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.~~performance and actual results and financial condition may differ materially from those indicated in the forward-looking statements.

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:

•extreme weather events, including windstorms and other natural disasters, particularly those driven or exacerbated by climate change, which could increase the risk of the Utilities’ equipment being damaged, becoming inoperable or contributing to a wildfire;

•the impact of the Maui windstorm and wildfires including the potential liabilities from the many lawsuits filed against the Company and potential regulatory penalties which may result in significant costs that may be unrecoverable through insurance and/or rates;

•an increase in insurance premiums and the inability to fully recover premiums through rates or the potential inability to obtain wildfire and general liability insurance coverage at reasonable rates, if available at all;

•the uncertainties surrounding the Company’s access to capital and credit markets due to the uncertainties associated with the costs related to the Maui windstorm and wildfires;

•the material reduction or extended delay in dividends or other distributions from one or more operating subsidiaries to HEI;

•further downgrades by securities rating agencies in their ratings of the securities of HEI and Hawaiian Electric and their impact on results of financing efforts;

•the risks of suffering losses and incurring liabilities that are uninsured (e.g., damages to the Utilities’ transmission and distribution system and losses from business interruption) or underinsured (e.g., losses not covered as a result of insurance deductibles or other exclusions or exceeding policy limits), and the risks associated with the operation of transmission and distribution assets and power generation facilities, including public and employee safety issues, and assets causing or contributing to wildfires;

•international, national and local economic and political conditions—including the state of the Hawaii tourism, defense and construction industries; the strength or weakness of the Hawaii and continental U.S. real estate markets (including the fair value and/or the actual performance of collateral underlying loans held by ASB, which could result in higher loan loss provisions and write-offs); decisions concerning the extent of the presence of the federal government and military in Hawaii; the implications and potential impacts of future federal government shutdowns, including the impact to our customers’ ability to pay their electric bills and/or bank loans and the impact on the state of Hawaii economy; the implications and potential impacts of U.S. and foreign capital and credit market conditions and federal, state and international responses to those conditions; ~~and~~ the potential impacts of global and local developments (including global economic conditions and ~~uncertainties; the effects of the United Kingdom’s referendum to withdraw from the European Union; unrest; the conflict in Syria;~~uncertainties, unrest, terrorist acts, wars, conflicts, political protests, deadly virus epidemic or other crisis); the effects of changes that have or may occur in U.S. policy, such as with respect to immigration and trade; ~~terrorist acts by ISIS~~and pandemics;

•the lingering impact of the COVID-19 pandemic, including any recurrence of the COVID-19 pandemic due to new variants and the potential reinstatement of related government orders and restrictions, and the resulting impact on our employees, customers and suppliers;

•the ability to adequately address risks and capitalize on opportunities related to our environmental, social and governance priority areas, which include safety, reliability and resilience, including relating to wildfires and other extreme weather events, decarbonization, economic health and affordability, secure digitalization, diversity, equity and inclusion, employee engagement, and climate-related risks and opportunities;

•citizen activism, including civil unrest, especially in times of severe economic depression and social divisiveness, which could negatively impact customers and employees, impair the ability of the Company and the Utilities to operate and maintain their facilities in an effective and safe manner, and citizen or ~~others; potential conflict~~stakeholder activism that could delay the construction, increase project costs or ~~crisis with North Korea;~~preclude the completion of third-party or Utility projects that are required to meet electricity demand, resilience and ~~potential pandemics);~~reliability objectives and renewable portfolio standards (RPS) and other climate-related goals;

•the effects of future actions or inaction of the U.S. government or related agencies, including those related to the U.S. debt ceiling or budget funding, monetary policy, ~~and~~trade policy and ~~regulation~~tariffs, energy and environmental policy, and other policy and regulatory changes advanced or proposed by President ~~Trump~~Biden and his administration;

