts in 2019. First, the 2019 RAM calculation for all of the Utilities incorporated additional amortization of the regulatory liability associated with certain deferred taxes. Secondly, Maui Electric incorporated a $2.8 million adjustment in its 2018 annual decoupling filing related to the Tax Act which is not recurring in 2019.

Performance-based regulation proceeding. On April 18, 2018, the PUC issued an order, instituting a proceeding to investigate performance-based regulation (PBR). The PUC stated that PBR seeks to utilize both revenue adjustment mechanisms and performance mechanisms to more strongly align utilities’ incentives with customer interests.

The order stated that, in general, the PUC is interested in ratemaking elements and/or mechanisms that result in:

Greater cost control and reduced rate volatility;

Efficient investment and allocation of resources regardless of classification as capital or operating expense;

Fair distribution of risks between utilities and customers; and

Fulfillment of State policy goals.

The proceeding has two phases. Phase 1 examined the current regulatory framework and identified those areas of utility performance that are deserving of further focus in Phase 2. In May 2019, the PUC issued an order concluding Phase 1, which established guiding principles, regulatory goals, and priority outcomes to guide the development of the PBR mechanisms in Phase 2. The PUC identified the following guiding principles, which will inform the development of the PBR framework: 1) a customer-centric approach, 2) administrative efficiency to reduce regulatory burdens; and 3) utility financial integrity to maintain the utility’s financial health. Priority goals (and priority outcomes) identified by the PUC were: enhance customer experience (affordability, reliability, interconnection experience, and customer engagement), improve utility performance (cost control, DER asset effectiveness, and grid investment efficiency), and advance societal outcomes (capital formation, customer equity, greenhouse gas reduction, electrification of transportation, and resilience).

The order also outlined the PUC’s vision of a comprehensive PBR framework that would be further developed in Phase 2. The framework envisioned would include 1) a five-year multi-year rate plan with an index-driven annual revenue adjustment based on an inflation factor, an X-factor which would encompass productivity, a Z-factor to account for exceptional circumstances not in the utility’s control and a customer dividend, 2) a symmetric earnings sharing mechanism that would help ensure that utility earnings do not excessively benefit or suffer from external factors outside of utility control or unforeseen results of regulatory mechanisms, 3) off-ramp provisions, 4) continuation of the RBA, MPIR adjustment mechanism, the pension and OPEB tracking mechanism, and other recovery mechanisms, and 5) a portfolio of performance incentive mechanisms for customer engagement and DER asset effectiveness (rewards only), and interconnection experience (both rewards and penalties), in addition to scorecards to track progress against targeted performance levels, shared savings mechanisms to apportion savings to the utility and customers, and reported metrics.

The Phase 2 schedule includes working group meetings through the first half of 2020, followed by statements of positions, evidentiary hearing in October 2020 and anticipated decision in December 2020.

Most recent rate proceedings.

Hawaiian Electric ~~consolidated 2014 test year abbreviated and 2017~~2020 test year rate ~~cases~~case. On ~~December 16, 2016,~~April 26, 2019, Hawaiian Electric filed a notice that it intends to file an application ~~with the PUC~~ for a general rate increase after June 30, 2019, but not later than September 30, 2019, based on a 2020 calendar year test period.

Maui Electric consolidated 2015 and 2018 test year rate cases. On August 9, 2018, the PUC approved an interim rate increase based on a stipulated settlement, that included the effects of ~~$106.4~~the 2017 Tax Act, between Maui Electric and the Consumer Advocate. On March 18, 2019, the PUC issued its D&O that approved, with certain modifications, the stipulated settlement, addressed all issues in the rate case.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Revised tariffs reflecting a final increase of $12.2 million over revenues at current effective rates based on the approved 7.43% rate of return (which incorporates a ROACE of 9.5% and a capital structure that includes a 57% common equity capitalization) on a $454 million rate base became effective on June 1, 2019. Maui Electric’s ECRC tariff, resulting in the recovery of all fuel and purchased energy through the ECRC and the removal of the recovery of these costs from base rates, will be effective September 1, 2019. The ECRC will reflect a 98%/2% fossil fuel generation cost risk-sharing split between ratepayers and Maui Electric, with an annual maximum increase or decrease to revenues to $0.6 million for the utility.

Hawaii Electric Light 2019 test year rate case. On December 14, 2018, Hawaii Electric Light filed an application for a general rate increase for its 2019 test year rate case, requesting an increase of $13.4 million over revenues at current effective rates (for a ~~6.9%~~3.4% increase in revenues), based on ~~a 2017 test year and~~ an ~~8.28%~~8.3% rate of return (which incorporates a ROACE of ~~10.6% and a capital structure that includes a 57.4% common equity capitalization) on a $2.0 billion rate base.~~10.5%). The requested increase is primarily to pay for operating costs and for system upgrades to increase reliability, improve customer service and integrate more renewable energy. In its application, Hawaiian Electric is also proposing implementation of performance based regulation (PBR) mechanisms related to its performance in the areas of customer service, reliability and communication relating to the private rooftop solar interconnection process. Hawaiian Electric proposed an expansion of the range of fuel usage efficiencies under which fuel costs would be fully passed through to customers, and an additional trigger that would allow a re-establishment of fuel usage efficiency targets under certain conditions.

~~On December 23, 2016, the PUC issued an order consolidating the Hawaiian Electric filings~~procedural schedule for the ~~2014 test year abbreviated rate case~~proceeding includes an interim decision by November 14, 2019, and evidentiary hearings during the 2017 test year rate case. The order also found and concluded that Hawaiian Electric's abbreviated 2014 rate case filing did not comply with: (1) the Mandatory Triennial Rate Case Cycle requirement in the decoupling order that Hawaiian Electric file an application for a general rate case every three years and (2) the requirement that Hawaiian Electric file its 2014 calendar test year rate case application by June 27, 2014. The order then stated that: “[T]he determination and dispositionweek of any rates, accounts, adjustment mechanisms, and practices that would have been subject to review in the context of a 2014 test year rate case proceeding are subject to appropriate adjustment based on evidence and findings in the consolidated rate case proceeding.”

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

On January 4, 2017, Hawaiian Electric filed a motion for clarification and/or partial reconsideration of the PUC’s order. On March 14, 2017, the PUC issued an order to address Hawaiian Electric’s motion, stating that the PUC is not initiating an investigation/enforcement proceeding against Hawaiian Electric regarding its compliance with the decoupling order, and the transfer and consolidation of Hawaiian Electric’s 2014 abbreviated rate case with the 2017 rate case is intended to ensure that ratepayers receive the attendant benefits of Hawaiian Electric’s decision to voluntarily forgo a general rate increase in base rates for its mandated 2014 test year. As directed, on April 12, 2017, Hawaiian Electric filed a supplement to its 2017 rate case filing, addressing the items raised in the order and explaining why Hawaiian Electric’s forgoing of a general rate increase in the 2014 test year should not result in any further adjustments to Hawaiian Electric’s revenue requirement in the 2017 test year.

On April 26, 2017, the PUC issued an Order regarding the supplement to Hawaiian Electric’s 2017 rate case filing, requesting updated pension and OPEB regulatory asset and liability schedules, by May 12, 2017, to reflect the use of the 2014 net periodic pension cost (NPPC) and net periodic benefits costs (NPBC) for the pension and OPEB tracking mechanisms and with amortization of such regulatory assets and liabilities beginning May 1, 2015. On May 12, 2017, Hawaiian Electric filed these schedules and on May 31, 2017, supplemented its May 12, 2017 filing to show the cumulative impact of the 2015-2017 change in employee benefits transferred to capital as a result of the change in the amortization of the pension and OPEB regulatory assets and liabilities.

On June 28, 2017, the PUC issued an order designating the filing date of Hawaiian Electric’s completed rate case application to be May 31, 2017 (the date that supplemental pension-related information described above was filed) rather than December 16, 2016, (the date of the filing of the rate case application). On July 28, 2017, the PUC issued a procedural schedule that includes Hawaiian Electric and the Consumer Advocate submitting statements of probable entitlement on November 17, 2017, an interim D&O tentatively scheduled for December 15, 2017, and an evidentiary hearing in early March 2018.

~~Maui Electric consolidated 2015 test year abbreviated and 2018 test year rate cases~~. On June 9, 2017, Maui Electric filed a notice of intent with the PUC to file a general rate case application by December 30, 2017 for a 2018 test year. On August 4, 2017, the PUC issued an order consolidating the Maui Electric filings for the 2015 test year abbreviated rate case and the 2018 test year rate case. Similar to the PUC’s conclusion regarding Hawaiian Electric’s 2014 abbreviated rate case filing, the order also found and concluded that Maui Electric’s 2015 test year abbreviated rate case filing did not comply with the Mandatory Triennial Rate Case Cycle requirement in the decoupling order that Maui Electric file an application for a general rate case every three years. The order further stated that the PUC is not initiating an investigation/enforcement proceeding against Maui Electric regarding its compliance with the decoupling order, and the transfer and consolidation of Maui Electric’s 2015 abbreviated rate case with the 2018 rate case is intended to ensure that ratepayers receive the attendant benefits of Maui Electric’s decision to voluntarily forgo a general rate increase in base rates for its mandated 2015 test year. The order stated that: “[T]he determination and disposition of any rates, accounts, adjustment mechanisms, and practices that would have been subject to review in the context of a 2015 test year rate case proceeding are subject to appropriate adjustment based on evidence and findings in the consolidated rate case proceeding.”

On October 12, 2017, Maui Electric filed its 2018 test year rate case application with the PUC for a general rate increase of $30.1 million over revenues at current effective rates (for a 9.3% increase in revenues) based on a 2018 test year and an 8.05% rate of return (which incorporates a ROACE of 10.6% and a capital structure that includes a 56.9% common equity capitalization) on a $473 million rate base. The requested rate increase is primarily to pay for operating costs, including system upgrades to increase reliability, integrate more renewable energy, and improve customer service. Further, Maui Electric requested that if a decision in a docket (filed in December 2016) seeking approval of new depreciation rates is rendered prior to new rates being established in the Maui Electric 2018 test year rate case, the new electric rates be based on the depreciation rates as a result of that docket. If the proposed depreciation rates are used to calculate Maui Electric’s 2018 test year revenue requirement, the requested revenue increase would be $46.6 million (14.3%) over revenues at current effective rates. Maui Electric filed an exhibit with information responding to the PUC’s consolidation order. Similar to Hawaiian Electric’s response, Maui Electric explained why its forgoing of a general rate increase in the 2015 test year should not result in any further adjustments to Maui Electric’s revenue requirement in the 2018 test year.

~~Hawaii Electric Light 2016 test year rate case~~. On September 19, 2016, Hawaii Electric Light filed an application with the PUC for a general rate increase of $19.3 million over revenues at current effective rates (for a 6.5% increase in revenues), based on an 8.44% rate of return (which incorporates a ROACE of 10.60%). The last rate increase in base rates for Hawaii Electric Light was in January 2011. The requested increase is to cover higher operating costs (including expanded vegetation management focusing on albizia tree removal and increased pension costs) and system upgrades to increase reliability, improve customer service and integrate more renewable energy. In its application, Hawaii Electric Light is also proposing implementation of PBR mechanisms similar to those proposed by Hawaiian Electric. In addition, Hawaii Electric Light proposed an equal sharing of fuel expenses outside the fuel usage efficiency target range.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

On July 11, 2017, Hawaii Electric Light and the Consumer Advocate filed a Stipulated Settlement Letter, which documented agreements reached with the Consumer Advocate on all of the issues in the proceeding, except for whether the stipulated ROACE should be reduced from 9.75% (by up to 25 basis points) based solely on the impact of decoupling, considering current circumstances and relevant precedents. On August 21, 2017, the PUC issued an order granting an interim rate increase of $9.9 million, based on the Stipulated Settlement and an ROACE of 9.5% and subject to refund, with interest, if it exceeds amounts allowed in a final order. The interim rate increase was implemented on August 31, 2017.2019.

Condensed consolidating financial information. ~~Hawaiian Electric is not required to provide separate~~Condensed consolidating financial statements or other disclosures concerning Hawaii Electric Light and Maui Electric to holders of the 2004 Debentures issued by Hawaii Electric Light and Maui Electric to Trust III since all of their voting capital stock is owned, and their obligations with respect to these securities have been fully and unconditionally guaranteed, on a subordinated basis, by Hawaiian Electric. Consolidating information ~~is provided below~~ for Hawaiian Electric and ~~each of~~ its subsidiaries are presented for the three and six month periods ended June 30, 2019 and 2018, and as of ~~the dates indicated.~~June 30, 2018 and December 31, 2018.

Hawaiian Electric ~~also~~ unconditionally guarantees Hawaii Electric Light’s and Maui Electric’s obligations (a) to the State of Hawaii for the repayment of principal and interest on Special Purpose Revenue Bonds issued for the benefit of Hawaii Electric Light and Maui Electric, (b) under their respective private placement note agreements and the Hawaii Electric Light notes and Maui Electric notes issued thereunder and (c) relating to the trust preferred securities of Trust ~~III.~~III, which were redeemed on May 15, 2019. Hawaiian Electric is also obligated, after the satisfaction of its obligations on its own preferred stock, to make dividend, redemption and liquidation payments on Hawaii Electric Light’s and Maui Electric’s preferred stock if the respective subsidiary is unable to make such payments.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Three months ended ~~September~~June 30, ~~2017~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	450,020		89,916		94,050		—	(202	)	$	633,784
Expenses
Fuel oil	125,431			19,941		36,248		—	—		181,620
Purchased power	126,871			24,029		11,954		—	—		162,854
Other operation and maintenance	78,551			18,031		22,678		—	—		119,260
Depreciation	35,868			10,453		7,592		—	—		53,913
Taxes, other than income taxes	42,590			8,706		9,147		—	—		60,443
Total expenses	409,311			81,160		87,619		—	—		578,090
Operating income	40,709			8,756		6,431		—	(202	)	55,694
Allowance for equity funds used during construction	2,614			218		343		—	—		3,175
Equity in earnings of subsidiaries	8,086			—		—		—	(8,086	)	—
Retirement defined benefits expense—other than service costs	(567		)	(105	)	(29	)	—	—		(701		)
Interest expense and other charges, net	(13,390		)	(2,920	)	(2,422	)	—	202		(18,530		)
Allowance for borrowed funds used during construction	962			91		126		—	—		1,179
Income before income taxes	38,414			6,040		4,449		—	(8,086	)	40,817
Income taxes	5,570			1,241		933		—	—		7,744
Net income	32,844			4,799		3,516		—	(8,086	)	33,073
Preferred stock dividends of subsidiaries	—			133		96		—	—		229
Net income attributable to Hawaiian Electric	32,844			4,666		3,420		—	(8,086	)	32,844
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270
Net income for common stock	$	32,574		4,666		3,420		—	(8,086	)	$	32,574

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric Other subsidiaries Consolidating adjustments Hawaiian Electric
Consolidated
Revenues $ 429,267
84,334
85,198
—
(30 ) $ 598,769
Expenses
Fuel oil 103,959
15,754
26,545
—
—
146,258
Purchased power 123,893
21,332
15,122
—
—
160,347
Other operation and maintenance 66,221
16,593
17,288
—
—
100,102
Depreciation 32,722
9,685
5,799
—
—
48,206
Taxes, other than income taxes 40,824
7,928
8,028
—
—
56,780
Total expenses 367,619
71,292
72,782
—
—
511,693
Operating income 61,648
13,042
12,416
—
(30 ) 87,076
Allowance for equity funds used during construction 3,108
167
207
—
—
3,482
Equity in earnings of subsidiaries 12,767
—
—
—
(12,767 ) —
Interest expense and other charges, net (11,786 ) (2,899 ) (2,252 ) —
30
(16,907 )
Allowance for borrowed funds used during construction 1,173
72
94
—
—
1,339
Income before income taxes 66,910
10,382
10,465
—
(12,767 ) 74,990
Income taxes 19,153
3,815
4,037
—
—
27,005
Net income 47,757
6,567
6,428
—
(12,767 ) 47,985
Preferred stock dividends of subsidiaries —
133
95
—
—
228
Net income attributable to Hawaiian Electric 47,757
6,434
6,333
—
(12,767 ) 47,757
Preferred stock dividends of Hawaiian Electric 270
—
—
—
—
270
Net income for common stock $ 47,487
6,434
6,333
—
(12,767 ) $ 47,487

~~Hawaiian Electric Company, Inc. and Subsidiaries~~

~~Condensed Consolidating Statement of Comprehensive Income~~

~~Three months ended September 30, 2017~~

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Net income for common stock $ 47,487
6,434
6,333
—
(12,767 ) $ 47,487
Other comprehensive income (loss), net of taxes:

Retirement benefit plans:

Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits 3,618
476
404
—
(880 ) 3,618
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes (3,596 ) (476 ) (404 ) —
880
(3,596 )
Other comprehensive income, net of taxes 22
—
—
—
—
22
Comprehensive income attributable to common shareholder $ 47,509
6,434
6,333
—
(12,767 ) $ 47,509

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

~~Hawaiian Electric Company, Inc. and Subsidiaries~~

~~Condensed Consolidating Statement of Income~~

~~Three months ended September 30, 2016~~

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric Other subsidiaries Consolidating adjustments Hawaiian Electric
Consolidated
Revenues $ 404,352
83,105
84,831
—
(35 ) $ 572,253
Expenses
Fuel oil 88,676
14,603
25,345
—
—
128,624
Purchased power 118,751
22,728
16,271
—
—
157,750
Other operation and maintenance 64,683
15,017
15,089
—
—
94,789
Depreciation 31,520
9,449
5,790
—
—
46,759
Taxes, other than income taxes 38,666
7,836
8,017
—
—
54,519
Total expenses 342,296
69,633
70,512
—
—
482,441
Operating income 62,056
13,472
14,319
—
(35 ) 89,812
Allowance for equity funds used during construction 1,806
238
230
—
—
2,274
Equity in earnings of subsidiaries 14,729
—
—
—
(14,729 ) —
Interest expense and other charges, net (11,903 ) (2,972 ) (2,483 ) —
35
(17,323 )
Allowance for borrowed funds used during construction 669
91
94
—
—
854
Income before income taxes 67,357
10,829
12,160
—
(14,729 ) 75,617
Income taxes 20,113
3,392
4,640
—
—
28,145
Net income 47,244
7,437
7,520
—
(14,729 ) 47,472
Preferred stock dividends of subsidiaries —
133
95
—
—
228
Net income attributable to Hawaiian Electric 47,244
7,304
7,425
—
(14,729 ) 47,244
Preferred stock dividends of Hawaiian Electric 270
—
—
—
—
270
Net income for common stock $ 46,974
7,304
7,425
—
(14,729 ) $ 46,974

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Three months ended ~~September~~June 30, ~~2016~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	32,574		4,666		3,420		—	(8,086	)	$	32,574
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	2,321			352		289		—	(641	)	2,321
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(2,298		)	(351	)	(289	)	—	640		(2,298		)
Other comprehensive income, net of taxes	23			1		—		—	(1	)	23
Comprehensive income attributable to common shareholder	$	32,597		4,667		3,420		—	(8,087	)	$	32,597

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Net income for common stock
$ 46,974
7,304
7,425
—
(14,729 ) $ 46,974
Other comprehensive income (loss), net of taxes:

Derivatives qualified as cash flow hedges:
Effective portion of foreign currency hedge net unrealized loss, net of tax benefits 321
—
—
—
—
321
Reclassification adjustment to net income, net of taxes (173 ) —
—
—
—
(173 )
Retirement benefit plans:

Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits 3,314
429
387
—
(816 ) 3,314
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes (3,311 ) (429 ) (389 ) —
818
(3,311 )
Other comprehensive income (loss), net of taxes 151
—
(2 ) —
2
151
Comprehensive income attributable to common shareholder $ 47,125
7,304
7,423
—
(14,727 ) $ 47,125

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

~~Nine~~Three months ended ~~September~~June 30, ~~2017~~2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	431,699		89,548		86,938		—	(59	)	$	608,126
Expenses
Fuel oil	120,007			19,432		32,278		—	—		171,717
Purchased power	121,812			24,664		14,262		—	—		160,738
Other operation and maintenance	76,845			19,015		16,782		—	—		112,642
Depreciation	34,391			10,038		5,932		—	—		50,361
Taxes, other than income taxes	40,951			8,408		8,165		—	—		57,524
Total expenses	394,006			81,557		77,419		—	—		552,982
Operating income	37,693			7,991		9,519		—	(59	)	55,144
Allowance for equity funds used during construction	2,588			124		271		—	—		2,983
Equity in earnings of subsidiaries	9,080			—		—		—	(9,080	)	—
Retirement defined benefits expense—other than service costs	(554		)	(105	)	(329	)	—	—		(988		)
Interest expense and other charges, net	(12,930		)	(2,922	)	(2,367	)	—	59		(18,160		)
Allowance for borrowed funds used during construction	1,150			77		138		—	—		1,365
Income before income taxes	37,027			5,165		7,232		—	(9,080	)	40,344
Income taxes	5,588			1,269		1,819		—	—		8,676
Net income	31,439			3,896		5,413		—	(9,080	)	31,668
Preferred stock dividends of subsidiaries	—			133		96		—	—		229
Net income attributable to Hawaiian Electric	31,439			3,763		5,317		—	(9,080	)	31,439
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270
Net income for common stock	$	31,169		3,763		5,317		—	(9,080	)	$	31,169

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric Other subsidiaries Consolidating adjustments Hawaiian Electric
Consolidated
Revenues $ 1,186,524
245,026
242,756
—
(51 ) $ 1,674,255
Expenses
Fuel oil 301,774
47,486
82,527
—
—
431,787
Purchased power 340,498
63,403
36,637
—
—
440,538
Other operation and maintenance 204,460
49,667
52,589
—
—
306,716
Depreciation 98,167
29,056
17,355
—
—
144,578
Taxes, other than income taxes 113,483
23,080
23,012
—
—
159,575
Total expenses 1,058,382
212,692
212,120
—
—
1,483,194
Operating income 128,142
32,334
30,636
—
(51 ) 191,061
Allowance for equity funds used during construction 7,823
416
669
—
—
8,908
Equity in earnings of subsidiaries 29,306
—
—
—
(29,306 ) —
Interest expense and other charges, net (36,405 ) (8,899 ) (7,372 ) —
51
(52,625 )
Allowance for borrowed funds used during construction 2,910
172
289
—
—
3,371
Income before income taxes 131,776
24,023
24,222
—
(29,306 ) 150,715
Income taxes 36,370
8,973
9,280
—
—
54,623
Net income 95,406
15,050
14,942
—
(29,306 ) 96,092
Preferred stock dividends of subsidiaries —
400
286
—
—
686
Net income attributable to Hawaiian Electric 95,406
14,650
14,656
—
(29,306 ) 95,406
Preferred stock dividends of Hawaiian Electric 810
—
—
—
—
810
Net income for common stock $ 94,596
14,650
14,656
—
(29,306 ) $ 94,596

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

~~Nine~~Three months ended ~~September~~June 30, ~~2017~~2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	31,169		3,763		5,317		—	(9,080	)	$	31,169
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	4,853			734		649		—	(1,383	)	4,853
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(4,827		)	(733	)	(649	)	—	1,382		(4,827		)
Other comprehensive income, net of taxes	26			1		—		—	(1	)	26
Comprehensive income attributable to common shareholder	$	31,195		3,764		5,317		—	(9,081	)	$	31,195

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Net income for common stock $ 94,596
14,650
14,656
—
(29,306 ) $ 94,596
Other comprehensive income (loss), net of taxes:

Derivatives qualifying as cash flow hedges:
Reclassification adjustment to net income, net of tax benefits 454
—
—
—
—
454
Retirement benefit plans:

Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits 10,857
1,428
1,214
—
(2,642 ) 10,857
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes (10,790 ) (1,427 ) (1,214 ) —
2,641
(10,790 )
Other comprehensive income, net of taxes 521
1
—
—
(1 ) 521
Comprehensive income attributable to common shareholder $ 95,117
14,651
14,656
—
(29,307 ) $ 95,117

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

~~Nine~~Six months ended ~~September~~June 30, ~~2016~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	855,689		177,121		179,703		—	(234	)	$	1,212,279
Expenses
Fuel oil	234,353			40,783		67,093		—	—		342,229
Purchased power	232,094			43,206		21,999		—	—		297,299
Other operation and maintenance	159,729			36,767		40,894		—	—		237,390
Depreciation	71,735			20,906		15,219		—	—		107,860
Taxes, other than income taxes	81,221			16,811		17,215		—	—		115,247
Total expenses	779,132			158,473		162,420		—	—		1,100,025
Operating income	76,557			18,648		17,283		—	(234	)	112,254
Allowance for equity funds used during construction	5,061			350		674		—	—		6,085
Equity in earnings of subsidiaries	19,935			—		—		—	(19,935	)	—
Retirement defined benefits expense—other than service costs	(1,134		)	(211	)	(59	)	—	—		(1,404		)
Interest expense and other charges, net	(26,190		)	(5,821	)	(4,739	)	—	234		(36,516		)
Allowance for borrowed funds used during construction	1,864			147		246		—	—		2,257
Income before income taxes	76,093			13,113		13,405		—	(19,935	)	82,676
Income taxes	10,853			3,011		3,114		—	—		16,978
Net income	65,240			10,102		10,291		—	(19,935	)	65,698
Preferred stock dividends of subsidiaries	—			267		191		—	—		458
Net income attributable to Hawaiian Electric	65,240			9,835		10,100		—	(19,935	)	65,240
Preferred stock dividends of Hawaiian Electric	540			—		—		—	—		540
Net income for common stock	$	64,700		9,835		10,100		—	(19,935	)	$	64,700

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric Other subsidiaries Consolidating adjustments Hawaiian Electric
Consolidated
Revenues $ 1,088,537
229,940
231,295
—
(72 ) $ 1,549,700
Expenses
Fuel oil 224,995
40,725
68,543
—
—
334,263
Purchased power 313,730
58,885
40,052
—
—
412,667
Other operation and maintenance 202,438
46,574
49,248
—
—
298,260
Depreciation 94,564
28,347
17,389
—
—
140,300
Taxes, other than income taxes 104,764
21,632
21,990
—
—
148,386
Total expenses 940,491
196,163
197,222
—
—
1,333,876
Operating income 148,046
33,777
34,073
—
(72 ) 215,824
Allowance for equity funds used during construction 4,771
571
668
—
—
6,010
Equity in earnings of subsidiaries 33,541
—
—
—
(33,541 ) —
Interest expense and other charges, net (34,113 ) (8,606 ) (7,087 ) —
72
(49,734 )
Allowance for borrowed funds used during construction 1,785
219
272
—
—
2,276
Income before income taxes 154,030
25,961
27,926
—
(33,541 ) 174,376
Income taxes 45,022
9,075
10,585
—
—
64,682
Net income 109,008
16,886
17,341
—
(33,541 ) 109,694
Preferred stock dividends of subsidiaries —
400
286
—
—
686
Net income attributable to Hawaiian Electric 109,008
16,486
17,055
—
(33,541 ) 109,008
Preferred stock dividends of Hawaiian Electric 810
—
—
—
—
810
Net income for common stock $ 108,198
16,486
17,055
—
(33,541 ) $ 108,198

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

~~Nine~~Six months ended ~~September~~June 30, ~~2016~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	64,700		9,835		10,100		—	(19,935	)	$	64,700
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	4,643			704		578		—	(1,282	)	4,643
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(4,596		)	(702	)	(578	)	—	1,280		(4,596		)
Other comprehensive income, net of taxes	47			2		—		—	(2	)	47
Comprehensive income attributable to common shareholder	$	64,747		9,837		10,100		—	(19,937	)	$	64,747

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Net income for common stock
$ 108,198
16,486
17,055
—
(33,541 ) $ 108,198
Other comprehensive income (loss), net of taxes:

Derivatives qualifying as cash flow hedges:
Effective portion of foreign currency hedge net unrealized gain, net of taxes 578
—
—
—
—
578
Reclassification adjustment to net income, net of taxes (173 ) —
—
—
—
(173 )
Retirement benefit plans:

Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits 9,941
1,288
1,162
—
(2,450 ) 9,941
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes (9,934 ) (1,289 ) (1,166 ) —
2,455
(9,934 )
Other comprehensive income (loss), net of taxes 412
(1 ) (4 ) —
5
412
Comprehensive income attributable to common shareholder $ 108,610
16,485
17,051
—
(33,536 ) $ 108,610

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Six months ended June 30, 2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	832,879		177,481		168,294		—	(101	)	$	1,178,553
Expenses
Fuel oil	234,505			37,919		66,261		—	—		338,685
Purchased power	229,182			48,498		22,968		—	—		300,648
Other operation and maintenance	149,785			35,113		35,354		—	—		220,252
Depreciation	68,830			20,093		11,904		—	—		100,827
Taxes, other than income taxes	79,118			16,620		15,890		—	—		111,628
Total expenses	761,420			158,243		152,377		—	—		1,072,040
Operating income	71,459			19,238		15,917		—	(101	)	106,513
Allowance for equity funds used during construction	5,475			235		567		—	—		6,277
Equity in earnings of subsidiaries	18,405			—		—		—	(18,405	)	—
Retirement defined benefits expense—other than service costs	(1,616		)	(208	)	(428	)	—	—		(2,252		)
Interest expense and other charges, net	(25,425		)	(5,829	)	(4,701	)	—	101		(35,854		)
Allowance for borrowed funds used during construction	2,388			141		280		—	—		2,809
Income before income taxes	70,686			13,577		11,635		—	(18,405	)	77,493
Income taxes	11,502			3,446		2,903		—	—		17,851
Net income	59,184			10,131		8,732		—	(18,405	)	59,642
Preferred stock dividends of subsidiaries	—			267		191		—	—		458
Net income attributable to Hawaiian Electric	59,184			9,864		8,541		—	(18,405	)	59,184
Preferred stock dividends of Hawaiian Electric	540			—		—		—	—		540
Net income for common stock	$	58,644		9,864		8,541		—	(18,405	)	$	58,644

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Six months ended June 30, 2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	58,644		9,864		8,541		—	(18,405	)	$	58,644
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	9,506			1,409		1,211		—	(2,620	)	9,506
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(9,449		)	(1,408	)	(1,211	)	—	2,619		(9,449		)
Other comprehensive income, net of taxes	57			1		—		—	(1	)	57
Comprehensive income attributable to common shareholder	$	58,701		9,865		8,541		—	(18,406	)	$	58,701

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

~~September~~June 30, ~~2017~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consoli- dating adjustments		Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	42,183		5,606		3,612		—	—		$	51,401
Plant and equipment	4,558,178			1,268,694		1,112,171		—	—		6,939,043
Less accumulated depreciation	(1,573,545		)	(562,286	)	(514,379	)	—	—		(2,650,210		)
Construction in progress	222,328			17,791		35,193		—	—		275,312
Utility property, plant and equipment, net	3,249,144			729,805		636,597		—	—		4,615,546
Nonutility property, plant and equipment, less accumulated depreciation	5,312			115		1,532		—	—		6,959
Total property, plant and equipment, net	3,254,456			729,920		638,129		—	—		4,622,505
Investment in wholly owned subsidiaries, at equity	584,149			—		—		—	(584,149	)	—
Current assets
Cash and cash equivalents	17,121			3,352		2,787		101	—		23,361
Advances to affiliates	25,300			5,000		—		—	(30,300	)	—
Customer accounts receivable, net	109,401			26,864		25,824		—	—		162,089
Accrued unbilled revenues, net	86,291			15,429		17,428		—	—		119,148
Other accounts receivable, net	17,447			8,526		2,086		—	(19,570	)	8,489
Fuel oil stock, at average cost	100,903			11,376		9,362		—	—		121,641
Materials and supplies, at average cost	33,874			9,611		17,609		—	—		61,094
Prepayments and other	23,804			5,202		2,980		—	—		31,986
Regulatory assets	46,673			2,122		6,830		—	—		55,625
Total current assets	460,814			87,482		84,906		101	(49,870	)	583,433
Other long-term assets
Operating lease right-of-use assets	205,148			1,582		402		—	—		207,132
Regulatory assets	513,738			115,178		103,224		—	—		732,140
Other	74,994			16,677		16,965		—	—		108,636
Total other long-term assets	793,880			133,437		120,591		—	—		1,047,908
Total assets	$	5,093,299		950,839		843,626		101	(634,019	)	$	6,253,846
Capitalization and liabilities
Capitalization
Common stock equity	$	1,971,762		300,619		283,429		101	(584,149	)	$	1,971,762
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	937,068			217,845		181,065		—	—		1,335,978
Total capitalization	2,931,123			525,464		469,494		101	(584,149	)	3,342,033
Current liabilities
Current portion of operating lease liabilities	61,941			92		30		—	—		62,063
Current portion of long-term debt	61,946			—		19,993		—	—		81,939
Short-term borrowings from non-affiliates	161,901			—		—		—	—		161,901
Short-term borrowings from affiliate	5,000			—		25,300		—	(30,300	)	—
Accounts payable	121,032			15,059		18,414		—	—		154,505
Interest and preferred dividends payable	16,287			4,225		2,914		—	(81	)	23,345
Taxes accrued	127,413			28,748		27,305		—	—		183,466
Regulatory liabilities	5,687			5,781		3,485		—	—		14,953
Other	53,450			14,842		13,249		—	(19,489	)	62,052
Total current liabilities	614,657			68,747		110,690		—	(49,870	)	744,224
Deferred credits and other liabilities
Operating lease liabilities	142,905			1,490		374		—	—		144,769
Deferred income taxes	271,441			53,564		57,559		—	—		382,564
Regulatory liabilities	660,351			178,018		99,224		—	—		937,593
Unamortized tax credits	60,375			16,514		14,725		—	—		91,614
Defined benefit pension and other postretirement benefit plans liability	362,174			71,830		70,243		—	—		504,247
Other	50,273			35,212		21,317		—	—		106,802
Total deferred credits and other liabilities	1,547,519			356,628		263,442		—	—		2,167,589
Total capitalization and liabilities	$	5,093,299		950,839		843,626		101	(634,019	)	$	6,253,846

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consoli-
dating
adjustments
Hawaiian Electric
Consolidated
Assets

Property, plant and equipment
Utility property, plant and equipment

Land $ 44,706
6,191
3,016
—
—
$ 53,913
Plant and equipment 4,368,428
1,278,884
1,130,942
—
—
6,778,254
Less accumulated depreciation (1,441,963 ) (524,759 ) (493,707 ) —
—
(2,460,429 )
Construction in progress 262,098
16,459
28,935
—
—
307,492
Utility property, plant and equipment, net 3,233,269
776,775
669,186
—
—
4,679,230
Nonutility property, plant and equipment, less accumulated depreciation 5,762
115
1,532
—
—
7,409
Total property, plant and equipment, net 3,239,031
776,890
670,718
—
—
4,686,639
Investment in wholly owned subsidiaries, at equity 559,671
—
—
—
(559,671 ) —
Current assets

Cash and cash equivalents 3,454
4,714
1,718
101
—
9,987
Advances to affiliates —
6,600
4,000
—
(10,600 ) —
Customer accounts receivable, net 92,961
20,830
19,344
—
—
133,135
Accrued unbilled revenues, net 80,644
15,145
13,918
—
—
109,707
Other accounts receivable, net 7,402
2,797
1,244
—
(7,346 ) 4,097
Fuel oil stock, at average cost 40,460
8,034
11,759
—
—
60,253
Materials and supplies, at average cost 28,865
8,960
18,134
—
—
55,959
Prepayments and other 22,197
4,183
3,647
—
(156 ) 29,871
Regulatory assets 63,608
4,341
4,824
—
—
72,773
Total current assets 339,591
75,604
78,588
101
(18,102 ) 475,782
Other long-term assets

Regulatory assets 639,689
118,655
105,847
—
—
864,191
Unamortized debt expense 472
83
106
—
—
661
Other 50,424
14,981
14,823
—
—
80,228
Total other long-term assets 690,585
133,719
120,776
—
—
945,080
Total assets $ 4,828,878
986,213
870,082
101
(577,773 ) $ 6,107,501
Capitalization and liabilities

Capitalization

Common stock equity $ 1,829,075
294,319
265,251
101
(559,671 ) $ 1,829,075
Cumulative preferred stock—not subject to mandatory redemption 22,293
7,000
5,000
—
—
34,293
Long-term debt, net 915,097
213,658
189,868
—
—
1,318,623
Total capitalization 2,766,465
514,977
460,119
101
(559,671 ) 3,181,991
Current liabilities

Short-term borrowings from non-affiliates 6,000
—
—
—
—
6,000
Short-term borrowings from affiliate 10,600
—
—
—
(10,600 ) —
Accounts payable 94,618
15,291
14,331
—
—
124,240
Interest and preferred dividends payable 17,870
3,973
3,429
—
(11 ) 25,261
Taxes accrued 134,935
27,571
25,919
—
(5,060 ) 183,365
Regulatory liabilities 576
1,029
1,794
—
—
3,399
Other 45,662
8,173
13,111
—
(7,335 ) 59,611
Total current liabilities 310,261
56,037
58,584
—
(23,006 ) 401,876
Deferred credits and other liabilities

Deferred income taxes 540,857
113,277
108,573
—
4,904
767,611
Regulatory liabilities 328,530
100,973
33,314
—
—
462,817
Unamortized tax credits 57,577
16,048
15,202
—
—
88,827
Defined benefit pension and other postretirement benefit plans liability 431,191
72,366
78,156
—
—
581,713
Other 27,097
14,383
16,068
—
—
57,548
Total deferred credits and other liabilities 1,385,252
317,047
251,313
—
4,904
1,958,516
Contributions in aid of construction 366,900
98,152
100,066
—
—
565,118
Total capitalization and liabilities $ 4,828,878
986,213
870,082
101
(577,773 ) $ 6,107,501

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

December 31, ~~2016~~2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consoli- dating adjustments		Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	40,449		5,606		3,612		—	—		$	49,667
Plant and equipment	4,456,090			1,259,553		1,094,028		—	—		6,809,671
Less accumulated depreciation	(1,523,861		)	(547,848	)	(505,633	)	—	—		(2,577,342		)
Construction in progress	193,677			8,781		30,687		—	—		233,145
Utility property, plant and equipment, net	3,166,355			726,092		622,694		—	—		4,515,141
Nonutility property, plant and equipment, less accumulated depreciation	5,314			115		1,532		—	—		6,961
Total property, plant and equipment, net	3,171,669			726,207		624,226		—	—		4,522,102
Investment in wholly owned subsidiaries, at equity	576,838			—		—		—	(576,838	)	—
Current assets
Cash and cash equivalents	16,732			15,623		3,421		101	—		35,877
Customer accounts receivable, net	125,960			26,483		25,453		—	—		177,896
Accrued unbilled revenues, net	88,060			17,051		16,627		—	—		121,738
Other accounts receivable, net	21,962			3,131		3,033		—	(21,911	)	6,215
Fuel oil stock, at average cost	54,262			11,027		14,646		—	—		79,935
Materials and supplies, at average cost	30,291			7,155		17,758		—	—		55,204
Prepayments and other	23,214			5,212		3,692		—	—		32,118
Regulatory assets	60,093			3,177		7,746		—	—		71,016
Total current assets	420,574			88,859		92,376		101	(21,911	)	579,999
Other long-term assets
Regulatory assets	537,708			120,658		104,044		—	—		762,410
Other	69,749			15,944		17,299		—	—		102,992
Total other long-term assets	607,457			136,602		121,343		—	—		865,402
Total assets	$	4,776,538		951,668		837,945		101	(598,749	)	$	5,967,503
Capitalization and liabilities
Capitalization
Common stock equity	$	1,957,641		295,874		280,863		101	(576,838	)	$	1,957,641
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	1,000,137			217,749		200,916		—	—		1,418,802
Total capitalization	2,980,071			520,623		486,779		101	(576,838	)	3,410,736
Current liabilities
Short-term borrowings-non-affiliate	25,000			—		—		—	—		25,000
Accounts payable	126,384			20,045		25,362		—	—		171,791
Interest and preferred dividends payable	16,203			4,203		2,841		—	(32	)	23,215
Taxes accrued	164,747			34,128		34,458		—	—		233,333
Regulatory liabilities	7,699			4,872		5,406		—	—		17,977
Other	46,391			15,077		20,414		—	(21,879	)	60,003
Total current liabilities	386,424			78,325		88,481		—	(21,911	)	531,319
Deferred credits and other liabilities
Deferred income taxes	271,438			54,936		56,823		—	—		383,197
Regulatory liabilities	657,210			176,101		98,948		—	—		932,259
Unamortized tax credits	60,271			16,217		15,034		—	—		91,522
Defined benefit pension and other postretirement benefit plans liability	359,174			73,147		71,338		—	—		503,659
Other	61,950			32,319		20,542		—	—		114,811
Total deferred credits and other liabilities	1,410,043			352,720		262,685		—	—		2,025,448
Total capitalization and liabilities	$	4,776,538		951,668		837,945		101	(598,749	)	$	5,967,503

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consoli-
dating
adjustments
Hawaiian Electric
Consolidated
Assets

Property, plant and equipment
Utility property, plant and equipment

Land $ 43,956
6,181
3,016
—
—
$ 53,153
Plant and equipment 4,241,060
1,255,185
1,109,487
—
—
6,605,732
Less accumulated depreciation (1,382,972 ) (507,666 ) (478,644 ) —
—
(2,369,282 )
Construction in progress 180,194
12,510
19,038
—
—
211,742
Utility property, plant and equipment, net 3,082,238
766,210
652,897
—
—
4,501,345
Nonutility property, plant and equipment, less accumulated depreciation 5,760
115
1,532
—
—
7,407
Total property, plant and equipment, net 3,087,998
766,325
654,429
—
—
4,508,752
Investment in wholly owned subsidiaries, at equity
550,946
—
—
—
(550,946 ) —
Current assets

Cash and cash equivalents 61,388
10,749
2,048
101
—
74,286
Advances to affiliates —
3,500
10,000
—
(13,500 ) —
Customer accounts receivable, net 86,373
20,055
17,260
—
—
123,688
Accrued unbilled revenues, net 65,821
13,564
12,308
—
—
91,693
Other accounts receivable, net 7,652
2,445
1,416
—
(6,280 ) 5,233
Fuel oil stock, at average cost 47,239
8,229
10,962
—
—
66,430
Materials and supplies, at average cost 29,928
7,380
16,371
—
—
53,679
Prepayments and other 16,502
5,352
2,179
—
(933 ) 23,100
Regulatory assets 60,185
3,483
2,364
—
—
66,032
Total current assets 375,088
74,757
74,908
101
(20,713 ) 504,141
Other long-term assets

Regulatory assets 662,232
120,863
108,324
—
—
891,419
Unamortized debt expense 151
23
34
—
—
208
Other 43,743
13,573
13,592
—
—
70,908
Total other long-term assets 706,126
134,459
121,950
—
—
962,535
Total assets $ 4,720,158
975,541
851,287
101
(571,659 ) $ 5,975,428
Capitalization and liabilities

Capitalization

Common stock equity $ 1,799,787
291,291
259,554
101
(550,946 ) $ 1,799,787
Cumulative preferred stock—not subject to mandatory redemption 22,293
7,000
5,000
—
—
34,293
Long-term debt, net 915,437
213,703
190,120
—
—
1,319,260
Total capitalization 2,737,517
511,994
454,674
101
(550,946 ) 3,153,340
Current liabilities

Short-term borrowings from affiliate 13,500
—
—
—
(13,500 ) —
Accounts payable 86,369
18,126
13,319
—
—
117,814
Interest and preferred dividends payable 15,761
4,206
2,882
—
(11 ) 22,838
Taxes accrued 120,176
28,100
25,387
—
(933 ) 172,730
Regulatory liabilities —
2,219
1,543
—
—
3,762
Other 41,352
7,637
12,501
—
(6,269 ) 55,221
Total current liabilities 277,158
60,288
55,632
—
(20,713 ) 372,365
Deferred credits and other liabilities

Deferred income taxes 524,433
108,052
100,911
—
263
733,659
Regulatory liabilities 281,112
93,974
31,845
—
—
406,931
Unamortized tax credits 57,844
15,994
15,123
—
—
88,961
Defined benefit pension and other postretirement benefit plans liability 444,458
75,005
80,263
—
—
599,726
Other 49,191
13,024
14,969
—
(263 ) 76,921
Total deferred credits and other liabilities 1,357,038
306,049
243,111
—
—
1,906,198
Contributions in aid of construction 348,445
97,210
97,870
—
—
543,525
Total capitalization and liabilities $ 4,720,158
975,541
851,287
101
(571,659 ) $ 5,975,428

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Changes in Common Stock Equity

~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2018	$	1,957,641		295,874		280,863		101	(576,838	)	$	1,957,641
Net income for common stock	32,126			5,169		6,680		—	(11,849	)	32,126
Other comprehensive income, net of taxes	24			1		—		—	(1	)	24
Common stock dividends	(25,313		)	(2,545	)	(3,767	)	—	6,312		(25,313		)
Common stock issuance expenses	—			(2	)	—		—	2		—
Balance, March 31, 2019	1,964,478			298,497		283,776		101	(582,374	)	1,964,478
Net income for common stock	32,574			4,666		3,420		—	(8,086	)	32,574
Other comprehensive income, net of taxes	23			1		—		—	(1	)	23
Common stock dividends	(25,313		)	(2,545	)	(3,767	)	—	6,312		(25,313		)
Balance, June 30, 2019	$	1,971,762		300,619		283,429		101	(584,149	)	$	1,971,762