•weather, ~~and~~ natural disasters (e.g., hurricanes, earthquakes, tsunamis, lightning strikes, lava flows and the ~~potential~~increasing effects of climate change, such as more severe storms, flooding, droughts, heat waves, and rising sea levels), and wildfires, including their impact on the ~~Company's~~resilience and ~~Utilities'~~reliability and cost of the Company’s and Utilities’ operations, collateral underlying ASB loans and the economy;

•the timing, speed and extent of changes in interest rates and the shape of the yield ~~curve;~~curve, which could result in lower portfolio yields and net interest margin, or higher borrowing costs;

•changes in interest rates and market liquidity, as well as the magnitude of such changes, which may reduce interest margins, impact funding sources, alter valuations and affect the ability to originate and distribute financial products in the primary and secondary markets;

•the ability of the Company and the Utilities to access the credit and capital markets (e.g., to obtain commercial paper and other short-term and long-term debt financing, including lines of credit, and, in the case of HEI, to issue common stock) under volatile and challenging market conditions, and the potential higher cost of such financings, if available;

•the risks inherent in changes in the value of the Company’s pension and other retirement plan assets and ASB’s securities available for ~~sale;~~sale, and the risks inherent in changes in the value of the Company’s pension liabilities, including changes driven by interest rates and mortality improvements;

•changes in laws, regulations (including tax regulations), market conditions, interest rates and other factors that result in changes in assumptions used to calculate retirement benefits costs and funding requirements;

~~the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) and of the rules and regulations that the Dodd-Frank Act requires to be promulgated;~~

•increasing competition in the banking industry from traditional financial institutions as well as from non-traditional providers of financial services, including financial service subsidiaries of commercial and manufacturing companies (e.g., increased price competition for loans and deposits, or an outflow of deposits to alternative investments or platforms, which may have an adverse impact on ASB’s ~~cost of funds)~~net interest margin and portfolio growth);

the impacts of the termination of the Merger with NextEra Energy, Inc. (NEE) and the resulting loss of NEE’s resources, expertise and support (e.g., financial and technological), including potentially higher costs and longer lead times to increase levels of renewable energy and to complete projects like Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM) and smart grids, and a higher cost of capital;

•the potential delay by the Public Utilities Commission of the State of Hawaii (PUC) in considering (and potential disapproval of actual or proposed) renewable energy or resilience proposals, among others, and related costs; reliance by the Utilities on outside parties such as the state, independent power producers (IPPs) and developers; supply-chain challenges; and uncertainties surrounding technologies, solar power, wind power, biofuels, environmental assessments required to meet ~~renewable portfolio standards (RPS) goals~~RPS and other climate-related goals; the impacts of implementation of the renewable energy and resilience proposals on future costs of ~~electricity;~~electricity and potential penalties imposed by the PUC for delays in the commercial operations of renewable energy projects;

•the ability of the Utilities to develop, implement and recover the costs of implementing the Utilities’ action plans included in their updated Power Supply Improvement Plans, ~~(PSIPs),~~ Demand Response Portfolio Plan, Distributed Generation Interconnection Plan, Grid Modernization Plans, and business model changes, which have been and are continuing to be developed and updated in response to the orders issued by the PUC, inthe PUC’s April 2014 statement of its ~~April 2014~~ inclinations on the future of Hawaii’s electric utilities and the vision, business strategies and regulatory policy changes required to align the Utilities’ business model with customer interests and the state’s public policy goals, and subsequent orders of the PUC;

•the ability of the Utilities to recover undepreciated cost of fossil fuel generating units, if they are required to be retired before the end of their expected useful life;

•capacity and supply constraints or difficulties, especially if generating units (utility-owned or IPP-owned) fail or measures such as demand-side management, ~~(DSM),~~ distributed generation, ~~(DG),~~ combined heat and power or other firm capacity supply-side resources fall short of achieving their forecasted benefits or are otherwise insufficient to reduce or meet peak demand;

•high and/or volatile fuel ~~oil price changes,~~prices, which increases working capital requirements and customer bills, or delivery of adequate fuel by suppliers (including as a result of the Russia-Ukraine war and the Israel-Hamas war), which could affect the reliability of utility operations, and the continued availability to the electric utilities of their energy cost ~~adjustment~~recovery clauses ~~(ECACs)~~(ECRCs);

•the continued availability to the electric utilities or modifications of other cost recovery mechanisms, including the purchased power adjustment clauses (PPACs), ~~rate~~annual revenue adjustment ~~mechanisms (RAMs)~~(ARA) and pension and postretirement benefits other than pensions (OPEB) tracking mechanisms, and the continued decoupling of revenues from sales to mitigate the effects of declining ~~kilowatthour~~kilowatt-hour sales;

•the ability of the Utilities to recover increasing costs and earn a reasonable return on capital investments not covered by the ARA, while providing the customer dividend required by performance-based regulation (PBR);

•the impact from the PUC’s implementation of PBR for the Utilities pursuant to Act 005, Session Laws 2018, including the potential addition of new performance incentive mechanisms (PIMs), third-party proposals adopted by the PUC in its implementation of PBR, and the implications of not achieving performance incentive goals;

•the impact of fuel price levels and volatility on customer satisfaction and political and regulatory support for the Utilities;

•unfavorable changes in economic conditions, such as sustained inflation, higher interest rates or recession, may negatively impact the ability of the Company’s customers to pay their utility bills or loan payments, reduce loan production, and increase operating costs of the Utilities or Bank that cannot be passed on to, or recovered, from customers;

•the risks associated with increasing reliance on renewable energy, including the availability and cost of non-fossil fuel supplies for renewable energy generation and the operational and related cost impacts of adding intermittent sources of renewable energy to the electric grid;

•the growing risk that energy production from renewable generating resources may be curtailed and the interconnection of additional resources will be constrained as more generating resources are added to the ~~Utilities'~~Utilities’ electric systems and as customers reduce their energy usage;

•the ability of IPPs to deliver the firm capacity anticipated in their power purchase agreements (PPAs);

•the potential that, as IPP contracts near the end of their terms, there may be less economic incentive for the IPPs to make investments in their units to ensure the availability of their units;

•the ability of the Utilities to negotiate, periodically, favorable agreements for significant resources such as fuel supply contracts and collective bargaining ~~agreements;~~agreements and avoid or mitigate labor disputes and work stoppages;

•new technological developments that could affect the operations and prospects of the Utilities and ASB or their ~~competitors;~~

~~new technological developments,~~competitors such as the commercial development of energy storage and microgrids ~~that~~and banking through alternative channels, including use of digital currencies, which could ~~affect the operations of the Utilities;~~include a central bank digital currency;

~~cyber security~~•cybersecurity risks and the potential for cyber incidents, including potential incidents at HEI, ~~ASB and the Utilities~~its subsidiaries (including at ASB branches and electric utility plants), its third-party service providers, contractors and customers with whom they have shared data (IPPs, distributed energy resources (DER) aggregators and customers enrolled under DER programs) and incidents at data processing centers ~~they use,~~used, to the extent not prevented by intrusion detection and prevention systems, anti-virus software, firewalls and other general ~~information technology~~IT controls;

•failure to achieve remaining cost savings commitment related to the management audit committed savings of $33 million over the 2021 to 2025 multi-year rate period (MRP);

•federal, state, county and international governmental and regulatory actions, such as existing, new and changes in laws, rules and regulations applicable to HEI, the Utilities and ASB (including changes in taxation and tax rates, increases in capital requirements, regulatory policy changes, environmental laws and regulations (including resulting compliance costs and risks of fines and penalties and/or liabilities), the regulation of greenhouse gas emissions, governmental fees and assessments (such as Federal Deposit Insurance Corporation assessments), and potential carbon pricing or “cap and trade” legislation that may fundamentally alter costs to produce electricity and accelerate the move to renewable generation);