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Balance, December 31, 2016 $ 1,799,787
291,291
259,554
101
(550,946 ) $ 1,799,787
Net income for common stock 94,596
14,650
14,656
—
(29,306 ) 94,596
Other comprehensive income, net of taxes 521
1
—
—
(1 ) 521
Common stock dividends (65,825 ) (11,622 ) (8,959 ) —
20,581
(65,825 )
Common stock issuance expenses (4 ) (1 ) —
—
1
(4 )
Balance, September 30, 2017 $ 1,829,075
294,319
265,251
101
(559,671 ) $ 1,829,075

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Changes in Common Stock Equity

~~Nine~~Six months ended ~~September~~June 30, ~~2016~~2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2017	$	1,845,283		286,647		270,265		101	(557,013	)	$	1,845,283
Net income for common stock	27,475			6,101		3,224		—	(9,325	)	27,475
Other comprehensive income, net of taxes	31			—		—		—	—		31
Common stock dividends	(25,826		)	(3,821	)	(3,006	)	—	6,827		(25,826		)
Common stock issuance expenses	(8		)	—		—		—	—		(8		)
Balance, March 31, 2018	1,846,955			288,927		270,483		101	(559,511	)	1,846,955
Net income for common stock	31,169			3,763		5,317		—	(9,080	)	31,169
Other comprehensive income, net of taxes	26			1		—		—	(1	)	26
Common stock dividends	(25,826		)	(3,823	)	(3,004	)	—	6,827		(25,826		)
Common stock issuance expenses	—			(3	)	2		—	1		—
Balance, June 30, 2018	$	1,852,324		288,865		272,798		101	(561,764	)	$	1,852,324

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Balance, December 31, 2015 $ 1,728,325
292,702
263,725
101
(556,528 ) $ 1,728,325
Net income for common stock 108,198
16,486
17,055
—
(33,541 ) 108,198
Other comprehensive income (loss), net of taxes 412
(1 ) (4 ) —
5
412
Common stock dividends (70,199 ) (9,906 ) (9,795 ) —
19,701
(70,199 )
Common stock issuance expenses (9 ) (5 ) —
—
5
(9 )
Balance, September 30, 2016 $ 1,766,727
299,276
270,981
101
(570,358 ) $ 1,766,727

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	65,240		10,102		10,291		—	(19,935	)	$	65,698
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of subsidiaries	(19,972		)	—		—		—	19,935		(37		)
Common stock dividends received from subsidiaries	12,661			—		—		—	(12,624	)	37
Depreciation of property, plant and equipment	71,735			20,906		15,219		—	—		107,860
Other amortization	11,444			2,142		75		—	—		13,661
Deferred income taxes	(5,354		)	(1,554	)	297		—	—		(6,611		)
Allowance for equity funds used during construction	(5,061		)	(350	)	(674	)	—	—		(6,085		)
Other	(2,494		)	(292	)	(767	)	—	—		(3,553		)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	19,969			(6,446	)	(1,188	)	—	(2,341	)	9,994
Decrease (increase) in accrued unbilled revenues	1,769			1,622		(801	)	—	—		2,590
Decrease (increase) in fuel oil stock	(46,641		)	(349	)	5,284		—	—		(41,706		)
Decrease (increase) in materials and supplies	(3,583		)	(2,456	)	149		—	—		(5,890		)
Decrease (increase) in regulatory assets	24,318			2,288		(1,214	)	—	—		25,392
Increase (decrease) in accounts payable	5,804			(3,454	)	(2,395	)	—	—		(45		)
Change in prepaid and accrued income taxes, tax credits and revenue taxes	(34,328		)	(5,111	)	(6,346	)	—	—		(45,785		)
Decrease in defined benefit pension and other postretirement benefit plans liability	(1,205		)	(377	)	(317	)	—	—		(1,899		)
Change in other assets and liabilities	(9,875		)	(265	)	(5,006	)	—	2,341		(12,805		)
Net cash provided by operating activities	84,427			16,406		12,607		—	(12,624	)	100,816
Cash flows from investing activities
Capital expenditures	(150,945		)	(18,083	)	(30,868	)	—	—		(199,896		)
Advances to affiliates	(25,300		)	(5,000	)	—		—	30,300		—
Other	2,821			(280	)	(31	)	—	—		2,510
Net cash used in investing activities	(173,424		)	(23,363	)	(30,899	)	—	30,300		(197,386		)
Cash flows from financing activities
Common stock dividends	(50,626		)	(5,090	)	(7,534	)	—	12,624		(50,626		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(540		)	(267	)	(191	)	—	—		(998		)
Proceeds from issuance of short-term debt	25,000			—		—		—	—		25,000
Proceeds from issuance of long-term debt	30,000			10,000		10,000		—	—		50,000
Repayment of long-term debt	(31,546		)	(10,000	)	(10,000	)	—	—		(51,546		)
Increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	116,901			—		25,300		—	(30,300	)	111,901
Other	197			43		83		—	—		323
Net cash provided by (used in) financing activities	89,386			(5,314	)	17,658		—	(17,676	)	84,054
Net increase (decrease) in cash and cash equivalents	389			(12,271	)	(634	)	—	—		(12,516		)
Cash and cash equivalents, beginning of period	16,732			15,623		3,421		101	—		35,877
Cash and cash equivalents, end of period	$	17,121		3,352		2,787		101	—		$	23,361

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Cash flows from operating activities

Net income $ 95,406
15,050
14,942
—
(29,306 ) $ 96,092
Adjustments to reconcile net income to net cash provided by operating activities:

Equity in earnings of subsidiaries (29,381 ) —
—
—
29,306
(75 )
Common stock dividends received from subsidiaries 20,656
—
—
—
(20,581 ) 75
Depreciation of property, plant and equipment 98,167
29,056
17,355
—
—
144,578
Other amortization 2,168
1,718
2,232
—
—
6,118
Deferred income taxes 12,166
5,237
7,493
—
4,641
29,537
Allowance for equity funds used during construction (7,823 ) (416 ) (669 ) —
—
(8,908 )
Other 216
566
(256 ) —
—
526
Changes in assets and liabilities:

Increase in accounts receivable (6,114 ) (1,127 ) (1,912 ) —
1,066
(8,087 )
Increase in accrued unbilled revenues (14,823 ) (1,581 ) (1,610 ) —
—
(18,014 )
Decrease (increase) in fuel oil stock 6,779
195
(797 ) —
—
6,177
Decrease (increase) in materials and supplies 1,063
(1,580 ) (1,763 ) —
—
(2,280 )
Decrease (increase) in regulatory assets 9,471
(2,935 ) (2,614 ) —
—
3,922
Increase (decrease) in accounts payable (22,224 ) (2,955 ) 2,338
—
—
(22,841 )
Change in prepaid and accrued income taxes, tax credits and revenue taxes 10,920
(758 ) 210
—
(5,081 ) 5,291
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability 532
39
(118 ) —
—
453
Change in other assets and liabilities (2,709 ) 1,059
54
—
(1,066 ) (2,662 )
Net cash provided by operating activities 174,470
41,568
34,885
—
(21,021 ) 229,902
Cash flows from investing activities

Capital expenditures (207,493 ) (36,405 ) (34,106 ) —
—
(278,004 )
Contributions in aid of construction 34,787
3,460
2,356
—
—
40,603
Other 6,089
871
714
—
440
8,114
Advances from affiliates —
(3,100 ) 6,000
—
(2,900 ) —
Net cash used in investing activities (166,617 ) (35,174 ) (25,036 ) —
(2,460 ) (229,287 )
Cash flows from financing activities

Common stock dividends (65,825 ) (11,622 ) (8,959 ) —
20,581
(65,825 )
Preferred stock dividends of Hawaiian Electric and subsidiaries (810 ) (400 ) (286 ) —
—
(1,496 )
Proceeds from issuance of special purpose revenue bonds 162,000
28,000
75,000
—

265,000
Funds transferred for redemption of special purpose revenue bonds (162,000 ) (28,000 ) (75,000 ) —
—
(265,000 )
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less 3,100
—
—
—
2,900
6,000
Other (2,252 ) (407 ) (934 ) —
—
(3,593 )
Net cash used in financing activities (65,787 ) (12,429 ) (10,179 ) —
23,481
(64,914 )
Net decrease in cash and cash equivalents (57,934 ) (6,035 ) (330 ) —
—
(64,299 )
Cash and cash equivalents, beginning of period 61,388
10,749
2,048
101
—
74,286
Cash and cash equivalents, end of period $ 3,454
4,714
1,718
101
—
$ 9,987

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

~~Nine~~Six months ended ~~September~~June 30, ~~2016~~2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	59,184		10,131		8,732		—	(18,405	)	$	59,642
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of subsidiaries	(18,455		)	—		—		—	18,405		(50		)
Common stock dividends received from subsidiaries	13,679			—		—		—	(13,654	)	25
Depreciation of property, plant and equipment	68,830			20,093		11,904		—	—		100,827
Other amortization	9,200			2,976		845		—	—		13,021
Deferred income taxes	(6,708		)	(2,429	)	794		—	—		(8,343		)
Allowance for equity funds used during construction	(5,475		)	(235	)	(567	)	—	—		(6,277		)
Other	1,469			(322	)	(169	)	—	—		978
Changes in assets and liabilities:
Increase in accounts receivable	(25,673		)	(2,387	)	(5,763	)	—	(245	)	(34,068		)
Decrease (increase) in accrued unbilled revenues	(3,063		)	697		(1,419	)	—	—		(3,785		)
Increase in fuel oil stock	(9,513		)	(3,934	)	(6,696	)	—	—		(20,143		)
Increase in materials and supplies	(2,752		)	(559	)	(233	)	—	—		(3,544		)
Increase in regulatory assets	(14,728		)	(1,974	)	(2,898	)	—	—		(19,600		)
Increase in accounts payable	13,093			3,096		2,095		—	—		18,284
Change in prepaid and accrued income taxes, tax credits and revenue taxes	(15,343		)	(9,952	)	(5,165	)	—	(601	)	(31,061		)
Decrease in defined benefit pension and other postretirement benefit plans liability	(1,117		)	(380	)	(464	)	—	—		(1,961		)
Change in other assets and liabilities	1,116			3,173		1,357		—	245		5,891
Net cash provided by operating activities	63,744			17,994		2,353		—	(14,255	)	69,836
Cash flows from investing activities
Capital expenditures	(146,920		)	(24,424	)	(28,303	)	—	—		(199,647		)
Advances (to) from affiliates	(5,600		)	(1,000	)	12,000		—	(5,400	)	—
Other	2,241			884		575		—	601		4,301
Net cash used in investing activities	(150,279		)	(24,540	)	(15,728	)	—	(4,799	)	(195,346		)
Cash flows from financing activities
Common stock dividends	(51,652		)	(7,644	)	(6,010	)	—	13,654		(51,652		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(540		)	(267	)	(191	)	—	—		(998		)
Proceeds from issuance of long-term debt	75,000			15,000		10,000		—	—		100,000
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	75,881			—		5,600		—	5,400		86,881
Other	(291		)	(52	)	(35	)	—	—		(378		)
Net cash provided by financing activities	98,398			7,037		9,364		—	19,054		133,853
Net increase (decrease) in cash and cash equivalents	11,863			491		(4,011	)	—	—		8,343
Cash and cash equivalents, beginning of period	2,059			4,025		6,332		101	—		12,517
Cash and cash equivalents, end of period	$	13,922		4,516		2,321		101	—		$	20,860

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric Other
subsidiaries Consolidating
adjustments Hawaiian Electric
Consolidated
Cash flows from operating activities
��

Net income $ 109,008
16,886
17,341
—
(33,541 ) $ 109,694
Adjustments to reconcile net income to net cash provided by operating activities:

Equity in earnings of subsidiaries (33,616 ) —
—
—
33,541
(75 )
Common stock dividends received from subsidiaries 19,776
—
—
—
(19,701 ) 75
Depreciation of property, plant and equipment 94,564
28,347
17,389
—
—
140,300
Other amortization 2,462
1,366
1,552
—
—
5,380
Deferred income taxes 41,005
4,529
10,085
—
29
55,648
Allowance for equity funds used during construction (4,771 ) (571 ) (668 ) —
—
(6,010 )
Other 2,925
162
147
—
—
3,234
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 328
(2,716 ) (1,313 ) —
3,046
(655 )
Increase in accrued unbilled revenues (9,673 ) (373 ) (612 ) —
—
(10,658 )
Decrease in fuel oil stock 4,157
1,425
1,154
—
—
6,736
Decrease (increase) in materials and supplies (1,755 ) (1,559 ) 387
—
—
(2,927 )
Decrease (increase) in regulatory assets (2,474 ) (150 ) 373
—
—
(2,251 )
Increase (decrease) in accounts payable (2,628 ) 143
1,809
—
—
(676 )
Change in prepaid and accrued income taxes, tax credits and revenue taxes (7,324 ) 2,230
(4,472 ) —
(29 ) (9,595 )
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability 449
40
(129 ) —
—
360
Change in other assets and liabilities (10,548 ) 2,856
(2,571 ) —
(3,046 ) (13,309 )
Net cash provided by operating activities 201,885
52,615
40,472
—
(19,701 ) 275,271
Cash flows from investing activities

Capital expenditures (188,415 ) (37,835 ) (24,454 ) —
—
(250,704 )
Contributions in aid of construction 18,181
2,691
2,696
—
—
23,568
Other 901
169
30
—
—
1,100
Advances from affiliates —
(3,000 ) (8,000 ) —
11,000
—
Net cash used in investing activities (169,333 ) (37,975 ) (29,728 ) —
11,000
(226,036 )
Cash flows from financing activities

Common stock dividends (70,199 ) (9,906 ) (9,795 ) —
19,701
(70,199 )
Preferred stock dividends of Hawaiian Electric and subsidiaries (810 ) (400 ) (286 ) —
—
(1,496 )
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less 32,000
—
—
—
(11,000 ) 21,000
Other (3 ) (8 ) (1 ) —
—
(12 )
Net cash used in financing activities (39,012 ) (10,314 ) (10,082 ) —
8,701
(50,707 )
Net increase (decrease) in cash and cash equivalents (6,460 ) 4,326
662
—
—
(1,472 )
Cash and cash equivalents, beginning of period 16,281
2,682
5,385
101
—
24,449
Cash and cash equivalents, end of period $ 9,821
7,008
6,047
101
—
$ 22,977

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Note 4 · Bank segment

Selected financial information

American Savings Bank, F.S.B.

Statements of Income Data



	Three months ended June 30				Six months ended June 30
(in thousands)	2019		2018		2019		2018
Interest and dividend income
Interest and fees on loans	$	58,620	$	54,633	$	116,480	$	107,433
Interest and dividends on investment securities	7,535		8,628		18,163		17,830
Total interest and dividend income	66,155		63,261		134,643		125,263
Interest expense
Interest on deposit liabilities	4,287		3,284		8,539		6,241
Interest on other borrowings	411		393		939		889
Total interest expense	4,698		3,677		9,478		7,130
Net interest income	61,457		59,584		125,165		118,133
Provision for loan losses	7,688		2,763		14,558		6,304
Net interest income after provision for loan losses	53,769		56,821		110,607		111,829
Noninterest income
Fees from other financial services	4,798		4,744		9,360		9,398
Fee income on deposit liabilities	5,004		5,138		10,082		10,327
Fee income on other financial products	1,830		1,675		3,423		3,329
Bank-owned life insurance	2,390		1,133		4,649		2,004
Mortgage banking income	976		617		1,590		1,230
Other income, net	534		536		992		972
Total noninterest income	15,532		13,843		30,096		27,260
Noninterest expense
Compensation and employee benefits	25,750		23,655		51,262		48,095
Occupancy	5,479		4,194		10,149		8,474
Data processing	3,852		3,540		7,590		7,004
Services	2,606		3,028		5,032		6,075
Equipment	2,189		1,874		4,253		3,602
Office supplies, printing and postage	1,663		1,491		3,023		2,998
Marketing	1,323		1,085		2,313		1,730
FDIC insurance	628		727		1,254		1,440
Other expense	4,519		4,556		8,373		8,657
Total noninterest expense	48,009		44,150		93,249		88,075
Income before income taxes	21,292		26,514		47,454		51,014
Income taxes	4,276		5,953		9,599		11,493
Net income	$	17,016	$	20,561	$	37,855	$	39,521

Three months ended September 30 Nine months ended September 30
(in thousands) 2017 2016 2017 2016
Interest and dividend income

Interest and fees on loans $ 52,210
$ 50,444
$ 155,269
$ 148,571
Interest and dividends on investment securities 6,850
4,759
20,593
14,219
Total interest and dividend income 59,060
55,203
175,862
162,790
Interest expense

Interest on deposit liabilities 2,444
1,871
6,858
5,154
Interest on other borrowings 470
1,464
2,110
4,416
Total interest expense 2,914
3,335
8,968
9,570
Net interest income 56,146
51,868
166,894
153,220
Provision for loan losses 490
5,747
7,231
15,266
Net interest income after provision for loan losses 55,656
46,121
159,663
137,954
Noninterest income

Fees from other financial services 5,635
5,599
17,055
16,799
Fee income on deposit liabilities 5,533
5,627
16,526
16,045
Fee income on other financial products 1,904
2,151
5,741
6,563
Bank-owned life insurance 1,257
1,616
4,165
3,620
Mortgage banking income 520
2,347
1,896
5,096
Gains on sale of investment securities, net —
—
—
598
Other income, net 380
1,165
1,229
1,786
Total noninterest income 15,229
18,505
46,612
50,507
Noninterest expense

Compensation and employee benefits 23,724
22,844
71,703
67,197
Occupancy 4,284
3,991
12,623
12,244
Data processing 3,262
3,150
9,749
9,599
Services 2,863
2,427
7,989
8,093
Equipment 1,814
1,759
5,333
5,193
Office supplies, printing and postage 1,444
1,483
4,506
4,431
Marketing 934
747
2,290
2,507
FDIC insurance 746
907
2,296
2,704
Other expense 5,050
4,591
14,066
13,948
Total noninterest expense 44,121
41,899
130,555
125,916
Income before income taxes 26,764
22,727
75,720
62,545
Income taxes 9,172
7,623
25,582
21,483
Net income $ 17,592
$ 15,104
$ 50,138
$ 41,062

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Reconciliation to amounts per HEI Condensed Consolidated Statements of Income*:



	Three months ended June 30						Six months ended June 30
(in thousands)	2019			2018			2019			2018
Interest and dividend income	66,155			63,261			$	134,643		$	125,263
Noninterest income	15,532			13,843			30,096			27,260
*Revenues-Bank	81,687			77,104			164,739			152,523
Total interest expense	4,698			3,677			9,478			7,130
Provision for loan losses	7,688			2,763			14,558			6,304
Noninterest expense	48,009			44,150			93,249			88,075
Less: Retirement defined benefits gain (expense)—other than service costs	40			(403		)	80			(790		)
*Expenses-Bank	60,435			50,187			117,365			100,719
*Operating income-Bank	21,252			26,917			47,374			51,804
Add back: Retirement defined benefits (gain) expense—other than service costs	(40		)	403			(80		)	790
Income before income taxes	$	21,292		$	26,514		$	47,454		$	51,014

American Savings Bank, F.S.B.

Statements of Comprehensive Income Data



	Three months ended June 30					Six months ended June 30
(in thousands)	2019		2018			2019			2018
Net income	$	17,016	$	20,561		$	37,855		$	39,521
Other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on available-for-sale investment securities:
Net unrealized gains (losses) on available-for-sale investment securities arising during the period, net of (taxes) benefits of $(5,182), $1,592, $(8,637) and $6,459, respectively	14,154		(4,348		)	23,593			(17,645		)
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of (taxes) benefits of $44, $133, $(1,122), and $827, respectively	121		366			(3,066		)	1,588
Other comprehensive income (loss), net of taxes	14,275		(3,982		)	20,527			(16,057		)
Comprehensive income	$	31,291	$	16,579		$	58,382		$	23,464

Three months ended September 30 Nine months ended September 30
(in thousands) 2017 2016 2017 2016
Net income $ 17,592
$ 15,104
$ 50,138
$ 41,062
Other comprehensive income (loss), net of taxes:

Net unrealized gains (losses) on available-for-sale investment securities:

Net unrealized gains (losses) on available-for-sale investment securities arising during the period, net of (taxes) benefits of $(137), $1,417, $(1,619) and $(5,413), respectively 208
(2,147 ) 2,452
8,197
Reclassification adjustment for net realized gains included in net income, net of taxes of nil, nil, nil and $238, respectively —
—
—
(360 )
Retirement benefit plans:

Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits of $138, $144, $675 and $421, respectively 209
219
1,023
638
Other comprehensive income (loss), net of taxes 417
(1,928 ) 3,475
8,475
Comprehensive income $ 18,009
$ 13,176
$ 53,613
$ 49,537

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

American Savings Bank, F.S.B.

Balance Sheets Data


(in thousands)	September 30, 2017						December 31, 2016						June 30, 2019						December 31, 2018
Assets
Cash and due from banks				$	120,492					$	137,083					$	115,214					$	122,059
Interest-bearing deposits				69,223						52,128						52,415						4,225
Restricted cash				—						1,764
Available-for-sale investment securities, at fair value				1,320,110						1,105,182
Investment securities
Available-for-sale, at fair value																1,298,010						1,388,533
Held-to-maturity, at amortized cost (fair value of $141,231 and $142,057, respectively)																137,029						141,875
Stock in Federal Home Loan Bank, at cost				9,706						11,218						8,434						9,958
Loans receivable held for investment				4,676,281						4,738,693
Loans held for investment																5,008,489						4,843,021
Allowance for loan losses				(53,047		)				(55,533		)				(58,425		)				(52,119		)
Net loans				4,623,234						4,683,160						4,950,064						4,790,902
Loans held for sale, at lower of cost or fair value				15,728						18,817						9,196						1,805
Other				378,224						329,815						511,502						486,347
Goodwill				82,190						82,190						82,190						82,190
Total assets				$	6,618,907					$	6,421,357					$	7,164,054					$	7,027,894

Liabilities and shareholder’s equity
Deposit liabilities—noninterest-bearing				$	1,710,698					$	1,639,051					$	1,883,044					$	1,800,727
Deposit liabilities—interest-bearing				4,041,628						3,909,878						4,374,339						4,358,125
Other borrowings				153,552						192,618						111,485						110,040
Other				107,558						101,635						134,162						124,613
Total liabilities				6,013,436						5,843,182						6,503,030						6,393,505
Commitments and contingencies
Common stock				1						1						1						1
Additional paid in capital				344,512						342,704
Additional paid-in capital																348,423						347,170
Retained earnings				279,956						257,943						330,141						325,286
Accumulated other comprehensive loss, net of tax benefits
Net unrealized losses on securities	$	(5,479	)				$	(7,931	)				$	(830	)				$	(24,423	)
Retirement benefit plans	(13,519		)	(18,998		)	(14,542		)	(22,473		)	(16,711		)	(17,541		)	(13,645		)	(38,068		)
Total shareholder’s equity				605,471						578,175						661,024						634,389
Total liabilities and shareholder’s equity				$	6,618,907					$	6,421,357					$	7,164,054					$	7,027,894

Other assets
Bank-owned life insurance				$	147,391					$	143,197					$	151,607					$	151,172
Premises and equipment, net				123,326						90,570						208,956						214,415
Prepaid expenses				5,356						3,348
Accrued interest receivable				17,488						16,824						20,675						20,140
Mortgage-servicing rights				9,070						9,373						8,103						8,062
Low-income housing equity investments				54,515						47,081						71,484						67,626
Real estate acquired in settlement of loans, net				1,183						1,189						—						406
Real estate held for sale																9,014						—
Other				19,895						18,233						41,663						24,526
				$	378,224					$	329,815					$	511,502					$	486,347
Other liabilities
Accrued expenses				$	41,698					$	36,754					$	42,129					$	54,084
Federal and state income taxes payable				6,829						4,728						7,176						2,012
Cashier’s checks				27,448						24,156						25,135						26,906
Advance payments by borrowers				4,867						10,335						11,080						10,183
Other				26,716						25,662						48,642						31,428
				$	107,558					$	101,635					$	134,162					$	124,613

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Bank-owned life insurance is life insurance purchased by ASB on the lives of certain key employees, with ASB as the beneficiary. The insurance is used to fund employee benefits through tax-free income from increases in the cash value of the policies and insurance proceeds paid to ASB upon an insured’s death.