•developments in laws, regulations and policies governing protections for historic, archaeological and cultural sites, and plant and animal species and habitats, as well as developments in the implementation and enforcement of such laws, regulations and policies;

•discovery of conditions that may be attributable to historical chemical releases, including any necessary investigation and remediation, and any associated enforcement, litigation or regulatory oversight;

•decisions by the PUC in rate cases and other proceedings (including the risks of delays in the timing of decisions, adverse changes in final decisions from interim decisions and the disallowance of project costs as a result of adverse regulatory audit reports or otherwise);

•decisions by the PUC and by other agencies and courts on land use, environmental and other permitting issues (such as required corrective actions, restrictions and penalties that may arise, such as with respect to environmental conditions or RPS);

•potential enforcement actions by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), the Federal Deposit Insurance Corporation (FDIC) and/or other governmental authorities (such as consent orders, required corrective actions, restrictions and penalties that may arise, for example, with respect to compliance deficiencies under existing or new banking and consumer protection laws and regulations or with respect to capital adequacy);

~~the ability of the Utilities to recover increasing costs and earn a reasonable return on capital investments not covered by RAMs;~~

•the risks associated with the geographic concentration of HEI’s businesses and ASB’s loans, ASB’s concentration in a single product type (i.e., first mortgages) and ASB’s significant credit relationships (i.e., concentrations of large loans and/or credit lines with certain customers);

•changes in accounting principles applicable to HEI ~~the Utilities~~ and ~~ASB,~~its subsidiaries, including the adoption of new U.S. accounting standards, the potential discontinuance of regulatory accounting ~~and~~related to PBR or other regulatory changes, the effects of potentially required consolidation of variable interest entities (VIEs), or required ~~capital~~finance lease or on-balance-sheet operating lease accounting for PPAs with IPPs;

~~changes by securities rating agencies in their ratings of the securities of HEI and Hawaiian Electric and the results of financing efforts;~~

•faster than expected loan prepayments that can cause a decrease in net interest income and portfolio yields, an acceleration of the amortization of premiums on loans and investments and the impairment of mortgage-servicing assets of ASB;

•changes in ASB’s loan portfolio credit profile and asset quality and/or mix, which may increase or decrease the required level of provision for ~~loan~~credit losses, allowance for ~~loan~~credit losses (ACL) and charge-offs;

•changes in ASB’s deposit levels, cost or mix which may have an adverse impact on ASB’s cost of funds;

•unanticipated changes from the expected discontinuance of LIBOR and the transition to an alternative reference rate, which may include adverse impacts to the Company’s cost of capital, loan portfolio and interest income on loans;

•the final outcome of tax positions taken by HEI and its subsidiaries;

•the ~~Utilities~~ability of the Company’s non-regulated subsidiary, Pacific Current, LLC (Pacific Current), to achieve its performance and ~~ASB;~~growth objectives, which in turn could affect its ability to service its non-recourse debt;

•the ~~risks~~Company’s reliance on third parties and the risk of ~~suffering losses and incurring liabilities that are uninsured (e.g., damages~~their non-performance, which has increased due to the ~~Utilities’ transmission~~impact from the COVID-19 pandemic supply chain issues; and ~~distribution system and losses from business interruption) or underinsured (e.g., losses not covered as a result of insurance deductibles or other exclusions or exceeding policy limits); and~~

•other risks or uncertainties described elsewhere in this report and in other reports (e.g., “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K) previously and subsequently filed by HEI and/or Hawaiian Electric with the Securities and Exchange ~~Commission (SEC).~~Commission.

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

Hawaiian Electric Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (unaudited)

Three months ended September 30 Nine months ended September 30
(in thousands, except per share amounts) 2017 2016 2017 2016
Revenues

Electric utility $ 598,769
$ 572,253
$ 1,674,255
$ 1,549,700
Bank 74,289
73,708
222,474
213,297
Other 127
94
299
262
Total revenues 673,185
646,055
1,897,028
1,763,259
Expenses

Electric utility 511,693
482,441
1,483,194
1,333,876
Bank 47,525
50,981
146,754
150,752
Other 4,422
7,191
13,777
18,883
Total expenses 563,640
540,613
1,643,725
1,503,511
Operating income (loss)

Electric utility 87,076
89,812
191,061
215,824
Bank 26,764
22,727
75,720
62,545
Other (4,295 ) (7,097 ) (13,478 ) (18,621 )
Total operating income 109,545
105,442
253,303
259,748
Merger termination fee —
90,000
—
90,000
Interest expense, net—other than on deposit liabilities and other bank borrowings (19,227 ) (19,365 ) (59,235 ) (56,792 )
Allowance for borrowed funds used during construction 1,339
854
3,371
2,276
Allowance for equity funds used during construction 3,482
2,274
8,908
6,010
Income before income taxes 95,139
179,205
206,347
301,242
Income taxes 34,595
51,592
72,003
96,203
Net income 60,544
127,613
134,344
205,039
Preferred stock dividends of subsidiaries 471
471
1,417
1,417
Net income for common stock $ 60,073
$ 127,142
$ 132,927
$ 203,622
Basic earnings per common share $ 0.55
$ 1.17
$ 1.22
$ 1.89
Diluted earnings per common share $ 0.55
$ 1.17
$ 1.22
$ 1.88
Dividends declared per common share $ 0.31
$ 0.31
$ 0.93
$ 0.93
Weighted-average number of common shares outstanding 108,786
108,268
108,737
107,951
Net effect of potentially dilutive shares 79
204
172
220
Weighted-average shares assuming dilution 108,865
108,472
108,909
108,171


	Three months ended September 30				Nine months ended September 30
(in thousands, except per share amounts)	2023		2022		2023		2022
Revenues
Electric utility	$	794,987	$	955,971	$	2,419,539	$	2,483,636
Bank	100,974		81,411		291,716		231,850
Other	5,912		4,815		14,540		7,386
Total revenues	901,873		1,042,197		2,725,795		2,722,872
Expenses
Electric utility	723,629		876,922		2,198,681		2,259,838
Bank	88,415		54,311		230,769		152,797
Other	14,718		8,849		34,737		22,178
Total expenses	826,762		940,082		2,464,187		2,434,813
Operating income (loss)
Electric utility	71,358		79,049		220,858		223,798
Bank	12,559		27,100		60,947		79,053
Other	(8,806)		(4,034)		(20,197)		(14,792)
Total operating income	75,111		102,115		261,608		288,059
Retirement defined benefits credit—other than service costs	1,256		1,039		3,561		3,528
Interest expense, net—other than on deposit liabilities and other bank borrowings	(32,629)		(26,626)		(91,259)		(75,940)
Allowance for borrowed funds used during construction	1,372		825		3,798		2,401
Allowance for equity funds used during construction	4,000		2,552		11,073		7,431
Gain on sales of equity-method investment	—		—		—		8,123
Income before income taxes	49,110		79,905		188,781		233,602
Income taxes	7,521		17,352		36,915		48,395
Net income	41,589		62,553		151,866		185,207
Preferred stock dividends of subsidiaries	471		471		1,417		1,417
Net income for common stock	$	41,118	$	62,082	$	150,449	$	183,790
Basic earnings per common share	$	0.37	$	0.57	$	1.37	$	1.68
Diluted earnings per common share	$	0.37	$	0.57	$	1.37	$	1.68

Weighted-average number of common shares outstanding	109,728		109,470		109,606		109,421
Net effect of potentially dilutive shares (share-based compensation programs)	189		235		326		291
Weighted-average shares assuming dilution	109,917		109,705		109,932		109,712

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2022 Form 10-K.