Other borrowings consisted of securities sold under agreements to repurchase and advances from the Federal Home Loan Bank (FHLB) of $~~104~~111 million and ~~$50 million~~,nil, respectively, as of ~~September~~June 30, ~~2017~~2019 and ~~$93~~$65 million and ~~$100~~$45 million, respectively, as of December 31, ~~2016~~2018.

~~Available-for-sale investment~~Investment securities. The major components of investment securities were as follows:



	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value		Gross unrealized losses
										Less than 12 months						12 months or longer
(dollars in thousands)										Number of issues	Fair value		Amount			Number of issues	Fair value		Amount
June 30, 2019
Available-for-sale
U.S. Treasury and federal agency obligations	$	130,810	$	736	$	(340	)	$	131,206	—	$	—	$	—		8	$	55,125	$	(340	)
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,090,729		4,083		(7,325		)	1,087,487		1	1,071		(3		)	113	628,194		(7,322		)
Corporate bonds	49,438		1,713		—			51,151		—	—		—			—	—		—
Mortgage revenue bonds	28,166		—		—			28,166		—	—		—			—	—		—
	$	1,299,143	$	6,532	$	(7,665	)	$	1,298,010	1	$	1,071	$	(3	)	121	$	683,319	$	(7,662	)
Held-to-maturity
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	$	137,029	$	4,202	$	—		$	141,231	—	$	—	$	—		—	$	—	$	—
	$	137,029	$	4,202	$	—		$	141,231	—	$	—	$	—		—	$	—	$	—
December 31, 2018
Available-for-sale
U.S. Treasury and federal agency obligations	$	156,694	$	62	$	(2,407	)	$	154,349	5	$	25,882	$	(208	)	19	$	118,405	$	(2,199	)
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,192,169		789		(31,542		)	1,161,416		22	129,011		(1,330		)	145	947,890		(30,212		)
Corporate bonds	49,398		103		(369		)	49,132		6	23,175		(369		)	—	—		—
Mortgage revenue bonds	23,636		—		—			23,636		—	—		—			—	—		—
	$	1,421,897	$	954	$	(34,318	)	$	1,388,533	33	$	178,068	$	(1,907	)	164	$	1,066,295	$	(32,411	)
Held-to-maturity
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	$	141,875	$	1,446	$	(1,264	)	$	142,057	3	$	29,814	$	(400	)	2	$	31,505	$	(864	)
	$	141,875	$	1,446	$	(1,264	)	$	142,057	3	$	29,814	$	(400	)	2	$	31,505	$	(864	)

ASB does not believe that the investment securities that were in an unrealized loss position at ~~September~~June 30, ~~2017,~~2019, represent an other-than-temporary impairment (OTTI). Total gross unrealized losses were primarily attributable to ~~rising interest rates relative to when~~change in market conditions. On a quarterly basis the investment securities ~~were purchased and not due to the credit quality~~are evaluated for changes in financial condition of the issuer. Based upon ASB’s evaluation, all securities held within the investment ~~securities.~~portfolio continue to be investment grade by one or more agencies. The contractual cash flows of the U.S. Treasury, federal agency obligations and ~~mortgage-related~~agency mortgage-backed securities are backed by the full faith and credit guaranty of the United States government or an agency of the government. ASB does not intend to sell the securities before the recovery of its amortized cost basis and there have been no adverse changes in the timing of the contractual cash flows for the securities. ASB did not recognize OTTI for the quarters and ~~nine month periods~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016.~~2018.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

U.S. Treasury, federal agency obligations, corporate bonds, and ~~the~~ mortgage revenue ~~bond~~bonds have contractual terms to maturity. ~~Mortgage-related~~Mortgage-backed securities have contractual terms to maturity, but require periodic payments to reduce principal. In addition, expected maturities will differ from contractual maturities because borrowers have the right to prepay the underlying mortgages.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

Proceeds from the sale of available-for-sale securities were nil for both the three ~~month periods ended September 30, 2017~~ and ~~2016 and nil and $16.4 million for the nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016, respectively.~~2018. Gross realized gains and losses were nil for both the three ~~month periods ended September 30, 2017~~ and ~~2016, and nil and $0.6 million for the nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016, respectively. Gross realized losses were nil or not material for all periods presented.~~2018.



	June 30, 2019			December 31, 2018
(in thousands)
Real estate:
Residential 1-4 family	$	2,189,976		$	2,143,397
Commercial real estate	790,174			748,398
Home equity line of credit	1,036,985			978,237
Residential land	14,696			13,138
Commercial construction	68,676			92,264
Residential construction	8,165			14,307
Total real estate	4,108,672			3,989,741
Commercial	626,524			587,891
Consumer	272,949			266,002
Total loans	5,008,145			4,843,634
Less: Deferred fees and discounts	344			(613		)
Allowance for loan losses	(58,425		)	(52,119		)
Total loans, net	$	4,950,064		$	4,790,902

ASB's policy is to require private mortgage insurance on all real estate loans when the loan-to-value ratio of the property exceeds 80% of the lower of the appraised value or purchase price at origination. For non-owner occupied residential properties, the loan-to-value ratio may not exceed 80% of the lower of the appraised value or purchase price at origination. ASB is subject to the risk that the private mortgage insurance company cannot satisfy the bank's claim on policies.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Allowance for loan losses.The allowance for loan losses (balances and changes) and financing receivables were as follows:



(in thousands)	Residential 1-4 family			Commercial real estate			Home equity line of credit			Residential land			Commercial construction			Residential construction			Commercial loans			Consumer loans			Total
Three months ended June 30, 2019
Allowance for loan losses:
Beginning balance	$	1,911		$	14,825		$	6,493		$	425		$	2,843		$	3		$	10,814		$	16,983		$	54,297
Charge-offs	(5		)	—			(19		)	(4		)	—			—			(494		)	(5,102		)	(5,624		)
Recoveries	8			—			4			7			—			—			1,281			764			2,064
Provision	101			986			403			109			(797		)	(1		)	1,472			5,415			7,688
Ending balance	$	2,015		$	15,811		$	6,881		$	537		$	2,046		$	2		$	13,073		$	18,060		$	58,425
Three months ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	2,525		$	15,959		$	7,982		$	674		$	4,361		$	4		$	10,355		$	12,035		$	53,895
Charge-offs	—			—			(144		)	(9		)	—			—			(540		)	(3,888		)	(4,581		)
Recoveries	14			—			13			46			—			—			280			373			726
Provision	400			(661		)	(517		)	(69		)	255			—			66			3,289			2,763
Ending balance	$	2,939		$	15,298		$	7,334		$	642		$	4,616		$	4		$	10,161		$	11,809		$	52,803
Six months ended June 30, 2019
Allowance for loan losses:
Beginning balance	$	1,976		$	14,505		$	6,371		$	479		$	2,790		$	4		$	9,225		$	16,769		$	52,119
Charge-offs	(19		)	—			(19		)	(4		)	—			—			(1,112		)	(10,661		)	(11,815		)
Recoveries	617			—			9			14			—			—			1,461			1,462			3,563
Provision	(559		)	1,306			520			48			(744		)	(2		)	3,499			10,490			14,558
Ending balance	$	2,015		$	15,811		$	6,881		$	537		$	2,046		$	2		$	13,073		$	18,060		$	58,425
June 30, 2019
Ending balance: individually evaluated for impairment	$	904		$	7		$	465		$	—		$	—		$	—		$	4,983		$	501		$	6,860
Ending balance: collectively evaluated for impairment	$	1,111		$	15,804		$	6,416		$	537		$	2,046		$	2		$	8,090		$	17,559		$	51,565
Financing Receivables:
Ending balance	$	2,189,976		$	790,174		$	1,036,985		$	14,696		$	68,676		$	8,165		$	626,524		$	272,949		$	5,008,145
Ending balance: individually evaluated for impairment	$	17,537		$	890		$	13,376		$	2,869		$	—		$	—		$	16,033		$	586		$	51,291
Ending balance: collectively evaluated for impairment	$	2,172,439		$	789,284		$	1,023,609		$	11,827		$	68,676		$	8,165		$	610,491		$	272,363		$	4,956,854
Six months ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	2,902		$	15,796		$	7,522		$	896		$	4,671		$	12		$	10,851		$	10,987		$	53,637
Charge-offs	(31		)	—			(144		)	(17		)	—			—			(1,142		)	(8,120		)	(9,454		)
Recoveries	68			—			27			51			—			—			1,450			720			2,316
Provision	—			(498		)	(71		)	(288		)	(55		)	(8		)	(998		)	8,222			6,304
Ending balance	$	2,939		$	15,298		$	7,334		$	642		$	4,616		$	4		$	10,161		$	11,809		$	52,803
December 31, 2018
Ending balance: individually evaluated for impairment	$	876		$	7		$	701		$	6		$	—		$	—		$	628		$	4		$	2,222
Ending balance: collectively evaluated for impairment	$	1,100		$	14,498		$	5,670		$	473		$	2,790		$	4		$	8,597		$	16,765		$	49,897
Financing Receivables:
Ending balance	$	2,143,397		$	748,398		$	978,237		$	13,138		$	92,264		$	14,307		$	587,891		$	266,002		$	4,843,634
Ending balance: individually evaluated for impairment	$	16,494		$	915		$	14,800		$	2,059		$	—		$	—		$	5,340		$	89		$	39,697
Ending balance: collectively evaluated for impairment	$	2,126,903		$	747,483		$	963,437		$	11,079		$	92,264		$	14,307		$	582,551		$	265,913		$	4,803,937

(in thousands)
Residential
1-4 family

Commercial real
estate
Home
equity line of credit Residential land Commercial construction Residential construction Commercial loans Consumer loans Unallo-cated Total
Three months ended September 30, 2017

Allowance for loan losses:

Beginning balance $ 3,130
$ 18,840
$ 5,527
$ 1,264
$ 4,706
$ 9
$ 14,552
$ 8,328
$ —
$ 56,356
Charge-offs (522 ) —
—
—
—
—
(1,215 ) (3,160 ) —
(4,897 )
Recoveries 33
—
164
259
—
—
326
316
—
1,098
Provision 347
(2,800 ) (36 ) (141 ) 370
2
(595 ) 3,343
—
490
Ending balance $ 2,988
$ 16,040
$ 5,655
$ 1,382
$ 5,076
$ 11
$ 13,068
$ 8,827
$ —
$ 53,047
Three months ended September 30, 2016

Allowance for loan losses:

Beginning balance $ 4,384
$ 13,561
$ 7,836
$ 1,689
$ 6,993
$ 12
$ 17,085
$ 3,771
$ —
$ 55,331
Charge-offs (373 ) —
(108 ) —
—
—
(833 ) (1,879 ) —
(3,193 )
Recoveries 92
—
15
187
—
—
347
211
—
852
Provision 154
1,289
(248 ) 23
179
(2 ) 2,457
1,895
—
5,747
Ending balance $ 4,257
$ 14,850
$ 7,495
$ 1,899
$ 7,172
$ 10
$ 19,056
$ 3,998
$ —
$ 58,737
Nine months ended September 30, 2017

Allowance for loan losses:

Beginning balance $ 2,873
$ 16,004
$ 5,039
$ 1,738
$ 6,449
$ 12
$ 16,618
$ 6,800
$ —
$ 55,533
Charge-offs (528 ) —
(14 ) (92 ) —
—
(3,477 ) (8,360 ) —
(12,471 )
Recoveries 91
—
294
477
—
—
922
970
—
2,754
Provision 552
36
336
(741 ) (1,373 ) (1 ) (995 ) 9,417
—
7,231
Ending balance $ 2,988
$ 16,040
$ 5,655
$ 1,382
$ 5,076
$ 11
$ 13,068
$ 8,827
$ —
$ 53,047
September 30, 2017
Ending balance: individually evaluated for impairment $ 1,317
$ 72
$ 409
$ 373
$ —
$ —
$ 667
$ 30
$ 2,868
Ending balance: collectively evaluated for impairment $ 1,671
$ 15,968
$ 5,246
$ 1,009
$ 5,076
$ 11
$ 12,401
$ 8,797
$ —
$ 50,179
Financing Receivables:

Ending balance $ 2,066,023
$ 745,583
$ 905,249
$ 18,611
$ 128,407
$ 13,031
$ 589,669
$ 211,571
$ 4,678,144
Ending balance: individually evaluated for impairment $ 19,757
$ 1,281
$ 7,078
$ 2,385
$ —
$ —
$ 5,486
$ 67
$ 36,054
Ending balance: collectively evaluated for impairment $ 2,046,266
$ 744,302
$ 898,171
$ 16,226
$ 128,407
$ 13,031
$ 584,183
$ 211,504
$ 4,642,090
Nine months ended September 30, 2016

Allowance for loan losses:

Beginning balance $ 4,186
$ 11,342
$ 7,260
$ 1,671
$ 4,461
$ 13
$ 17,208
$ 3,897
$ —
$ 50,038
Charge-offs (433 ) —
(108 ) —
—
—
(3,138 ) (4,977 ) —
(8,656 )
Recoveries 144
—
46
306
—
—
907
686
—
2,089
Provision 360
3,508
297
(78 ) 2,711
(3 ) 4,079
4,392
—
15,266
Ending balance $ 4,257
$ 14,850
$ 7,495
$ 1,899
$ 7,172
$ 10
$ 19,056
$ 3,998
$ —
$ 58,737
December 31, 2016
Ending balance: individually evaluated for impairment $ 1,352
$ 80
$ 215
$ 789
$ —
$ —
$ 1,641
$ 6
$ 4,083
Ending balance: collectively evaluated for impairment $ 1,521
$ 15,924
$ 4,824
$ 949
$ 6,449
$ 12
$ 14,977
$ 6,794
$ —
$ 51,450
Financing Receivables:

Ending balance $ 2,048,051
$ 800,395
$ 863,163
$ 18,889
$ 126,768
$ 16,080
$ 692,051
$ 178,222
$ 4,743,619
Ending balance: individually evaluated for impairment $ 19,854
$ 1,569
$ 6,158
$ 3,629
$ —
$ —
$ 20,539
$ 10
$ 51,759
Ending balance: collectively evaluated for impairment $ 2,028,197
$ 798,826
$ 857,005
$ 15,260
$ 126,768
$ 16,080
$ 671,512
$ 178,212
$ 4,691,860

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

Credit quality. ASB performs an internal loan review and grading on an ongoing basis. The review provides management with periodic information as to the quality of the loan portfolio and effectiveness of its lending policies and procedures. The objectives of the loan review and grading procedures are to identify, in a timely manner, existing or emerging credit trends so that appropriate steps can be initiated to manage risk and avoid or minimize future losses. Loans subject to grading include commercial, commercial real estate and commercial construction loans.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Each commercial and commercial real estate loan is assigned an Asset Quality Rating (AQR) reflecting the likelihood of repayment or orderly liquidation of that loan transaction pursuant to regulatory credit classifications: Pass, Special Mention, Substandard, Doubtful and Loss. The AQR is a function of the probability of default model rating, the loss given default and possible non-model factors which impact the ultimate collectability of the loan such as character of the business owner/guarantor, interim period performance, litigation, tax liens and major changes in business and economic conditions. Pass exposures generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral. Special Mention loans have potential weaknesses that, if left uncorrected, could jeopardize the liquidation of the debt. Substandard loans have well-defined weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the Bank may sustain some loss. An asset classified Doubtful has the weaknesses of those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. An asset classified Loss is considered uncollectible and has such little value that its continuance as a bankable asset is not warranted.

The credit risk profile by internally assigned grade for loans was as follows:



	June 30, 2019								December 31, 2018
(in thousands)	Commercial real estate		Commercial construction		Commercial		Total		Commercial real estate		Commercial construction		Commercial		Total
Grade:
Pass	$	703,028	$	66,387	$	570,099	$	1,339,514	$	658,288	$	89,974	$	547,640	$	1,295,902
Special mention	11,012		—		28,263		39,275		32,871		—		11,598		44,469
Substandard	76,134		2,289		19,336		97,759		57,239		2,290		28,653		88,182
Doubtful	—		—		8,826		8,826		—		—		—		—
Loss	—		—		—		—		—		—		—		—
Total	$	790,174	$	68,676	$	626,524	$	1,485,374	$	748,398	$	92,264	$	587,891	$	1,428,553

September 30, 2017 December 31, 2016
(in thousands)
Commercial
real estate

Commercial
construction
Commercial
Commercial
real estate

Commercial
construction
Commercial
Grade:

Pass $ 647,599
$ 103,892
$ 539,336
$ 701,657
$ 102,955
$ 614,139
Special mention 44,088
22,500
25,053
65,541
—
25,229
Substandard 53,896
2,015
23,130
33,197
23,813
52,683
Doubtful —
—
2,150
—
—
—
Loss —
—
—
—
—
—
Total $ 745,583
$ 128,407
$ 589,669
$ 800,395
$ 126,768
$ 692,051

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

The credit risk profile based on payment activity for loans was as follows:



(in thousands)	30-59 days past due		60-89 days past due		Greater than 90 days		Total past due		Current		Total financing receivables		Recorded investment> 90 days and accruing
June 30, 2019
Real estate:
Residential 1-4 family	$	4,125	$	661	$	3,763	$	8,549	$	2,181,427	$	2,189,976	$	—
Commercial real estate	—		—		—		—		790,174		790,174		—
Home equity line of credit	1,444		813		1,798		4,055		1,032,930		1,036,985		—
Residential land	—		—		376		376		14,320		14,696		—
Commercial construction	—		—		—		—		68,676		68,676		—
Residential construction	—		—		—		—		8,165		8,165		—
Commercial	410		305		2,264		2,979		623,545		626,524		—
Consumer	4,583		2,536		2,276		9,395		263,554		272,949		—
Total loans	$	10,562	$	4,315	$	10,477	$	25,354	$	4,982,791	$	5,008,145	$	—
December 31, 2018
Real estate:
Residential 1-4 family	$	3,757	$	2,773	$	2,339	$	8,869	$	2,134,528	$	2,143,397	$	—
Commercial real estate	—		—		—		—		748,398		748,398		—
Home equity line of credit	1,139		681		2,720		4,540		973,697		978,237		—
Residential land	9		—		319		328		12,810		13,138		—
Commercial construction	—		—		—		—		92,264		92,264		—
Residential construction	—		—		—		—		14,307		14,307		—
Commercial	315		281		548		1,144		586,747		587,891		—
Consumer	5,220		3,166		2,702		11,088		254,914		266,002		—
Total loans	$	10,440	$	6,901	$	8,628	$	25,969	$	4,817,665	$	4,843,634	$	—

(in thousands)
30-59
days
past due

60-89
days
past due

Greater
than
90 days

Total
past due
Current
Total
financing
receivables

Recorded
investment>
90 days and
accruing
September 30, 2017

Real estate:

Residential 1-4 family $ 3,905
$ 1,513
$ 4,452
$ 9,870
$ 2,056,153
$ 2,066,023
$ —
Commercial real estate 5,414
—
—
5,414
740,169
745,583
—
Home equity line of credit 1,936
177
1,367
3,480
901,769
905,249
—
Residential land 498
984
497
1,979
16,632
18,611
—
Commercial construction —
—
—
—
128,407
128,407
—
Residential construction —
—
—
—
13,031
13,031
—
Commercial 1,095
218
648
1,961
587,708
589,669
—
Consumer 2,508
1,465
1,178
5,151
206,420
211,571
—
Total loans $ 15,356
$ 4,357
$ 8,142
$ 27,855
$ 4,650,289
$ 4,678,144
$ —
December 31, 2016

Real estate:

Residential 1-4 family $ 5,467
$ 2,338
$ 3,505
$ 11,310
$ 2,036,741
$ 2,048,051
$ —
Commercial real estate 2,416
—
—
2,416
797,979
800,395
—
Home equity line of credit 1,263
381
1,342
2,986
860,177
863,163
—
Residential land —
—
255
255
18,634
18,889
—
Commercial construction —
—
—
—
126,768
126,768
—
Residential construction —
—
—
—
16,080
16,080
—
Commercial 413
510
1,303
2,226
689,825
692,051
—
Consumer 1,945
1,001
963
3,909
174,313
178,222
—
Total loans $ 11,504
$ 4,230
$ 7,368
$ 23,102
$ 4,720,517
$ 4,743,619
$ —

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

The credit risk profile based on nonaccrual loans, accruing loans 90 days or more past due and ~~TDR~~troubled debt restructuring (TDR) loans was as follows:



(in thousands)		June 30, 2019		December 31, 2018
Real estate:
Residential 1-4 family		$	13,087	$	12,037
Commercial real estate		—		—
Home equity line of credit		7,506		6,348
Residential land		818		436
Commercial construction		—		—
Residential construction		—		—
Commercial		13,595		4,278
Consumer	��	4,362		4,196
Total nonaccrual loans		$	39,368	$	27,295
Real estate:
Residential 1-4 family		$	—	$	—
Commercial real estate		—		—
Home equity line of credit		—		—
Residential land		—		—
Commercial construction		—		—
Residential construction		—		—
Commercial		—		—
Consumer		—		—
Total accruing loans 90 days or more past due		$	—	$	—
Real estate:
Residential 1-4 family		$	10,269	$	10,194
Commercial real estate		890		915
Home equity line of credit		11,116		11,597
Residential land		2,402		1,622
Commercial construction		—		—
Residential construction		—		—
Commercial		2,611		1,527
Consumer		59		62
Total troubled debt restructured loans not included above		$	27,347	$	25,917

(in thousands) September 30, 2017 December 31, 2016
Real estate:

Residential 1-4 family $ 12,853
$ 11,154
Commercial real estate —
223
Home equity line of credit 4,000
3,080
Residential land 1,022
878
Commercial construction —
—
Residential construction —
—
Commercial 3,691
6,708
Consumer 1,791
1,282
  Total nonaccrual loans $ 23,357
$ 23,325
Real estate:
Residential 1-4 family $ —
$ —
Commercial real estate —
—
Home equity line of credit —
—
Residential land —
—
Commercial construction —
—
Residential construction —
—
Commercial —
—
Consumer —
—
     Total accruing loans 90 days or more past due $ —
$ —
Real estate:
Residential 1-4 family $ 11,592
$ 14,450
Commercial real estate 1,281
1,346
Home equity line of credit 5,250
4,934
Residential land 1,555
2,751
Commercial construction —
—
Residential construction —
—
Commercial 2,052
14,146
Consumer 67
10
     Total troubled debt restructured loans not included above $ 21,797
$ 37,637

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

The total carrying amount and the total unpaid principal balance of impaired loans were as follows:


	September 30, 2017						Three months ended September 30, 2017				Nine months ended September 30, 2017					June 30, 2019						Three months ended June 30, 2019				Six months ended June 30, 2019
(in thousands)	Recorded investment		Unpaid principal balance		Related Allowance		Average recorded investment		Interest income recognized*		Average recorded investment		Interest income recognized*			Recorded investment		Unpaid principal balance		Related Allowance		Average recorded investment		Interest income recognized*		Average recorded investment		Interest income recognized*
With no related allowance recorded															With no related allowance recorded
Real estate:
Residential 1-4 family	$	9,987	$	10,541	$	—	$	9,650	$	70	$	9,503	$	230		$	9,208	$	9,833	$	—	$	8,993	$	87	$	8,492	$	247
Commercial real estate	—		—		—		—		—		121		11			—		—		—		—		—		—		—
Home equity line of credit	1,565		1,889		—		1,918		32		2,108		97			1,787		2,073		—		1,940		54		2,238		66
Residential land	1,134		1,425		—		1,209		73		1,080		107			2,869		3,072		—		2,280		24		2,158		50
Commercial construction	—		—		—		—		—		—		—			—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—			—		—		—		—		—		—		—
Commercial	2,901		6,257		—		1,808		29		2,888		37			4,553		5,774		—		4,626		—		4,299		—
Consumer	—		—		—		—		—		—		—			30		30		—		31		—		31		—
	$	15,587	$	20,112	$	—	$	14,585	$	204	$	15,700	$	482		$	18,447	$	20,782	$	—	$	17,870	$	165	$	17,218	$	363
With an allowance recorded															With an allowance recorded
Real estate:
Residential 1-4 family	$	9,770	$	9,972	$	1,317	$	9,788	$	97	$	9,963	$	333		$	8,329	$	8,382	$	904	$	8,440	$	96	$	8,417	$	179
Commercial real estate	1,281		1,281		72		1,284		13		1,292		41			890		890		7		894		9		900		19
Home equity line of credit	5,513		5,543		409		5,076		68		4,670		164			11,589		11,623		465		11,665		152		11,743		282
Residential land	1,251		1,251		373		1,251		12		1,620		73			—		—		—		79		—		54		—
Commercial construction	—		—		—		—		—		—		—			—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—			—		—		—		—		—		—		—
Commercial	2,585		2,595		667		2,482		225		4,104		694			11,480		11,584		4,983		10,997		30		7,874		56
Consumer	67		67		30		67		1		55		2			556		556		501		288		1		173		2
	$	20,467	$	20,709	$	2,868	$	19,948	$	416	$	21,704	$	1,307		$	32,844	$	33,035	$	6,860	$	32,363	$	288	$	29,161	$	538
Total
Real estate:
Residential 1-4 family	$	19,757	$	20,513	$	1,317	$	19,438	$	167	$	19,466	$	563		$	17,537	$	18,215	$	904	$	17,433	$	183	$	16,909	$	426
Commercial real estate	1,281		1,281		72		1,284		13		1,413		52			890		890		7		894		9		900		19
Home equity line of credit	7,078		7,432		409		6,994		100		6,778		261			13,376		13,696		465		13,605		206		13,981		348
Residential land	2,385		2,676		373		2,460		85		2,700		180			2,869		3,072		—		2,359		24		2,212		50
Commercial construction	—		—		—		—		—		—		—			—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—			—		—		—		—		—		—		—
Commercial	5,486		8,852		667		4,290		254		6,992		731			16,033		17,358		4,983		15,623		30		12,173		56
Consumer	67		67		30		67		1		55		2			586		586		501		319		1		204		2
	$	36,054	$	40,821	$	2,868	$	34,533	$	620	$	37,404	$	1,789		$	51,291	$	53,817	$	6,860	$	50,233	$	453	$	46,379	$	901

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

ASB may consider various types of concessions in granting a TDR including maturity date extensions, extended amortization of principal, temporary deferral of principal payments and temporary interest rate reductions. ASB rarely grants principal forgiveness in its TDR modifications. Residential loan modifications generally involve interest rate reduction,

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

All TDR loans are classified as impaired and are segregated and reviewed separately when assessing the adequacy of the allowance for loan losses based on the appropriate method of measuring impairment: (1) present value of expected future cash flows discounted at the loan’s effective original contractual rate, (2) fair value of collateral less cost to sell or (3) observable market price. The financial impact of the calculated impairment amount is an increase to the allowance associated with the modified loan. When available information confirms that specific loans or portions thereof are uncollectible (confirmed losses), these amounts are charged off against the allowance for loan losses.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Loan modifications that occurred during the ~~third~~second quarters and first ~~nine~~six months of ~~2017~~2019 and ~~2016 and the impact on the allowance for loan losses~~2018 were as follows:

Outstanding recorded
investment
(as of period end)¹

Related allowance
(as of period end)

Outstanding recorded

(as of period end)¹

Outstanding recorded
investment
(as of period end)¹

Related allowance
(as of period end)

Outstanding recorded
investment
(as of period end)¹

Related allowance
(as of period end)

Three months ended September 30, 2016 Nine months ended September 30, 2016
Number of contracts
Outstanding recorded
investment¹
Net increase in allowance Number of contracts
Outstanding recorded
investment¹
Net increase in allowance
(dollars in thousands) Pre-modification Post-modification (as of period end) Pre-modification Post-modification (as of period end)
Troubled debt restructurings

Real estate:

Residential 1-4 family 2
$ 251
$ 251
$ 46
11
$ 2,239
$ 2,351
$ 305
Commercial real estate —
—
—
—
—
—
—
—
Home equity line of credit 12
1,268
1,268
237
30
2,705
2,705
492
Residential land —
—
—
—
1
120
121
—
Commercial construction —
—
—
—
—
—
—
—
Residential construction —
—
—
—
—
—
—
—
Commercial 6
3,462
3,462
53
14
20,119
20,119
723
Consumer —
—
—
—
—
—
—
—
20
$ 4,981
$ 4,981
$ 336
56
$ 25,183
$ 25,296
$ 1,520

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

There were no loans modified in TDRs that experienced a payment default of 90 days or more during the second quarter and first six months of 2019. Loans modified in TDRs that experienced a payment default of 90 days or more during the ~~third quarters~~second quarter and first ~~nine~~six months of ~~2017 and 2016,~~2018, and for which the payment of default occurred within one year of the modification, were as follows:

Outstanding
recorded
investment
(as of period end)¹

Troubled debt restructurings that

subsequently defaulted

If loans modified in a TDR subsequently default, ASB evaluates the loan for further impairment. Based on its evaluation, adjustments may be made in the allocation of the allowance or partial charge-offs may be taken to further write-down the carrying value of the loan. Commitments to lend additional funds to borrowers whose loan terms have been modified in a TDR totaled nil ~~and $2.6 million~~ at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016, respectively.~~2018.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Changes related to MSRs were as follows:



	Three months ended June 30						Six months ended June 30
(in thousands)	2019			2018			2019			2018
Mortgage servicing rights
Beginning balance	$	7,897		$	8,541		$	8,062		$	8,639
Amount capitalized	632			392			862			727
Amortization	(426		)	(424		)	(821		)	(857		)
Other-than-temporary impairment	—			—			—			—
Carrying amount before valuation allowance	8,103			8,509			8,103			8,509
Valuation allowance for mortgage servicing rights
Beginning balance	—			—			—			—
Provision (recovery)	—			—			—			—
Other-than-temporary impairment	—			—			—			—
Ending balance	—			—			—			—
Net carrying value of mortgage servicing rights	$	8,103		$	8,509		$	8,103		$	8,509

~~Changes related to mortgage servicing rights were as follows:~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

Key assumptions used in estimating the fair value of ASB’s ~~mortgage servicing rights~~MSRs used in the impairment analysis were as follows:



(dollars in thousands)	June 30, 2019			December 31, 2018
Unpaid principal balance	$	1,200,017		$	1,188,514
Weighted average note rate	4.01		%	3.98		%
Weighted average discount rate	9.3		%	10.0		%
Weighted average prepayment speed	10.3		%	6.5		%

The sensitivity analysis of fair value of MSRs to hypothetical adverse changes of 25 and 50 basis points in certain key assumptions was as follows:



(dollars in thousands)	June 30, 2019			December 31, 2018
Prepayment rate:
25 basis points adverse rate change	$	(843	)	$	(250	)
50 basis points adverse rate change	(1,786		)	(566		)
Discount rate:
25 basis points adverse rate change	(108		)	(139		)
50 basis points adverse rate change	(215		)	(275		)

(dollars in thousands) September 30, 2017
December 31, 2016
Prepayment rate:
  25 basis points adverse rate change $ (878 ) $ (567 )
  50 basis points adverse rate change (1,847 ) (1,154 )
Discount rate:
  25 basis points adverse rate change (111 ) (128 )
  50 basis points adverse rate change (220 ) (254 )

The effect of a variation in certain assumptions on fair value is calculated without changing any other assumptions. This analysis typically cannot be extrapolated because the relationship of a change in one key assumption to the changes in the fair value of MSRs typically is not linear.

Other borrowings. As of June 30, 2019, ASB had no FHLB advances outstanding. ASB was in compliance with all Advances, Pledge and Security Agreement requirements as of June 30, 2019.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

securities sold under agreements to repurchase on a gross basis in the balance sheet. The following tables present information about the securities sold under agreements to repurchase, including the related collateral received from or pledged to counterparties:

recognized liabilities

Gross amount offset in

Net amount of liabilities presented

in the Balance Sheet

recognized liabilities

Gross amount offset in

Net amount of liabilities presented

in the Balance Sheets

Net amount of liabilities presented

in the Balance Sheets

Net amount of liabilities presented

in the Balance Sheet

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

The notional amount and fair value of ASB’s derivative financial instruments were as follows:



	June 30, 2019					December 31, 2018
(in thousands)	Notional amount		Fair value			Notional amount		Fair value
Interest rate lock commitments	$	40,392	$	473		$	10,180	$	91
Forward commitments	41,640		(115		)	10,132		(43		)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

September 30, 2017 December 31, 2016
(in thousands) Notional amount Fair value Notional amount Fair value
Interest rate lock commitments $ 385
$ 7
$ 25,883
$ 421
Forward commitments 500
(2 ) 30,813
(177 )

ASB’s derivative financial instruments, their fair values and balance sheet location were as follows:

Derivative Financial Instruments Not Designated as Hedging Instruments ¹

Low-Income Housing Tax Credit (LIHTC). ASB’s unfunded commitments to fund its LIHTC investment partnerships were ~~$18.6~~$22.3 million and ~~$14.0~~$18.1 million at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. These unfunded commitments

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

were unconditional and legally binding and are recorded in other liabilities with a corresponding increase in other assets. As of ~~September~~June 30, ~~2017,~~2019, ASB did not have any impairment losses resulting from forfeiture or ineligibility of tax credits or other circumstances related to its LIHTC investment partnerships.

Note 5 · Credit agreements ~~and long-term debt~~

~~Credit agreements.~~ HEI and Hawaiian Electric each entered into a separate agreement with a syndicate of eight financial institutions (the HEI Facility and Hawaiian Electric Facility, respectively, and together, the Credit Facilities), effective July 3, 2017, to amend and restate their respective previously existing revolving unsecured credit agreements. The $150 million HEI Facility ~~extended the term of the facility to June 30, 2022. The~~and $200 million Hawaiian Electric Facility ~~has an initial term that expires~~both terminate on June ~~29, 2018, but its term will extend to~~30, 2022. As of June 30, ~~2022 upon approval by the PUC during the initial term, which approval is currently being requested. As of September 30, 2017~~2019 and December 31, ~~2016,~~2018, no amounts were outstanding under the ~~Facilities or previously existing facilities.~~Credit Facilities.

Changes in long-term debt. On ~~June 29, 2017,~~May 13, 2019, the Utilities issued, through a private placement pursuant to separate Note Purchase Agreements (the Note Purchase Agreements), the following unsecured notes bearing taxable interest (the Unsecured Notes):

The Unsecured Notes include substantially the same financial covenants and customary conditions as Hawaiian Electric’s credit agreement. Hawaiian Electric is also a party as guarantor under the Note Purchase Agreements entered into by Hawaii Electric Light and Maui Electric. The Unsecured Notes may be prepaid in whole or in part at any time at the prepayment price of the principal amount plus a “Make-Whole Amount,” as defined in the Note Purchase Agreements. Proceeds from the sale

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

were applied to refinance the Utilities’ 2004 junior subordinated deferrable interest debentures at par value:

On July 18, 2019, the Department of Budget and Finance of the State of Hawaii ~~(Department)~~(DBF) for the benefit of ~~the Utilities,~~Hawaiian Electric and Hawaii Electric Light, issued, at par:

~~Proceeds~~On July 26, 2019, proceeds from the sale were applied to redeem at par, bonds previously issued by the ~~Department~~DBF for the benefit of ~~the Utilities:~~

~~October 2017 loan. On October 6, 2017, HEI entered into a loan agreement with The Bank of Tokyo-Mitsubishi UFJ, Ltd., which agreement includes substantially the same financial covenant~~Hawaiian Electric and customary conditions as the loan agreement with The Bank of Tokyo-Mitsubishi UFJ, Ltd. and U.S. Bank, National Association that matured on the same date. On October 6, 2017, HEI drew a $125 million Eurodollar loan for a term of 364 days at resetting interest rates. The initial Eurodollar Borrowing was for a one month interest period at an annualized interest rate of 1.99%. The proceeds from this loan were used to pay off the $125 million maturing loan.Hawaii Electric Light:



	Series 2009 Special Purpose Revenue Bonds Redeemed
Aggregate principal amount	$150 million
Fixed coupon interest rate	6.50%
Maturity date	July 1, 2039
Principal amount by company:
Hawaiian Electric	$90 million
Hawaii Electric Light	$60 million

The Company leases certain real estate and equipment for various terms under long-term operating lease agreements. The agreements expire at various dates through 2054 and provide for renewal options up to 10 years. The periods associated with the renewal options are excluded for the purpose of determining the lease term unless the exercise of the renewable option is reasonably certain. In the normal course of business, it is expected that many of these agreements will be replaced by similar

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

agreements. Certain real estate leases require the Company to pay for operating expenses such as common area maintenance, real estate taxes and insurance.

The Utilities’ lease payments for each operating lease agreement were discounted using its estimated unsecured borrowing rates for the appropriate term, reduced for the estimated impact of collateral. ASB’s lease payments for each operating lease agreement were discounted using Federal Home Loan Bank of Des Moines (FHLB) fixed rate advance rates, which are collateralized, for the appropriate term. The FHLB is the bank’s primary wholesale funding source and can provide borrowing rates for various terms starting at overnight borrowings to 30-year borrowing terms.

Amounts related to the Company’s total lease cost and cash flows arising from lease transaction are as follows:

Three months ended June 30, 2019

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Accumulated other comprehensive income/(loss).Changes in the balances of each component of accumulated other comprehensive income/(loss) (AOCI) were as follows:



	HEI Consolidated												Hawaiian Electric Consolidated
(in thousands)	Net unrealized gains (losses) on securities			Unrealized gains (losses) on derivatives			Retirement benefit plans			AOCI			AOCI-Retirement benefit plans
Balance, December 31, 2018	$	(24,423	)	$	(436	)	$	(25,751	)	$	(50,610	)	$	99
Current period other comprehensive income (loss)	23,593			(1,063		)	410			22,940			47
Balance, June 30, 2019	$	(830	)	$	(1,499	)	$	(25,341	)	$	(27,670	)	$	146
Balance, December 31, 2017	$	(14,951	)	$	—		$	(26,990	)	$	(41,941	)	$	(1,219	)
Current period other comprehensive income (loss)	(17,645		)	—			1,047			(16,598		)	57
Balance, June 30, 2018	$	(32,596	)	$	—		$	(25,943	)	$	(58,539	)	$	(1,162	)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

HEI Consolidated Hawaiian Electric Consolidated
(in thousands) Net unrealized gains (losses) on securities Unrealized gains (losses) on derivatives Retirement benefit plans AOCI Unrealized gains (losses) on derivatives Retirement benefit plans AOCI
Balance, December 31, 2016 $ (7,931 ) $ (454 ) $ (24,744 ) $ (33,129 ) $ (454 ) $ 132
$ (322 )
Current period other comprehensive income 2,452
454
1,003
3,909
454
67
521
Balance, September 30, 2017 $ (5,479 ) $ —
$ (23,741 ) $ (29,220 ) $ —
$ 199
$ 199
Balance, December 31, 2015 $ (1,872 ) $ (54 ) $ (24,336 ) $ (26,262 ) $ —
$ 925
$ 925
Current period other comprehensive income 7,837
459
943
9,239
405
7
412
Balance, September 30, 2016 $ 5,965
$ 405
$ (23,393 ) $ (17,023 ) $ 405
$ 932
$ 1,337

Reclassifications out of AOCI were as follows:



	Amount reclassified from AOCI
	Three months ended June 30						Six months ended June 30						Affected line item in the
(in thousands)	2019			2018			2019			2018			Statements of Income / Balance Sheets
HEI consolidated
Retirement benefit plans:
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost	$	2,503		$	5,350		$	5,006		$	10,496		See Note 9 for additional details
Impact of D&Os of the PUC included in regulatory assets	(2,298		)	(4,827		)	(4,596		)	(9,449		)	See Note 9 for additional details
Total reclassifications	$	205		$	523		$	410		$	1,047
Hawaiian Electric consolidated
Retirement benefit plans:
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost	$	2,321		$	4,853		$	4,643		$	9,506		See Note 9 for additional details
Impact of D&Os of the PUC included in regulatory assets	(2,298		)	(4,827		)	(4,596		)	(9,449		)	See Note 9 for additional details
Total reclassifications	$	23		$	26		$	47		$	57

Amount reclassified from AOCI
Three months ended September 30 Nine months ended September 30 Affected line item in the
(in thousands) 2017 2016 2017 2016 Statements of Income / Balance Sheets
HEI consolidated
Net realized gains on securities included in net income $ —
$ —
$ —
$ (360 ) Revenues-bank (net gains on sales of securities)
Derivatives qualifying as cash flow hedges:

Window forward contracts —
(173 ) 454
(173 ) Property, plant and equipment-electric utilities
Interest rate contracts (settled in 2011) —
—
—
54
Interest expense
Retirement benefit plans:

Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost 3,942
3,641
11,793
10,877
See Note 7 for additional details
Impact of D&Os of the PUC included in regulatory assets (3,596 ) (3,311 ) (10,790 ) (9,934 ) See Note 7 for additional details
Total reclassifications $ 346
$ 157
$ 1,457
$ 464

Hawaiian Electric consolidated
Derivatives qualifying as cash flow hedges:
Window forward contracts $ —
$ (173 ) $ 454
$ (173 ) Construction in progress
Retirement benefit plans:

Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost 3,618
3,314
10,857
9,941
See Note 7 for additional details
Impact of D&Os of the PUC included in regulatory assets (3,596 ) (3,311 ) (10,790 ) (9,934 ) See Note 7 for additional details
Total reclassifications $ 22
$ (170 ) $ 521
$ (166 )

Note 8 · Revenues

Revenue from contracts with customers. The following tables disaggregate revenues by major source, timing of revenue recognition, and segment:



	Three months ended June 30, 2019										Six months ended June 30, 2019
(in thousands)	Electric utility			Bank		Other		Total			Electric utility			Bank		Other		Total
Revenues from contracts with customers
Electric energy sales - residential	$	195,868		$	—	$	—	$	195,868		$	371,613		$	—	$	—	$	371,613
Electric energy sales - commercial	217,278			—		—		217,278			404,686			—		—		404,686
Electric energy sales - large light and power	231,869			—		—		231,869			430,795			—		—		430,795
Electric energy sales - other	3,774			—		—		3,774			7,852			—		—		7,852
Bank fees	—			11,632		—		11,632			—			22,865		—		22,865
Total revenues from contracts with customers	648,789			11,632		—		660,421			1,214,946			22,865		—		1,237,811
Revenues from other sources
Regulatory revenue	(20,360		)	—		—		(20,360		)	(14,153		)	—		—		(14,153		)
Bank interest and dividend income	—			66,155		—		66,155			—			134,643		—		134,643
Other bank noninterest income	—			3,900		—		3,900			—			7,231		—		7,231
Other	5,355			—		14		5,369			11,486			—		82		11,568
Total revenues from other sources	(15,005		)	70,055		14		55,064			(2,667		)	141,874		82		139,289
Total revenues	$	633,784		$	81,687	$	14	$	715,485		$	1,212,279		$	164,739	$	82	$	1,377,100
Timing of revenue recognition
Services/goods transferred at a point in time	$	—		$	11,632	$	—	$	11,632		$	—		$	22,865	$	—	$	22,865
Services/goods transferred over time	648,789			—		—		648,789			1,214,946			—		—		1,214,946
Total revenues from contracts with customers	$	648,789		$	11,632	$	—	$	660,421		$	1,214,946		$	22,865	$	—	$	1,237,811

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)



	Three months ended June 30, 2018										Six months ended June 30, 2018
(in thousands)	Electric utility			Bank		Other		Total			Electric utility		Bank		Other			Total
Revenues from contracts with customers
Electric energy sales - residential	$	185,217		$	—	$	—	$	185,217		$	363,806	$	—	$	—		$	363,806
Electric energy sales - commercial	206,169			—		—		206,169			395,167		—		—			395,167
Electric energy sales - large light and power	214,676			—		—		214,676			406,997		—		—			406,997
Electric energy sales - other	3,968			—		—		3,968			8,028		—		—			8,028
Bank fees	—			11,557		—		11,557			—		23,054		—			23,054
Total revenues from contracts with customers	610,030			11,557		—		621,587			1,173,998		23,054		—			1,197,052
Revenues from other sources
Regulatory revenue	(4,643		)	—		—		(4,643		)	107		—		—			107
Bank interest and dividend income	—			63,261		—		63,261			—		125,263		—			125,263
Other bank noninterest income	—			2,286		—		2,286			—		4,206		—			4,206
Other	2,739			—		47		2,786			4,448		—		75			4,523
Total revenues from other sources	(1,904		)	65,547		47		63,690			4,555		129,469		75			134,099
Total revenues	$	608,126		$	77,104	$	47	$	685,277		$	1,178,553	$	152,523	$	75	��	$	1,331,151
Timing of revenue recognition
Services/goods transferred at a point in time	$	751		$	11,557	$	—	$	12,308		$	1,548	$	23,054	$	—		$	24,602
Services/goods transferred over time	609,279			—		—		609,279			1,172,450		—		—			1,172,450
Total revenues from contracts with customers	$	610,030		$	11,557	$	—	$	621,587		$	1,173,998	$	23,054	$	—		$	1,197,052

There are no material contract assets or liabilities associated with revenues from contracts with customers existing at the beginning of the period or as of June 30, 2019. Accounts receivable and unbilled revenues related to contracts with customers represent an unconditional right to consideration since all performance obligations have been satisfied. These amounts are disclosed as accounts receivable and unbilled revenues, net on HEI’s condensed consolidated balance sheets and customer accounts receivable, net and accrued unbilled revenues, net on Hawaiian Electric’s condensed consolidated balance sheets.