Hawaiian Electric Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (unaudited)

Three months ended September 30 Nine months ended September 30
(in thousands) 2017 2016 2017 2016
Net income for common stock $ 60,073
$ 127,142
$ 132,927
$ 203,622
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 )
Derivatives qualifying as cash flow hedges:

Effective portion of foreign currency hedge net unrealized gains arising during the period, net of taxes of nil, $205, nil and $368, respectively —
321
—
578
Reclassification adjustment to net income, net of (taxes) benefits of nil, $(110), $289 and $(75), respectively —
(173 ) 454
(119 )
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 $2,516, $2,324, $7,526 and $6,943, respectively 3,942
3,641
11,793
10,877
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $2,290, $2,109, $6,872 and $6,327, respectively (3,596 ) (3,311 ) (10,790 ) (9,934 )
Other comprehensive income (loss), net of taxes 554
(1,669 ) 3,909
9,239
Comprehensive income attributable to Hawaiian Electric Industries, Inc. $ 60,627
$ 125,473
$ 136,836
$ 212,861


	Three months ended September 30				Nine months ended September 30
(in thousands)	2023		2022		2023		2022
Net income for common stock	$	41,118	$	62,082	$	150,449	$	183,790
Other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on available-for-sale investment securities:
Net unrealized losses on available-for-sale investment securities arising during the period, net of taxes of $(13,918), $(36,230), $(11,860) and $(112,838), respectively	(38,016)		(98,965)		(32,395)		(308,229)

Amortization of unrealized holding losses on held-to-maturity securities, net of taxes of $1,354, nil, $4,050 and nil, respectively	3,699		—		11,065		—
Derivatives qualifying as cash flow hedges:
Unrealized interest rate hedging gains (losses) arising during the period, net of taxes of $(185), $901, $(237) and $2,220, respectively	(535)		2,597		(684)		6,400
Reclassification adjustment to net income, net of taxes of $(17), $19, $(50) and $56, respectively	(47)		53		(143)		161
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses (gains) recognized during the period in net periodic benefit cost, net of taxes of $(153), $1,943, $(397) and $3,549, respectively	(446)		5,606		(1,160)		10,229
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $163, $(1,839), $458 and $(3,320), respectively	470		(5,303)		1,321		(9,572)
Other comprehensive loss, net of tax benefits	(34,875)		(96,012)		(21,996)		(301,011)
Comprehensive income (loss) attributable to Hawaiian Electric Industries, Inc.	$	6,243	$	(33,930)	$	128,453	$	(117,221)

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2022 Form 10-K.

Hawaiian Electric Industries, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

(dollars in thousands) September 30, 2017 December 31, 2016
Assets

Cash and cash equivalents $ 202,173
$ 278,452
Accounts receivable and unbilled revenues, net 264,426
237,950
Available-for-sale investment securities, at fair value 1,320,110
1,105,182
Stock in Federal Home Loan Bank, at cost 9,706
11,218
Loans receivable held for investment, net 4,623,234
4,683,160
Loans held for sale, at lower of cost or fair value 15,728
18,817
Property, plant and equipment, net of accumulated depreciation of $2,537,320 and $2,444,348 at September 30, 2017 and December 31, 2016, respectively 4,813,875
4,603,465
Regulatory assets 936,964
957,451
Other 474,444
447,621
Goodwill 82,190
82,190
Total assets $ 12,742,850
$ 12,425,506
Liabilities and shareholders’ equity

Liabilities

Accounts payable $ 160,897
$ 143,279
Interest and dividends payable 26,484
25,225
Deposit liabilities 5,752,326
5,548,929
Short-term borrowings—other than bank 24,498
—
Other bank borrowings 153,552
192,618
Long-term debt, net—other than bank 1,618,446
1,619,019
Deferred income taxes 756,814
728,806
Regulatory liabilities 466,216
410,693
Contributions in aid of construction 565,118
543,525
Defined benefit pension and other postretirement benefit plans liability 620,788
638,854
Other 460,396
473,512
Total liabilities 10,605,535
10,324,460
Preferred stock of subsidiaries - not subject to mandatory redemption 34,293
34,293
Commitments and contingencies (Notes 3 and 4)