As of June 30, 2019, the Company had no material remaining performance obligations due to the nature of the Company’s contracts with its customers. For the Utilities, performance obligations are fulfilled as electricity is delivered to customers. For ASB, fees are recognized when a transaction is completed.

Note 9 · Retirement benefits

Defined benefit pension and other postretirement benefit plans information. For the first ~~nine~~six months of ~~2017~~2019, the Company contributed $5024 million ($4923 million by the Utilities) to its pension and other postretirement benefit plans, compared to $4932 million ($4832 million by the Utilities) in the first ~~nine~~six months of ~~2016.~~2018. The Company’s current estimate of contributions to its pension and other postretirement benefit plans in ~~2017~~2019 is ~~$67~~$48 million ($6647 million by the Utilities, $1 million by HEI and nil by ASB), compared to $6539 million ($6438 million by the Utilities, $1 million by HEI and nil by ASB) in ~~2016~~2018. In addition, the Company expects to pay directly $2$3 million ($1 million by the Utilities) of benefits in ~~2017~~2019, ~~comparable~~compared to ~~benefits~~$2 million ($1 million by the Utilities) paid ~~directly~~ in ~~2016~~2018.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

The components of NPPC and NPBC for HEI consolidated and Hawaiian Electric consolidated were as follows:



	Three months ended June 30												Six months ended June 30
	Pension benefits						Other benefits						Pension benefits						Other benefits
(in thousands)	2019			2018			2019			2018			2019			2018			2019			2018
HEI consolidated
Service cost	$	15,382		$	17,428		$	542		$	692		$	30,764		$	34,541		$	1,083		$	1,361
Interest cost	21,033			19,459			1,997			2,030			42,066			38,693			3,994			3,961
Expected return on plan assets	(27,999		)	(27,224		)	(3,086		)	(3,267		)	(55,997		)	(54,478		)	(6,172		)	(6,459		)
Amortization of net prior service gain	(11		)	(11		)	(452		)	(451		)	(22		)	(21		)	(904		)	(903		)
Amortization of net actuarial (gains) losses	3,839			7,634			(4		)	48			7,678			15,029			(7		)	46
Net periodic pension/benefit cost (return)	12,244			17,286			(1,003		)	(948		)	24,489			33,764			(2,006		)	(1,994		)
Impact of PUC D&Os	12,278			7,179			811			1,024			24,557			9,836			1,622			2,095
Net periodic pension/benefit cost (adjusted for impact of PUC D&Os)	$	24,522		$	24,465		$	(192	)	$	76		$	49,046		$	43,600		$	(384	)	$	101
Hawaiian Electric consolidated
Service cost	$	15,001		$	17,007		$	538		$	688		$	30,002		$	33,680		$	1,075		$	1,352
Interest cost	19,414			17,937			1,918			1,955			38,828			35,647			3,835			3,814
Expected return on plan assets	(26,164		)	(25,577		)	(3,036		)	(3,216		)	(52,328		)	(51,184		)	(6,071		)	(6,356		)
Amortization of net prior service (gain) cost	2			2			(451		)	(451		)	4			4			(902		)	(902		)
Amortization of net actuarial loss	3,576			6,941			—			49			7,152			13,651			—			49
Net periodic pension/benefit cost (return)	11,829			16,310			(1,031		)	(975		)	23,658			31,798			(2,063		)	(2,043		)
Impact of PUC D&Os	12,278			7,179			811			1,024			24,557			9,836			1,622			2,095
Net periodic pension/benefit cost (adjusted for impact of PUC D&Os)	$	24,107		$	23,489		$	(220	)	$	49		$	48,215		$	41,634		$	(441	)	$	52

Three months ended September 30 Nine months ended September 30
Pension benefits Other benefits Pension benefits Other benefits
(in thousands) 2017 2016 2017 2016 2017 2016 2017 2016
HEI consolidated
Service cost $ 16,271
$ 15,126
$ 843
$ 831
$ 48,635
$ 45,430
$ 2,530
$ 2,499
Interest cost 20,304
20,396
2,363
2,417
60,881
61,154
7,089
7,254
Expected return on plan assets (25,689 ) (24,640 ) (3,078 ) (3,064 ) (77,056 ) (73,920 ) (9,248 ) (9,207 )
Amortization of net prior service gain (14 ) (15 ) (448 ) (449 ) (41 ) (43 ) (1,345 ) (1,345 )
Amortization of net actuarial loss 6,638
6,228
283
200
19,858
18,605
848
603
Net periodic pension/benefit cost 17,510
17,095
(37 ) (65 ) 52,277
51,226
(126 ) (196 )
Impact of PUC D&Os (4,534 ) (4,653 ) 346
336
(14,557 ) (13,464 ) 1,019
1,008
Net periodic pension/benefit cost (adjusted for impact of PUC D&Os) $ 12,976
$ 12,442
$ 309
$ 271
$ 37,720
$ 37,762
$ 893
$ 812
Hawaiian Electric consolidated
Service cost $ 15,764
$ 14,699
$ 839
$ 821
$ 47,294
$ 44,097
$ 2,515
$ 2,463
Interest cost 18,659
18,702
2,279
2,334
55,974
56,106
6,837
7,003
Expected return on plan assets (23,973 ) (22,908 ) (3,037 ) (3,023 ) (71,919 ) (68,725 ) (9,110 ) (9,072 )
Amortization of net prior service loss (gain) 2
3
(451 ) (451 ) 6
10
(1,353 ) (1,353 )
Amortization of net actuarial loss 6,098
5,674
275
198
18,294
17,020
826
595
Net periodic pension/benefit cost 16,550
16,170
(95 ) (121 ) 49,649
48,508
(285 ) (364 )
Impact of PUC D&Os (4,534 ) (4,653 ) 346
336
(14,557 ) (13,464 ) 1,019
1,008
Net periodic pension/benefit cost (adjusted for impact of PUC D&Os) $ 12,016
$ 11,517
$ 251
$ 215
$ 35,092
$ 35,044
$ 734
$ 644

HEI consolidated recorded retirement benefits expense of $2529 million ($2229 million by the Utilities) and $2627 million ($2325 million by the Utilities) in the first ~~nine~~six months of ~~2017~~2019 and ~~2016,~~2018, respectively, and charged the remaining net periodic benefit cost primarily to electric utility plant.

The Utilities have implemented pension and OPEB tracking mechanisms under which all of their retirement benefit expenses (except for executive life and nonqualified pension plan expenses) determined in accordance with GAAP are recovered over time. Under the tracking mechanisms, these retirement benefit costs that are over/under amounts allowed in rates are charged/credited to a regulatory asset/liability. The regulatory asset/liability for each utility will be amortized over 5 years beginning with the issuance of the PUC’s D&O in the respective utility’s next rate case.

Defined contribution plans information. For the first ~~nine~~six months of ~~2017~~2019 and ~~2016,~~2018, the Company’s expenses for its defined contribution pension plans under the Hawaiian Electric Industries Retirement Savings Plan (HEIRSP) and the ASB 401(k) Plan were $~~5.1~~3.6 million and $~~4.1~~3.2 million, respectively, and cash contributions were $~~5.0~~4.9 million and ~~$4.6~~$4.8 million,, respectively. For the first ~~nine~~six months of ~~2017~~2019 and ~~2016,~~2018, the Utilities’ expenses for its defined contribution pension plan under the HEIRSP were ~~$1.4~~$1.3 million and ~~$1.2~~$1.1 million, respectively, and cash contributions were ~~$1.4~~$1.3 million and ~~$1.2~~$1.1 million, respectively.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

8 Note 10 · Share-based compensation

Under the 2010 Equity and Incentive Plan, as amended, HEI can issue shares of common stock as incentive compensation to selected employees in the form of stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares and other share-based and cash-based awards. The 2010 Equity and Incentive Plan (original EIP) was amended and restated effective March 1, 2014 (EIP) and an additional 1.5 million shares ~~was~~were added to the shares available for issuance under these programs.

As of ~~September~~June 30, ~~2017,~~2019, approximately ~~3.3~~3.2 million shares remained available for future issuance under the terms of the EIP, assuming recycling of shares withheld to satisfy minimum statutory tax liabilities relating to EIP awards, including an estimated ~~0.4~~0.8 million shares that could be issued upon the vesting of outstanding restricted stock units and the achievement of performance goals for awards outstanding under long-term incentive plans (assuming that such performance goals are achieved at maximum levels).

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Under the 2011 Nonemployee Director Stock Plan (2011 Director Plan), HEI can issue shares of common stock as compensation to nonemployee directors of HEI, Hawaiian Electric and ASB. On June 26, 2019, an additional 300,000 shares were made available for issuance under the 2011 Director Plan. As of ~~September~~June 30, ~~2017,~~2019, there were ~~85,428~~311,027 shares remaining available for future issuance under the 2011 Director Plan.

Share-based compensation expense and the related income tax benefit were as follows:


	Three months ended September 30				Nine months ended September 30				Three months ended June 30				Six months ended June 30
(in millions)	2017		2016		2017		2016		2019		2018		2019		2018
HEI consolidated
Share-based compensation expense ¹	$	1.1	$	1.6	$	4.4	$	3.6	$	3.7	$	2.8	$	5.9	$	4.4
Income tax benefit	0.4		0.5		1.5		1.2		0.7		0.5		0.9		0.7
Hawaiian Electric consolidated
Share-based compensation expense ¹	0.4		0.5		1.6		1.0		1.1		0.9		1.8		1.5
Income tax benefit	0.2		0.2		0.6		0.4		0.2		0.2		0.3		0.3


¹	For the three ~~months~~ and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, the Company has not capitalized any share-based compensation.

Stock awards. ~~No nonemployee director stock grants were awarded from January 1 to September 29, 2016. Nonemployee director awards totaling $0.2 million were paid in cash in July 2016.~~ HEI granted HEI common stock to nonemployee directors ~~of HEI, Hawaiian Electric and ASB~~ under the 2011 Director Plan as follows:



	Three months ended June 30				Six months ended June 30
(dollars in millions)	2019		2018		2019		2018
Shares granted	35,580		37,747		35,580		38,821
Fair value	$	1.5	$	1.3	$	1.5	$	1.3
Income tax benefit	0.4		0.3		0.4		0.3

Three months ended September 30 Nine months ended September 30
($ in millions) 2017 2016 2017 2016
Shares granted —
19,846
35,770
19,846
Fair value $ —
$ 0.6
$ 1.2
$ 0.6
Income tax benefit —
0.2
0.5
0.2

The number of shares issued to each nonemployee ~~directors~~director of HEI, Hawaiian Electric and ASB is determined based on the closing price of HEI Common Stock on the grant date.

Restricted stock units. Information about HEI’s grants of restricted stock units was as follows:


	Three months ended September 30										Nine months ended September 30										Three months ended June 30										Six months ended June 30
	2017					2016					2017					2016					2019					2018					2019					2018
	Shares			(1)		Shares			(1)		Shares			(1)		Shares			(1)		Shares			(1)		Shares			(1)		Shares			(1)		Shares			(1)
Outstanding, beginning of period	206,483			$	31.50	225,752			$	29.59	220,683			$	29.57	210,634			$	28.82	211,225			$	35.28	208,088			$	32.97	200,358			$	33.05	197,047			$	31.53
Granted	—			—		766			30.65		97,873			33.47		95,048			29.91		—			—		3,159			33.78		94,559			37.68		92,064			34.09
Vested	(687		)	24.48		(4,419		)	27.26		(89,681		)	28.84		(83,583		)	27.88		—			—		(448		)	31.94		(76,712		)	32.61		(75,683		)	30.56
Forfeited	—			—		(2,352		)	29.69		(23,079		)	31.50		(2,352		)	29.69		(2,600		)	35.56		(9,943		)	32.05		(9,580		)	33.82		(12,572		)	32.27
Outstanding, end of period	205,796			$	31.53	219,747			$	29.64	205,796			$	31.53	219,747			$	29.64	208,625			$	35.28	200,856			$	33.03	208,625			$	35.28	200,856			$	33.03
Total weighted-average grant-date fair value of shares granted ($ millions)	$	—				$	—				$	3.3				$	2.8
Total weighted-average grant-date fair value of shares granted (in millions)																					$	—				$	0.1				$	3.6				$	3.1

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

For the first ~~nine~~six months of ~~2017~~2019 and ~~2016,~~2018, total restricted stock units ~~that vested~~ and related dividends that vested had a fair value of $~~3.4~~3.2 million and $2.7 million, respectively, and the related tax benefits were $~~1.1~~0.5 million and $~~0.9~~0.4 million, respectively.

Long-term incentive plan payable in stock. The 2017-2019, 2018-2020 and 2019-2021 long-term incentive ~~plan~~plans (LTIP) ~~provides~~provide for performance awards under the EIP of shares of HEI common stock based on the satisfaction of performance goals, including a market condition goal. The number of shares of HEI common stock that may be awarded is fixed on the date the grants are made, subject to the achievement of specified performance levels and calculated dividend equivalents. The potential payout varies from 0% to 200% of the number of target shares, depending on the achievement of the goals. The market condition goal is based on HEI’s total shareholder return (TSR) compared to the Edison Electric Institute Index over the relevant three-year period. The other performance condition goals relate to EPS growth, return on average common equity (ROACE), Hawaiian Electric’s net income and ASB’s efficiency ratio. ~~The 2015-2017 and 2016-2018 LTIPs provide for performance awards payable in cash, and thus are not included in the tables below.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

LTIP linked to TSR. Information about HEI’s LTIP grants linked to TSR was as follows:

The grant date fair values of the shares were determined using a Monte Carlo simulation model utilizing actual information for the common shares of HEI and its peers for the period from the beginning of the performance period to the grant date and estimated future stock volatility and dividends of HEI and its peers over the remaining three-year performance period. The expected stock volatility assumptions for HEI and its peer group were based on the three-year historic stock volatility, and the annual dividend yield assumptions were based on dividend yields calculated on the basis of daily stock prices over the same three-year historical period.

The following table summarizes the assumptions used to determine the fair value of the LTIP awards linked to TSR and the resulting fair value of LTIP awards granted:



	2019		2018
Risk-free interest rate	2.48	%	2.29	%
Expected life in years	3		3
Expected volatility	15.8	%	17.0	%
Range of expected volatility for Peer Group	15.0% to 73.2%		15.1% to 26.2%
Grant date fair value (per share)	$41.07		$38.20

~~For the~~ ~~nine~~ months ended September 30, 2017, total vested LTIP awards linked to TSR and related dividends had a fair value of $1.9 million and the related tax benefits were $0.7 million. For the nine months ended September 30, 2016, all vested shares in the table above were unissued and cancelled (i.e., lapsed) because the TSR goal was not met.

As of ~~September~~June 30, ~~2017,~~2019, there was ~~$1.0~~$2.0 million of total unrecognized compensation cost related to the nonvested performance awards payable in shares linked to TSR. The cost is expected to be recognized over a weighted-average period of ~~2.3~~1.6 years.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

LTIP awards linked to other performance conditions. Information about HEI’s LTIP awards payable in shares linked to other performance conditions was as follows:

~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~ and 2016, total vested LTIP awards linked to other performance conditions and related dividends had a fair value of $4.2 million and $3.6 million and the related tax benefits were $1.6 million and $1.4 million, respectively.

As of ~~September~~June 30, ~~2017,~~2019, there was ~~$3.4~~$7.4 million of total unrecognized compensation cost related to the nonvested shares linked to performance conditions other than TSR. The cost is expected to be recognized over a weighted-average period of ~~2.3 years~~.1.5 years.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Note 11 · Income taxes

The Company’s ~~ETRs~~and the Utilities’ effective tax rates (combined federal and state income tax rates) were 19% and 21%, respectively, for the ~~third quarters of 2017 and 2016 were 36% and 29%, respectively, and for the first nine months of 2017 and 2016 were 35% and 32%, respectively. The ETR was higher for the three months and nine~~six months ended ~~September~~June 30, ~~2017 compared to~~2019. These rates differed from the ~~same periods in 2016~~combined statutory rates, due primarily to ~~2016 tax benefits recognized on previously nondeductible merger- and spin-off-related expenses and higher tax benefits recognized for~~ the ~~Domestic Production Activities Deduction (DPAD) in 2016~~Utilities’ amortization of excess deferred income taxes related to the ~~Utilities’ generation activities when~~provision in the ~~Utilities were in a consolidated net operating loss position.~~

~~Hawaiian Electric’s ETRs for~~Tax Act that lowered the ~~third quarters~~federal income tax rate from 35% to 21%, the non-taxability of ~~2017~~the bank-owned life insurance income and ~~2016 were 36% and 37%, respectively, and for the first nine months of 2017 and 2016 were 36% and 37%, respectively. The lower ETR was due in part to~~ the tax benefits ~~recognized~~derived from the low income housing tax credit investments. The Company’s and the Utilities’ effective tax rate were 23%, for the ~~DPAD as a result of moving out of a federal net operating loss position in 2017.~~six months ended June 30, 2018.

~~Recent tax developments.~~ The extension of bonus depreciation under the “Protecting Americans from Tax Hikes (PATH) Act of 2015” continues to be the most significant recent tax change. The PATH Act provides 50% bonus depreciation through 2017, phases down the percentage to 40% in 2018 and 30% in 2019 and then terminates bonus depreciation thereafter. Tax depreciation is expected to increase by approximately $120 million in 2017 due to bonus depreciation, which has the effect of increasing accumulated deferred tax liabilities. However, the rate of growth of accumulated deferred tax liabilities is decreasing over time as book depreciation “catches up” with the tax depreciation taken in the past.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

Nine months ended September 30 2017 2016
(in millions)
Supplemental disclosures of cash flow information

HEI consolidated
Interest paid to non-affiliates $ 62
$ 61
Income taxes paid (including refundable credits) 32
19
Income taxes refunded (including refundable credits) —
45
Hawaiian Electric consolidated
Interest paid to non-affiliates 45
43
Income taxes paid (including refundable credits) 9
—
Income taxes refunded (including refundable credits) —
20
Supplemental disclosures of noncash activities

HEI consolidated
Property, plant and equipment
Estimated fair value of noncash contributions in aid of construction (investing) 3
12
Unpaid invoices and accruals for capital expenditures (investing)
Change during the period 31
(6 )
Balance, end of period 116
64
Common stock dividends reinvested in HEI common stock (financing)¹
—
17
Loans transferred from held for investment to held for sale (investing) 41
14
Common stock issued (gross) for director and executive/management compensation (financing)²
11
7
Obligations to fund low income housing investments (investing) 10
—
Hawaiian Electric consolidated
Electric utility property, plant and equipment
Estimated fair value of noncash contributions in aid of construction (investing) 3
12
Unpaid invoices and accruals for capital expenditures (investing)
Change during the period 29
(7 )
Balance, end of period 113
63

11Note 13 ·Fair value measurements

Fair value estimates are estimates of the price that would be received to sell an asset or paid upon the transfer of a liability in an orderly transaction between market participants at the measurement date. The fair value estimates are generally determined based on assumptions that market participants would use in pricing the asset or liability and are based on market data obtained from independent sources. However, in certain cases, the Company and the Utilities use their own assumptions based on the best information available in the circumstances. These valuations are estimates at a specific point in time, based on relevant market information, information about the financial instrument and judgments regarding future expected loss experience, economic conditions, risk characteristics of various financial instruments and other factors. These estimates do not reflect any premium or discount that could result if the Company or the Utilities were to sell its entire holdings of a particular financial instrument at one time. Because no active trading market exists for a portion of the Company’s and the Utilities’ financial instruments, fair value estimates cannot be determined with precision. Changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the estimates. In addition, the tax ramifications related to the realization of the unrealized gains and losses could have a significant effect on fair value estimates but have not been considered in making such estimates.

~~The Company and the Utilities group their financial assets measured at fair value in three levels outlined as follows:~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

Classification in the hierarchy is based upon the lowest level input that is significant to the fair value measurement of the asset or liability. For instruments classified in Level 1 and 2 where inputs are primarily based upon observable market data, there is less judgment applied in arriving at the fair value. For instruments classified in Level 3, management judgment is more significant due to the lack of observable market data.

Fair value is also used on a nonrecurring basis to evaluate certain assets for impairment or for disclosure purposes. Examples of nonrecurring uses of fair value include mortgage servicing rights accounted for by the amortization method, loan impairments for certain loans and goodwill.

Fair value measurement and disclosure valuation methodology. The following are descriptions of the valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial instruments not carried at fair value:

Short-term borrowings—other than bank. The carrying amount of short-term borrowings approximated fair value because of the short maturity of these instruments.

Investment securities. The fair value of ASB’s investment securities is determined quarterly through pricing obtained from independent third-party pricing services or from brokers not affiliated with the trade. Non-binding broker quotes are infrequent and generally occur for new securities that are settled close to the month-end pricing date. The third-party pricing vendors ASB uses for pricing its securities are reputable firms that provide pricing services on a global basis and have processes in place to ensure quality and control. The third-party pricing services use a variety of methods to determine the fair value of securities that fall under Level 2 of ~~the~~ ASB’s fair value measurement hierarchy. Among the considerations are quoted prices for similar securities in an active market, yield spreads for similar trades, adjustments for liquidity, size, collateral characteristics, historic and generic prepayment speeds, and other observable market factors.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

To enhance the robustness of the pricing process, ASB will on a quarterly basis compare its standard third-party vendor’s price with that of another third-party vendor. If the prices are within an acceptable tolerance range, the price of the standard vendor will be accepted. If the variance is beyond the tolerance range, an evaluation will be conducted by ASB and a challenge to the price may be made. Fair value in such cases will be based on the value that best reflects the data and observable characteristics of the security. In all cases, the fair value used will have been independently determined by a third-party pricing vendor or non-affiliated broker.

The fair value of the mortgage revenue ~~bond~~bonds is estimated using a discounted cash flow model to calculate the present value of future principal and interest payments and, therefore is classified within Level 3 of the valuation hierarchy.

Loans held for sale. Residential and commercial loans are carried at the lower of cost or market and are valued using market observable pricing inputs, which are derived from third party loan sales and, ~~securitizations and,~~ therefore, are classified within Level 2 of the valuation hierarchy. ~~Commercial loans are valued at quoted market prices determined in the active market in which the loans are traded.~~

Loans held for investment. Fair value of loans held for investment is derived using a discounted cash flow approach which includes an evaluation of the underlying loan characteristics. The valuation model uses loan characteristics which includes product type, maturity dates and the underlying interest rate of the portfolio. This information is input into the valuation models along with various forecast valuation assumptions including prepayment forecasts, to determine the discount rate. These assumptions are derived from internal and third party sources. ~~Noting~~Since the valuation is derived from model-based techniques, ASB includes loans held for investment within Level 3 of the valuation hierarchy.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

Impaired loans. At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Fair value is determined primarily by using an income, cost or market approach and is normally provided through appraisals. Impaired loans carried at fair value generally receive specific allocations within the allowance for loan losses. For collateral-dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Generally, impaired loans are evaluated quarterly for additional impairment and adjusted accordingly.

Real estate acquired in settlement of loans. Foreclosed assets are carried at fair value (less estimated costs to sell) and are generally based upon appraisals or independent market prices that are periodically updated subsequent to classification as real estate owned. Such adjustments typically result in a Level 3 classification of the inputs for determining fair value. ASB estimates the fair value of collateral-dependent loans and real estate owned using the sales comparison approach.

Mortgage servicing rights. Mortgage servicing rights (MSRs) are capitalized at fair value based on market data at the time of sale and accounted for in subsequent periods at the lower of amortized cost or fair value. ~~Mortgage servicing rights~~MSRs are evaluated for impairment at each reporting date. ASB's MSRs are stratified based on predominant risk characteristics of the underlying loans including loan type and note rate. For each stratum, fair value is calculated by discounting expected net income streams using discount rates that reflect industry pricing for similar assets. Expected net income streams are estimated based on industry assumptions regarding prepayment expectations and income and expenses associated with servicing residential mortgage loans for others. Impairment is recognized through a valuation allowance for each stratum when the carrying amount exceeds fair value, with any associated provision recorded as a component of loan servicing fees included in "Revenues - bank" in the consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable. ASB compares the fair value of MSRs to an estimated value calculated by an independent third-party. The third-party relies on both published and unpublished sources of market related assumptions and their own experience and expertise to arrive at a value. ASB uses the third-party value only to assess the reasonableness of its own estimate.

~~Time deposits~~Deposit liabilities. The fair value of fixed-maturity certificates of deposit was estimated by discounting the future cash flows using the rates currently offered for ~~deposits~~FHLB advances of similar remaining maturities. Deposit liabilities are classified in Level 2 of the valuation hierarchy.

Other borrowings. For ~~fixed-rate~~ advances and repurchase agreements, fair value is estimated using quantitative discounted cash flow models that require the use of interest rate inputs that are currently offered for advances and repurchase agreements of similar remaining maturities. The majority of market inputs are actively quoted and can be validated through external sources, including broker market transactions and third party pricing services.

Long-term debt—other than bank. Fair value of long-term debt of HEI and the Utilities was obtained from third-party financial services providers based on the current rates offered for debt of the same or similar remaining maturities and from

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

discounting the future cash flows using the current rates offered for debt of the same or similar risks, terms, and remaining maturities. Long-term debt-other than bank is classified in Level 2 of the valuation hierarchy.

Interest rate lock commitments (IRLCs). The estimated fair value of commitments to originate residential mortgage loans for sale is based on quoted prices for similar loans in active markets. IRLCs are classified as Level 2 measurements.

Forward sales commitments. To be announced (TBA) mortgage-backed securities forward commitments are classified as Level 1, and consist of publicly-traded debt securities for which identical fair values can be obtained through quoted market prices in active exchange markets. The fair values of ASB’s best efforts and mandatory delivery loan sale commitments are determined using quoted prices in the market place that are observable and are classified as Level 2 measurements.

~~Window forward contracts~~. The estimated fair value of the Utilities’ window forward contracts was obtained from a third-party financial services provider based on the effective exchange rate offered for the foreign currency denominated transaction. Window forward contracts are classified as Level 2 measurements.

The following table presents the carrying or notional amount, fair value and placement in the fair value hierarchy of the Company’s financial instruments. For stock in Federal Home Loan Bank, the carrying amount is a reasonable estimate of fair value because it can only be redeemed at par.~~For bank-owned life insurance, the carrying amount is the cash surrender value of the insurance policies, which is a reasonable estimate of fair value.~~ ~~For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings and money market deposits, the carrying amount is a reasonable estimate of fair value as~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

for identical assets

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Interest rate lock commitments (bank segment)¹

Forward commitments (bank segment)¹

Window forward contracts (electric utility segment)²

Interest rate lock commitments (bank segment) ¹

Forward commitments (bank segment) ¹

Window forward contracts (electric utility segment)²

Interest rate lock commitments (bank segment)¹

Forward commitments (bank segment)¹

Interest rate swap (Other segment)²

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Fair value measurements on a nonrecurring basis. Certain assets and liabilities are measured at fair value on a nonrecurring basis and therefore are not included in the tables above. These measurements primarily result from assets carried at the lower of cost or fair value or from impairment of individual assets. The carrying value of assets measured at fair value on a nonrecurring basis were as follows:



			Fair value measurements
(in thousands)	Balance		Level 1		Level 2		Level 3
June 30, 2019
Loans	$	224	$	—	$	—	$	224
December 31, 2018
Loans	77		—		—		77
Real estate acquired in settlement of loans	186		—		—		186

Fair value measurements
(in thousands) Balance Level 1 Level 2 Level 3
September 30, 2017
Loans $ 2,881
$ —
$ —
$ 2,881
Real estate acquired in settlement of loans 93
—
—
93
December 31, 2016
Loans 2,767
—
—
2,767
Real estate acquired in settlement of loans 1,189
—
—
1,189

For ~~nine~~six months ended ~~September~~June 30,~~2017~~2019 and ~~2016,~~2018, there were no adjustments to fair value for ASB’s loans held for sale.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis:

Significant unobservable
input value ⁽¹⁾
($ in thousands) Fair value Valuation technique Significant unobservable input Range
Weighted
Average
September 30, 2017
Residential loans $ 731
Fair value of collateral Appraised value less 7% selling cost 50-91% 69%
Commercial loans 2,150
Fair value of collateral Appraised value 72-76% 76%
Total loans $ 2,881

Real estate acquired in settlement of loans $ 93
Sales price Sales price less 7% selling cost
N/A (2)

December 31, 2016
Residential loans $ 2,468
Sales price Sales price 95-100% 97%
Residential loans 287
Fair value of property or collateral Appraised value less 7% selling cost 42-65% 61%
Home equity lines of credit 12
Fair value of property or collateral Appraised value less 7% selling cost N/A (2)
Total loans $ 2,767

Real estate acquired in settlement of loans $ 1,189
Fair value of property or collateral Appraised value less 7% selling cost 100% 100%

Significant unobservable

input value ⁽¹⁾

($ in thousands)

Fair value

Valuation technique

Significant unobservable input

Range

Weighted

Average

June 30, 2019

Home equity line of credit

199

Fair value of property or collateral

Appraised value less 7% selling cost

N/A (2)

Residential land

Fair value of property or collateral

Appraised value less 7% selling cost

N/A (2)

Total loans

224

December 31, 2018

Home equity line of credit

Fair value of property or collateral

Appraised value less 7% selling cost

N/A (2)

Total loans

Real estate acquired in settlement of loans

186

Fair value of property or collateral

Appraised value less 7% selling cost

N/A (2)

(1) Represent percent of outstanding principal balance.

(2) N/A - Not applicable. There is one ~~loan or property~~asset in each fair value measurement type.

Significant increases (decreases) in any of those inputs in isolation would result in significantly higher (lower) fair value measurements.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

~~12 · Termination of proposed merger and other matters~~

On December 3, 2014, HEI, NextEra Energy, Inc. (NEE) and two subsidiaries of NEE entered into an Agreement and Plan of Merger (the Merger Agreement), under which Hawaiian Electric was to become a subsidiary of NEE. The Merger Agreement contemplated that, prior to the Merger, HEI would distribute to its shareholders all of the common stock of ASB Hawaii, Inc. (ASB Hawaii), the parent company of ASB (such distribution referred to as the Spin-Off).

The closing of the Merger was subject to various conditions, including receipt of regulatory approval from the PUC. In July 2016: (1) the PUC dismissed NEE and Hawaiian Electric’s application requesting approval of the proposed Merger, (2) NEE terminated the Merger Agreement and (3) pursuant to the terms of the Merger Agreement, NEE paid HEI a $90 million termination fee and $5 million for the reimbursement of expenses associated with the transaction. In 2016, the Company recognized $60 million of net income ($2 million of net loss in each of the first and second quarters and $64 million of net income in the third quarter), comprised of the termination fee ($55 million), reimbursements of expenses from NEE and insurance ($3 million), and additional tax benefits on the previously non-tax-deductible merger- and Spin-Off-related expenses incurred through June 30, 2016 ($8 million), less merger- and Spin-Off-related expenses incurred in 2016 ($6 million) (all net of income tax impacts). The Spin-Off of ASB Hawaii was cancelled as it was cross-conditioned on the merger consummation.

In May 2016, the Utilities had filed an application for approval of an liquefied natural gas (LNG) supply and transport agreement and LNG-related capital equipment, which application was conditioned on the PUC’s approval of the proposed Merger. Subsequently, the Utilities terminated the LNG agreement and withdrew the application. In 2016, Hawaiian Electric recognized expenses related to the terminated LNG agreement of $1 million, net of tax benefits, in each of the first and second quarters.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion updates “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in HEI’s and Hawaiian Electric’s ~~2016~~2018 Form 10-K and should be read in conjunction with such discussion and the ~~2016~~2018 annual consolidated financial statements of HEI and Hawaiian Electric and notes thereto included in HEI’s and Hawaiian Electric’s ~~2016~~2018 Form 10-K, as well as the quarterly (as of and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017)~~2019) condensed consolidated financial statements and notes thereto included in this Form 10-Q.

HEI consolidated

RESULTS OF OPERATIONS

(in thousands, except per Three months ended September 30 %
share amounts) 2017 2016 change Primary reason(s)*
Revenues $ 673,185
$ 646,055
4
Increases for the electric utility and bank segments
Operating income 109,545
105,442
4
Increase for the bank segment and lower losses for the “other” segment, partly offset by a decrease at the electric utility segment
Merger termination fee —
90,000
(100 ) See Note 12 of the Condensed Consolidated Financial Statements
Net income for common stock 60,073
127,142
(53 ) Merger termination fee at corporate in 2016 (in the “other” segment), partly offset by higher bank net income in 2017
Basic earnings per common share $ 0.55
$ 1.17
(53 ) Lower net income
Weighted-average number of common shares outstanding 108,786
108,268
—
Issuances of shares under the HEI Dividend Reinvestment and Stock Purchase Plan and other plans

(in thousands, except per Nine months ended September 30 %
share amounts) 2017 2016 change Primary reason(s)*
Revenues $ 1,897,028
$ 1,763,259
8
Increases for the electric utility and bank segments
Operating income 253,303
259,748
(2 ) Decrease for the electric utility segment, partly offset by an increase at the bank segment and lower losses for the “other” segment
Merger termination fee —
90,000
(100 ) See Note 12 of the Condensed Consolidated Financial Statements
Net income for common stock 132,927
203,622
(35 ) Merger termination fee at corporate in 2016 (in the “other” segment) and lower net income at the electric utility segment, partly offset by higher net income at the bank segment
Basic earnings per common share $ 1.22
$ 1.89
(35 ) Lower net income
Weighted-average number of common shares outstanding 108,737
107,951
1
Issuances of shares under the HEI Dividend Reinvestment and Stock Purchase Plan and other plans



	Three months ended June 30, 2019				%
(in thousands)	2019		2018		change		Primary reason(s)*
Revenues	$	715,485	$	685,277	4		Increases for the electric utility and bank segments
Operating income	72,634		78,799		(8	)	Decrease for bank segment and higher operating losses for the “other” segment, partly offset by an increase for the electric utility segment
Net income for common stock	42,512		46,054		(8	)	Lower net income at bank segment and higher net losses at the “other” segment, partly offset by higher net income at the electric utility. See below for effective tax rate explanation.



	Six months ended June 30, 2019				%
(in thousands)	2019		2018		change	Primary reason(s)*
Revenues	$	1,377,100	$	1,331,151	3	Increases for the electric utility and bank segments
Operating income	150,571		150,688		—	Decrease for bank segment and higher operating losses for the “other” segment, offset by an increase for the electric utility segment
Net income for common stock	88,200		86,301		2	Higher net income at the electric utility segment, partly offset by lower net income at the bank segment and higher net losses at the “other” segment. See below for effective tax rate explanation.


*	Also, see segment discussions which follow.

~~HEI’s consolidated ROACE was 8.5%~~The Company’s effective tax rates for the ~~twelve months ended September 30, 2017~~second quarters of 2019 and ~~12.3% for the twelve months ended September 30, 2016.~~2018 were 18% and 22%, respectively. The ~~higher ROACE for the twelve months ended September 30, 2016 was primarily due to the merger termination fee received in July 2016.~~

~~Dividends.~~ ~~The payout ratios~~Company’s effective tax rates for the first ~~nine~~six months of ~~2017~~2019 and ~~full year 2016~~2018 were ~~76%~~19% and ~~54%~~23%, respectively. ~~HEI currently expects to maintain its dividend at its present level; however,~~The effective tax rates were lower for the ~~HEI Board of Directors evaluates the dividend quarterly and considers many factors in the evaluation, including but not limited~~six months ended June 30, 2019 compared to the ~~Company’s results~~same period in 2018 due primarily to the additional amortization of ~~operations,~~ the ~~long-term prospects for~~Utilities’ regulatory liability related to certain excess deferred income taxes resulting from the ~~Company~~Tax Act’s decrease in federal income tax rate and ~~current and expected future economic conditions.~~

higher bank-owned life insurance income that is nontaxable.

Economic conditions.

Note: The statistical data in this section is from public third-party sources that management believes to be reliable (e.g., Department of Business, Economic Development and Tourism (DBEDT), Council on Revenues, University of Hawaii Economic Research Organization, U.S. Bureau of Labor Statistics, Department of Labor and Industrial Relations (DLIR), Hawaii Tourism Authority (HTA), Honolulu Board of REALTORS®, Federal Open Market Committee and national and local ~~newspapers)~~news media).

~~After three quarters~~Through the first half of ~~2017,~~2019, Hawaii’s tourism industry, a significant driver of Hawaii’s economy, ~~ended with strong growth~~showed an increase in ~~both~~ visitor ~~spending~~arrivals and ~~arrivals.~~a decrease in visitor spending. Visitor ~~expenditures increased 7.1% and~~ arrivals increased ~~4.9%~~4.2% and expenditures decreased -2.0% compared to the same ~~time~~ period in ~~2016.~~2018. While visitor statistics are mixed year-to-date, DBEDT forecasts full-year growth in visitor arrivals and visitor spending for 2019 and continued annual growth in visitor arrivals and visitor spending through 2022. Looking ahead, the Hawaii Tourism Authority expects scheduled nonstop seats to Hawaii ~~for~~increase as the ~~fourth quarter of 2017 to increase by 4.7% over the fourth quarter of 2016~~year progresses, driven primarily by an increase in seats from ~~Asia, Canada~~West Coast, East Coast and Asia. The introduction of Southwest Airlines to the ~~West Coast.~~Hawaii market in March 2019 could lead to a potential boost in visitor arrivals.

Hawaii’s unemployment rate ~~continued to decline to 2.5% in September 2017~~remained steady at 2.8% for June 2019, which was ~~lower~~higher than the ~~3.0%~~ rate ~~a year ago in September 2016 and~~for June 2018, but lower than the national unemployment rate of ~~4.2% in September 2017. It was the second lowest unemployment rate in the nation along with Colorado.~~3.7%.

Hawaii real estate activity, as indicated by the home resale market, experienced ~~growth~~a decline in median sales prices for single family homes and condominiums so far in ~~2017.~~2019. Median sales prices for single family residential homes ~~and condominiums~~ on Oahu through ~~September 2017~~June

2019 were ~~higher~~lower by ~~3.4%~~-0.5% and ~~5.4%, respectively,~~for condominiums were lower by -1.4% over the same time period in ~~2016.~~2018. The number of closed sales for ~~both~~ single family residential homes and condominiums were down by -3.7% and -8.8% respectively through ~~September~~June of ~~2017 were also up~~2019 compared to same time period of ~~2016 by 5.0% and 5.8%, respectively.~~2018.

Hawaii’s petroleum product prices reflect supply and demand in the Asia-Pacific region and the price of crude oil in international markets. ~~Following steady price increases through 2016,~~Although the price of crude oil fluctuates month to month, the price has ~~remained relatively stable through~~been increasing over the ~~first three quarters of 2017.~~last few months.

At its ~~September 2017~~June 2019 meeting, the Federal Open Market Committee (FOMC) decided to maintain the target range for the federal funds rate ~~target range of “1.0%~~at “2.25% to ~~1.25%~~2.50%” in view of ~~its~~realized and expected outlook on the labor market conditions and ~~inflation.~~inflation, however, uncertainties around the outlook has increased. The ~~FOMC~~Committee will ~~continue~~closely monitor information on the economic outlook and indicated they will act as appropriate to ~~assess economic conditions relative~~sustain the expansion.

In its County Forecast released in May 2019, the University of Hawaii Economic Research Organization stated that over the past year while growth continues, there has been a slowing of growth across all counties. Their near-term outlook for all counties remains muted, reflecting limits to ~~its objectives~~growth in a tight labor market, mature construction expansion and restrained tourism prospects. The State’s Department of ~~maximum employment and 2% inflation in determining~~Business, Economic Development & Tourism’s second quarter 2019 Outlook for the ~~size and timing of future adjustments to the target range.~~

~~Overall,~~Economy report stated that Hawaii’s economy ~~in the near term~~ is expected to ~~be buoyed by a strong tourism industry. Tourism continues to fare well however, future gains may be hindered by capacity constraints in visitor accommodations. The~~continue positive growth in 2019 and 2020 based on recent developments in the ~~number~~national and global economics, performance in the tourism industry, labor market conditions and growth in personal income and tax revenues. They are projecting the economy, as measured by real GDP, to show an increase of jobs is anticipated to decline as construction activity eases and unemployment remains low. Risks remain stemming from geopolitical uncertainty and its impact on tourism and from the impact of the financial markets on real estate development and sales.1.2% in 2019, followed by 1.3% in 2020.

“Other” segment.


	Three months ended September 30						Nine months ended September 30							Three months ended June 30						Six months ended June 30
(in thousands)	2017			2016			2017			2016			Primary reason(s)	2019			2018			2019			2018			Primary reason(s)
Revenues	$	127		$	94		$	299		$	262			$	14		$	47		$	82		$	75
Operating loss	(4,295		)	(7,097		)	(13,478		)	(18,621		)	Third quarter and first nine months of 2016 merger and spin-off-related expenses (see below) and lower other administrative and general expenses in the third quarter and first nine months of 2017	(4,312		)	(3,262		)	(9,057		)	(7,629		)	The second quarters of 2019 and 2018 include $1.2 million and $1.3 million, respectively, of operating income from Pacific Current¹. Second quarter 2019 corporate expense was $0.9 million higher than the second quarter of 2018, primarily due to higher professional fees. The six months ended June 30, 2019 and 2018 include $1.4 million and $2.3 million, respectively, of operating income from Pacific Current¹. The lower Pacific Current operating income was primarily due to the hiring of Pacific Current employees. Corporate expense for the second quarter of 2019 was $0.5 million higher than the second quarter of 2018, primarily due to higher professional fees, partly offset by lower incentive compensation accruals and adjustments in the first six months of 2018, as compared to the first six months of 2019.
Merger termination fee	—			90,000			—			90,000			See Note 12 of the Condensed Consolidated Financial Statements
Net income (loss)	(5,006		)	65,064			(11,807		)	54,362			Third quarter of 2016 merger termination fee and $8 million of tax benefits on previously non-deductible expenses related to the previously proposed merger with NEE and spin-off of ASBH and tax benefits recognized for the Domestic Production Activities Deduction in 2016 (see Note 9 of the Condensed Consolidated Financial Statements)
Net loss														(7,078		)	(5,676		)	(14,355		)	(11,864		)	The net loss for the second quarter and first six months of 2019 was higher than the net loss for the second quarter and first six months of 2018 due to higher interest expense (as a result of higher interest rates and balances at corporate), higher HEI corporate expenses. and lower Pacific Current income, partially offset by a higher income tax benefit.

~~FINANCIAL CONDITION~~RESULTS OF OPERATIONS

~~Liquidity and capital resources.~~

second quarters of 2019 and 2018 were 18% and 22%, respectively. The ~~consolidated capital structure of HEI (excluding deposit liabilities and other bank borrowings) was as follows:~~

~~HEI’s short-term borrowings and HEI’s line of credit facility were as follows:~~

Short-term borrowings ¹



Exact Name of Registrant as	~~Commission~~	~~I.R.S. Employer~~
Specified in Its Charter	Commission File Number	I.R.S. Employer Identification No.
HAWAIIAN ELECTRIC INDUSTRIES, INC.	1-8503	99-0208097
and Principal Subsidiary
HAWAIIAN ELECTRIC COMPANY, INC.	1-4955	99-0040500



Registrant	Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Hawaiian Electric Industries, Inc.	Common Stock, Without Par Value	HE	New York Stock Exchange



Hawaiian Electric Industries, Inc.	Yesx	☒	Noo	☐	Hawaiian Electric Company, Inc.	Yesx	☒	Noo	☐



Hawaiian Electric Industries, Inc.	Yesx	☒	Noo	☐	Hawaiian Electric Company, Inc.	Yesx	☒	Noo	☐



Hawaiian Electric Industries, Inc.				~~Large accelerated filer~~ x :		Hawaiian Electric Company, Inc.:
Large accelerated filero	☒	Smaller reporting company	☐	Large accelerated filer	☐	Smaller reporting company	☐
		Accelerated filero	☐	Emerging growth company	☐	Accelerated filer	☐	Emerging growth company	☐
Non-accelerated filer	☐			Non-accelerated filer	☒				~~Accelerated filer~~ o
		~~Non-accelerated filer~~ o				~~Non-accelerated filer~~ x
		~~(Do not check if a smaller reporting company)~~				~~(Do not check if a smaller reporting company)~~
		~~Smaller reporting company~~ o				~~Smaller reporting company~~ o
		~~Emerging growth company~~ o				~~Emerging growth company~~ o



Hawaiian Electric Industries, Inc.	Yeso	☐	Nox	☒	Hawaiian Electric Company, Inc.	Yeso	☐	Nox	☒



Class of Common Stock	Outstanding ~~October 27, 2017~~July 26, 2019
Hawaiian Electric Industries, Inc. (Without Par Value)	~~108,785,978~~ 108,972,564	Shares
Hawaiian Electric Company, Inc. ($6-2/3 Par Value)	~~16,019,785~~ 16,751,488	Shares (not publicly traded)



Page No.
ii	Glossary of Terms
iv	Cautionary Note Regarding Forward-Looking Statements

	PART I. FINANCIAL INFORMATION
1	Item 1.	Financial Statements
		Hawaiian Electric Industries, Inc. and Subsidiaries
1		Condensed Consolidated Statements of Income (unaudited) - three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018
2		Condensed Consolidated Statements of Comprehensive Income (unaudited) - three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018
3		Condensed Consolidated Balance Sheets (unaudited) - ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018
4		Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) - ~~nine~~ three and six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018
5		Condensed Consolidated Statements of Cash Flows (unaudited) - ~~nine~~ six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018
		Hawaiian Electric Company, Inc. and Subsidiaries
6		Condensed Consolidated Statements of Income (unaudited) - three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018
6		Condensed Consolidated Statements of Comprehensive Income (unaudited) - three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018
7		Condensed Consolidated Balance Sheets (unaudited) - ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018
8		Condensed Consolidated Statements of Changes in Common Stock Equity (unaudited) - ~~nine~~ three and six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018
9		Condensed Consolidated Statements of Cash Flows (unaudited) - ~~nine~~ six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018
10		Notes to Condensed Consolidated Financial Statements (unaudited)
6057	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
57		HEI consolidated
60		~~HEI consolidated~~Electric Utilities
6469		~~Electric Utilities~~Bank
74		~~Bank~~
8376	Item 3.	Quantitative and Qualitative Disclosures About Market Risk
8477	Item 4.	Controls and Procedures

	PART II.	OTHER INFORMATION
8478	Item 1.	Legal Proceedings
8478	Item 1A.	Risk Factors
8578	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
8579	Item 5.	Other Information
8680	Item 6.	Exhibits
8781	Signatures



Terms		Definitions
ADIT		Accumulated deferred income tax balances
AES Hawaii		AES Hawaii, Inc.
AFUDC		Allowance for funds used during construction
AOCI		Accumulated other comprehensive income/(loss)
ASB		American Savings Bank, F.S.B., a wholly-owned subsidiary of ASB Hawaii, Inc.
ASB Hawaii		ASB Hawaii, Inc. (formerly American Savings Holdings, Inc.), a wholly owned subsidiary of Hawaiian Electric Industries, Inc. and the parent company of American Savings Bank, F.S.B.
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
CBRE		Community-based renewable energy
CIAC		Contributions in aid of construction
CIP CT-1		Campbell Industrial Park 110 MW combustion turbine No. 1
Company		Hawaiian Electric Industries, Inc. and its direct and indirect subsidiaries, including, without limitation, Hawaiian Electric Company, Inc. and its subsidiaries (listed under Hawaiian Electric); ASB Hawaii, Inc. and its subsidiary, American Savings Bank, F.S.B.; ~~HEI Properties, Inc. (dissolved in 2015~~Pacific Current, LLC and ~~wound up in 2017)~~its subsidiaries, Hamakua Holdings, LLC (and its subsidiary, Hamakua Energy, LLC) and Mauo Holdings, LLC (and its subsidiary, Mauo, LLC); and The Old Oahu Tug Service, Inc. (formerly Hawaiian Tug & Barge Corp.)~~; and Pacific Current, LLC and its subsidiary, Hamakua Holdings, LLC and its subsidiary, Hamakua Energy, LLC~~
Consumer Advocate		Division of Consumer Advocacy, Department of Commerce and Consumer Affairs of the State of Hawaii
~~CBRE~~		~~Community-based renewable energy~~
~~DER~~		~~Distributed energy resources~~
D&O		Decision and order from the PUC
DGDER		Distributed ~~generation~~energy resources
Dodd-Frank Act		Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
DOH		Department of Health of the State of Hawaii
DRIP		HEI Dividend Reinvestment and Stock Purchase Plan
~~DSM~~		~~Demand-side management~~
ECAC		Energy cost adjustment clause
ECRC		Energy cost recovery clause
EIP		2010 Equity and Incentive Plan, as amended and restated
EPA		Environmental Protection Agency — federal
~~EPS~~		~~Earnings per share~~
ERP/EAM		Enterprise Resource Planning/Enterprise Asset Management
EPS		Earnings per share
EVE		Economic value of equity
Exchange Act		Securities Exchange Act of 1934
FASB		Financial Accounting Standards Board
FDIC		Federal Deposit Insurance Corporation
federal		U.S. Government
FHLB		Federal Home Loan Bank
FHLMC		Federal Home Loan Mortgage Corporation
FNMA		Federal National Mortgage Association
FRB		Federal Reserve Board
GAAP		Accounting principles generally accepted in the United States of America



~~Terms~~		~~Definitions~~
GNMA		Government National Mortgage Association
Hamakua Energy		Hamakua Energy, LLC, an indirect subsidiary of HEI and successor in interest to Hamakua Energy Partners, L.P., an affiliate of Arclight Capital Partners (a Boston-based private equity firm focused on energy infrastructure investments) and successor in interest to Encogen Hawaii, L.P.
Hawaii Electric Light		Hawaii Electric Light Company, Inc., an electric utility subsidiary of Hawaiian Electric Company, Inc.



($ in millions)	Hawaiian Electric			Hawaii Electric Light			Maui Electric
2017 Annual incremental RAM adjusted revenues	$	12.7		$	3.2		$	1.6
Annual change in accrued earnings sharing credits	$	—		$	—		$	—
Annual change in accrued RBA balance as of December 31, 2016 (and associated revenue taxes) (refunded)	$	(2.4	)	$	(2.5	)	$	(0.2	)
Net annual incremental amount to be collected under the tariffs	$	10.3		$	0.7		$	1.4


	December 31, 2016						Three months ended September 30, 2016				Nine months ended September 30, 2016					December 31, 2018						Three months ended June 30, 2018				Six months ended June 30, 2018
(in thousands)	Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized*		Average recorded investment		Interest income recognized*			Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized*		Average recorded investment		Interest income recognized*
With no related allowance recorded															With no related allowance recorded
Real estate:
Residential 1-4 family	$	9,571	$	10,400	$	—	$	10,069	$	65	$	10,378	$	268		$	7,822	$	8,333	$	—	$	8,900	$	50	$	8,699	$	157
Commercial real estate	223		228		—		1,206		—		1,177		—			—		—		—		—		—		—		—
Home equity line of credit	1,500		1,900		—		1,220		6		1,035		15			2,743		3,004		—		2,374		7		2,037		12
Residential land	1,218		1,803		—		1,521		16		1,532		47			2,030		2,228		—		1,132		5		1,150		10
Commercial construction	—		—		—		—		—		—		—			—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—			—		—		—		—		—		—		—
Commercial	6,299		8,869		—		14,352		141		9,240		154			3,722		4,775		—		3,026		10		2,691		20
Consumer	—		—		—		10		—		3		—			32		32		—		15		—		11		—
	$	18,811	$	23,200	$	—	$	28,378	$	228	$	23,365	$	484		$	16,349	$	18,372	$	—	$	15,447	$	72	$	14,588	$	199
With an allowance recorded
Real estate:
Residential 1-4 family	$	10,283	$	10,486	$	1,352	$	11,800	$	119	$	11,933	$	356		$	8,672	$	8,875	$	876	$	8,778	$	97	$	8,953	$	190
Commercial real estate	1,346		1,346		80		2,444		—		1,939		—			915		915		7		997		10		1,003		21
Home equity line of credit	4,658		4,712		215		4,165		36		3,470		91			12,057		12,086		701		10,420		96		9,080		177
Residential land	2,411		2,411		789		2,915		44		3,090		165			29		29		6		40		1		58		3
Commercial construction	—		—		—		—		—		—		—			—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—			—		—		—		—		—		—		—
Commercial	14,240		14,240		1,641		11,433		65		15,075		275			1,618		1,618		628		1,738		30		1,848		66
Consumer	10		10		6		11		—		12		—			57		57		4		58		1		58		2
	$	32,948	$	33,205	$	4,083	$	32,768	$	264	$	35,519	$	887		$	23,348	$	23,580	$	2,222	$	22,031	$	235	$	21,000	$	459
Total
Real estate:
Residential 1-4 family	$	19,854	$	20,886	$	1,352	$	21,869	$	184	$	22,311	$	624		$	16,494	$	17,208	$	876	$	17,678	$	147	$	17,652	$	347
Commercial real estate	1,569		1,574		80		3,650		—		3,116		—			915		915		7		997		10		1,003		21
Home equity line of credit	6,158		6,612		215		5,385		42		4,505		106			14,800		15,090		701		12,794		103		11,117		189
Residential land	3,629		4,214		789		4,436		60		4,622		212			2,059		2,257		6		1,172		6		1,208		13
Commercial construction	—		—		—		—		—		—		—			—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—			—		—		—		—		—		—		—
Commercial	20,539		23,109		1,641		25,785		206		24,315		429			5,340		6,393		628		4,764		40		4,539		86
Consumer	10		10		6		21		—		15		—			89		89		4		73		1		69		2
	$	51,759	$	56,405	$	4,083	$	61,146	$	492	$	58,884	$	1,371		$	39,697	$	41,952	$	2,222	$	37,478	$	307	$	35,588	$	658


	Three months ended September 30, 2017											Nine months ended September 30, 2017
	Number of contracts		Outstanding recorded investment¹						Net increase in allowance			Number of contracts	Outstanding recorded investment¹						Net increase in allowance
Loans modified as a TDR																			Three months ended June 30, 2019							Six months ended June 30, 2019
(dollars in thousands)	Number of contracts	Number of contracts			Pre-modification			Post-modification			(as of period end)		Number of contracts		Pre-modification			Post-modification			(as of period end)		Number of contracts		Outstanding recorded investment (as of period end)¹			Related allowance (as of period end)		Number of contracts		Outstanding recorded investment (as of period end)¹			Related allowance (as of period end)
Troubled debt restructurings												Number of contracts	Number of contracts
Real estate:		Number of contracts
Residential 1-4 family	2		$	83		$	83		$	—		7	$	955		$	963		$	45		1	$	469		$	154		9	$	1,501		$	161
Commercial real estate	—		—			—			—			—	—			—			—			—	—			—			—	—			—
Home equity line of credit	15		862			862			184			28	1,386			1,372			277			2	311			59			3	432			83
Residential land	—		—			—			—			—	—			—			—			2	825			—			2	825			—
Commercial construction	—		—			—			—			—	—			—			—			—	—			—			—	—			—
Residential construction	—		—			—			—			—	—			—			—			—	—			—			—	—			—
Commercial	1		330			330			38			2	672			672			38			2	1,317			133			3	1,507			150
Consumer	—		—			—			—			1	59			59			27			—	—			—			—	—			—
	18		$	1,275		$	1,275		$	222		38	$	3,072		$	3,066		$	387		7	$	2,922		$	346		17	$	4,265		$	394

Loans modified as a TDR																						Three months ended June 30, 2018							Six months ended June 30, 2018
(dollars in thousands)																						Number of contracts	Outstanding recorded investment (as of period end)¹			Related allowance (as of period end)			Number of contracts	Outstanding recorded investment (as of period end)¹			Related allowance (as of period end)
Troubled debt restructurings
Real estate:
Residential 1-4 family																						—	$	—		$	—		—	$	—		$	—
Commercial real estate																						—	—			—			—	—			—
Home equity line of credit																						20	3,260			578			37	5,293			953
Residential land																						—	—			—			—	—			—
Commercial construction																						—	—			—			—	—			—
Residential construction																						—	—			—			—	—			—
Commercial																						2	43			43			7	2,200			43
Consumer																						—	—			—			—	—			—
																						22	$	3,303		$	621		44	$	7,493		$	996


¹	~~The reported balances include loans that became TDR during the period, and were fully paid-off, charged-off, or sold prior to period end.~~


¹	The period end balances reflect all paydowns and charge-offs since the modification period. TDRs fully paid off, charged-off, or foreclosed upon by period end are not included.



(in thousands)	Gross carrying amount		Accumulated amortization			Valuation allowance		Net carrying amount
June 30, 2019	$	19,418	$	(11,315	)	$	—	$	8,103
December 31, 2018	18,556		(10,494		)	—		8,062



(in thousands)	Gross carrying amount¹		Accumulated amortization¹			Valuation allowance		Net carrying amount
September 30, 2017	$	18,463	$	(9,393	)	$	—	$	9,070
December 31, 2016	17,271		(7,898		)	—		9,373


(in millions)	Gross amount of recognized liabilities	Gross amount offset in the Balance Sheet	Net amount of liabilities presented in the Balance Sheet	Gross amount of recognized liabilities		Gross amount offset in the Balance Sheets		Net amount of liabilities presented in the Balance Sheets
Repurchase agreements
September 30, 2017	$104	$—	$104
December 31, 2016	93	—	93
June 30, 2019				$	111	$	—	$	111
December 31, 2018				65		—		65



	Gross amount not offset in the Balance Sheets
(in millions)	Net amount of liabilities presented in the Balance Sheets		Financial instruments		Cash collateral pledged
Commercial account holders
June 30, 2019	$	111	$	128	$	—
December 31, 2018	65		92		—



Derivative Financial Instruments Not Designated as Hedging Instruments	Location of net gains (losses) recognized in the Statements of Income	Three months ended June 30					Six months ended June 30
(in thousands)		2019		2018			2019			2018
Interest rate lock commitments	Mortgage banking income	$	11	$	(7	)	$	382		$	117
Forward commitments	Mortgage banking income	46		(2		)	(72		)	(38		)
		$	57	$	(9	)	$	310		$	79



	Series 2019A
Aggregate principal amount	$50 million
Fixed coupon interest rate	4.21%
Maturity date	May 15, 2034
Principal amount by company:
Hawaiian Electric	$30 million
Hawaii Electric Light	$10 million
Maui Electric	$10 million



	2004 Junior subordinated deferrable interest debentures redeemed
Aggregate principal amount	$51.5 million
Fixed coupon interest rate	6.50%
Maturity date	May 15, 2034
Principal amount by company:
Hawaiian Electric	$31.5 million
Hawaii Electric Light	$10 million
Maui Electric	$10 million



	Refunding Series 2017A Special Purpose Revenue Bonds	Refunding Series 2017B Special Purpose Revenue Bonds
Aggregate principal amount	$125 million	$140 million
Fixed coupon interest rate	3.10%	4.00%
Maturity date	May 1, 2026	March 1, 2037
Department loaned the proceeds to:
Hawaiian Electric	$62 million	$100 million
Hawaii Electric Light	$8 million	$20 million
Maui Electric	$55 million	$20 million



	Refunding Series 2019 Special Purpose Revenue Bonds
Aggregate principal amount	$150 million
Fixed coupon interest rate	3.20%
Maturity date	July 1, 2039
DBF loaned the proceeds to:
Hawaiian Electric	$90 million
Hawaii Electric Light	$60 million



	Refunding Series 2007B Special Purpose Revenue Bonds	Series 2007A Special Purpose Revenue Bonds
Aggregate principal amount	$125 million	$140 million
Fixed coupon interest rate	4.60%	4.65%
Maturity date	May 1, 2026	March 1, 2037



	HEI consolidated						Hawaiian Electric consolidated
Three months ended June 30, 2019 (in thousands)	Other leases		PPAs classified as leases		Total		Other leases		PPAs classified as leases		Total
Operating lease cost	$	3,056	$	15,478	$	18,534	$	1,523	$	15,478	$	17,001
Variable lease cost	3,396		43,985		47,381		2,764		43,985		46,749
Total lease cost	$	6,452	$	59,463	$	65,915	$	4,287	$	59,463	$	63,750
Other information
Cash paid for amounts included in the measurement of lease liabilities—Operating cash flows from operating leases	$	2,593	$	14,329	$	16,922	$	1,411	$	14,329	$	15,740



	HEI consolidated									Hawaiian Electric consolidated
Six months ended June 30, 2019 (in thousands)	Other leases			PPAs classified as leases			Total			Other leases			PPAs classified as leases			Total
Operating lease cost	$	5,740		$	30,956		$	36,696		$	3,009		$	30,956		$	33,965
Variable lease cost	6,200			85,265			91,465			4,850			85,265			90,115
Total lease cost	$	11,940		$	116,221		$	128,161		$	7,859		$	116,221		$	124,080
Other information
Cash paid for amounts included in the measurement of lease liabilities—Operating cash flows from operating leases	$	5,179		$	29,367		$	34,546		$	2,808		$	29,367		$	32,175
Weighted-average remaining lease term—operating leases (in years)	6.6			3.3			3.8			4.8			3.3			3.4
Weighted-average discount rate—operating leases	3.70		%	4.08		%	4.01		%	4.17		%	4.08		%	4.09		%


(1)	Weighted-average grant-date fair value per share based on the average price of HEI common stock on the date of grant.



	~~2017~~
~~Risk-free interest rate~~	~~1.46~~	%
~~Expected life in years~~	3
~~Expected volatility~~	~~20.1~~	%
~~Range of expected volatility for Peer Group~~	~~15.4% to 26.0%~~
~~Grant date fair value (per share)~~	~~$39.51~~



			Estimated fair value
	Carrying or notional amount		Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
(in thousands)			(Level 1)		(Level 2)		(Level 3)		Total
June 30, 2019
Financial assets
HEI consolidated
Available-for-sale investment securities	$	1,298,010	$	—	$	1,269,844	$	28,166	$	1,298,010
Held-to-maturity investment securities	137,029		—		141,231		—		141,231
Stock in Federal Home Loan Bank	8,434		—		8,434		—		8,434
Loans, net	4,959,260		—		9,233		5,029,542		5,038,775
Mortgage servicing rights	8,103		—		—		12,240		12,240
Derivative assets	46,051		—		483		—		483
Financial liabilities
HEI consolidated
Deposit liabilities	855,745		—		850,123		—		850,123
Short-term borrowings—other than bank	211,893		—		211,893		—		211,893
Other bank borrowings	111,485		—		111,480		—		111,480
Long-term debt, net—other than bank	1,884,030		—		2,036,486		—		2,036,486
Derivative liabilities	59,981		78		2,066		—		2,144
Hawaiian Electric consolidated
Short-term borrowings	161,901		—		161,901		—		161,901
Long-term debt, net	1,417,917		—		1,551,097		—		1,551,097
December 31, 2018
Financial assets
HEI consolidated
Available-for-sale investment securities	1,388,533		—		1,364,897		23,636		1,388,533
Held-to-maturity investment securities	141,875		—		142,057		—		142,057
Stock in Federal Home Loan Bank	9,958		—		9,958		—		9,958
Loans, net	4,792,707		—		1,809		4,800,244		4,802,053
Mortgage servicing rights	8,062		—		—		13,618		13,618
Derivative assets	10,180		—		91		—		91
Financial liabilities
HEI consolidated
Deposit liabilities	827,841		—		817,667		—		817,667
Short-term borrowings—other than bank	73,992		—		73,992		—		73,992
Other bank borrowings	110,040		—		110,037		—		110,037
Long-term debt, net—other than bank	1,879,641		—		1,904,261		—		1,904,261
Derivative liabilities	34,132		34		596		—		630
Hawaiian Electric consolidated
Short-term borrowings	25,000		—		25,000		—		25,000
Long-term debt, net	1,418,802		—		1,443,968		—		1,443,968



	September 30, 2017						December 31, 2016
	Fair value measurements using						Fair value measurements using
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Money market funds (“other” segment)	$	—	$	—	$	—	$	—	$	13,085	$	—
Available-for-sale investment securities (bank segment)
Mortgage-related securities-FNMA, FHLMC and GNMA	$	—	$	1,122,565	$	—	$	—	$	897,474	$	—
U.S. Treasury and federal agency obligations	—		182,118		—		—		192,281		—
Mortgage revenue bond	—		—		15,427		—		—		15,427
	$	—	$	1,304,683	$	15,427	$	—	$	1,089,755	$	15,427
Derivative assets
Interest rate lock commitments (bank segment)¹	$	—	$	7	$	—	$	—	$	445	$	—
Forward commitments (bank segment)¹	—		—		—		—		8		—
Window forward contracts (electric utility segment)²	—		584		—		—		—		—
	$	—	$	591	$	—	$	—	$	453	$	—
Derivative liabilities
Interest rate lock commitments (bank segment) ¹	$	—	$	—	$	—	$	—	$	24	$	—
Forward commitments (bank segment) ¹	2		—		—		129		56		—
Window forward contracts (electric utility segment)²	—		—		—		—		743		—
	$	2	$	—	$	—	$	129	$	823	$	—



(in thousands, except per	Three months ended September 30				%
share amounts)	2017		2016		change		Primary reason(s)*
Revenues	$	673,185	$	646,055	4		Increases for the electric utility and bank segments
Operating income	109,545		105,442		4		Increase for the bank segment and lower losses for the “other” segment, partly offset by a decrease at the electric utility segment
Merger termination fee	—		90,000		(100	)	See Note 12 of the Condensed Consolidated Financial Statements
Net income for common stock	60,073		127,142		(53	)	Merger termination fee at corporate in 2016 (in the “other” segment), partly offset by higher bank net income in 2017
Basic earnings per common share	$	0.55	$	1.17	(53	)	Lower net income
Weighted-average number of common shares outstanding	108,786		108,268		—		Issuances of shares under the HEI Dividend Reinvestment and Stock Purchase Plan and other plans


1	Hamakua Energy’s sales to Hawaii Electric Light (a regulated affiliate) are eliminated in consolidation.



	Average balance		Balance
(in millions)	Nine months ended September 30, 2017		September 30, 2017		December 31, 2016
Short-term borrowings ¹
Commercial paper	$	3	$	19	$	—
Line of credit draws	—		—		—
Undrawn capacity under HEI’s line of credit facility			150		150



Three months ended September 30				Increase
2017		2016		(decrease)						(dollars in millions, except per barrel amounts)
$	599	$	572	$	27					Revenues. Net increase largely due to:
							$	25		higher fuel oil prices¹
							5			higher RAM revenues
							2			higher purchased power energy costs²
							(5		)	lower KWH generated
146		129		17						Fuel oil expense. Increase due to higher fuel oil prices, partially offset by lower KWH generated
160		158		2						Purchased power expense. Increase due to higher fuel oil prices
100		95		5						Operation and maintenance expenses. Net increase due to:
							6			higher overhaul costs due to more overhauls being performed in 2017
							2			ERP project costs commencing in 2017
							(1		)	lower production operating and maintenance cost
							(1		)	PSIP consulting costs incurred in 2016
105		101		4						Other expenses. Increase due to higher revenue taxes from higher revenue, coupled with higher depreciation expense for plant investments in 2016
87		90		(3		)				Operating income. Decrease due to higher O&M and other expenses
47		47		—						Net income for common stock. Lower operating income, offset by higher AFUDC in 2017 due to larger capital projects, primarily Schofield generating station

2,340		2,372		(32		)				Kilowatthour sales (millions)⁴
$	66.73	$	57.72	$	9.01					Average fuel oil cost per barrel¹