Shareholders’ equity

Preferred stock, no par value, authorized 10,000,000 shares; issued: none —
—
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 108,785,978 shares and 108,583,413 shares at September 30, 2017 and December 31, 2016, respectively 1,661,492
1,660,910
Retained earnings 470,750
438,972
Accumulated other comprehensive loss, net of tax benefits (29,220 ) (33,129 )
Total shareholders’ equity 2,103,022
2,066,753
Total liabilities and shareholders’ equity $ 12,742,850
$ 12,425,506


(dollars in thousands)	September 30, 2023		December 31, 2022
Assets
Cash and cash equivalents	$	667,129	$	199,877
Restricted cash	15,164		5,050
Accounts receivable and unbilled revenues, net	540,082		511,903
Available-for-sale investment securities, at fair value	1,266,412		1,429,667
Held-to-maturity investment securities, at amortized cost	1,212,005		1,251,747
Stock in Federal Home Loan Bank, at cost	18,000		26,560
Loans held for investment, net	6,114,640		5,906,690
Loans held for sale, at lower of cost or fair value	2,171		824
Property, plant and equipment, net of accumulated depreciation of $3,341,082 and $3,192,545 at September 30, 2023 and December 31, 2022, respectively	5,917,342		5,687,003
Operating lease right-of-use assets	99,466		115,684

Regulatory assets	231,197		242,513
Other	826,020		824,536
Goodwill	82,190		82,190
Total assets	$	16,991,818	$	16,284,244
Liabilities and shareholders’ equity
Liabilities
Accounts payable	$	256,323	$	251,460
Interest and dividends payable	57,901		21,333
Deposit liabilities	8,224,351		8,169,696
Short-term borrowings—other than bank	—		172,568
Other bank borrowings	750,000		695,120
Long-term debt, net—other than bank	2,944,589		2,384,980
Deferred income taxes	258,942		262,462
Operating lease liabilities	108,681		126,604
Finance lease liabilities	122,320		48,709
Regulatory liabilities	1,101,773		1,055,650

Defined benefit pension and other postretirement benefit plans liability	70,785		71,813
Other	837,506		787,057
Total liabilities	14,733,171		14,047,452
Preferred stock of subsidiaries - not subject to mandatory redemption	34,293		34,293
Commitments and contingencies (Notes 2, 4 and 5)
Shareholders’ equity
Preferred stock, no par value, authorized 10,000,000 shares; issued: none	—		—
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 110,086,035 shares and 109,470,795 shares at September 30, 2023 and December 31, 2022, respectively	1,704,447		1,692,697
Retained earnings	877,931		845,830
Accumulated other comprehensive loss, net of tax benefits	(358,024)		(336,028)
Total shareholders’ equity	2,224,354		2,202,499
Total liabilities and shareholders’ equity	$	16,991,818	$	16,284,244

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2022 Form 10-K.

Hawaiian Electric Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited)

Common stock Retained
Accumulated
other
comprehensive

(in thousands) Shares Amount Earnings income (loss) Total
Balance, December 31, 2016 108,583
$ 1,660,910
$ 438,972
$ (33,129 ) $ 2,066,753
Net income for common stock —
—
132,927
—
132,927
Other comprehensive income, net of taxes —
—
—
3,909
3,909
Issuance of common stock, net of expenses 203
582
—
—
582
Common stock dividends —
—
(101,149 ) —
(101,149 )
Balance, September 30, 2017 108,786
$ 1,661,492
$ 470,750
$ (29,220 ) $ 2,103,022
Balance, December 31, 2015 107,460
$ 1,629,136
$ 324,766
$ (26,262 ) $ 1,927,640
Net income for common stock —
—
203,622
—
203,622
Other comprehensive income, net of taxes —
—
—
9,239
9,239
Issuance of common stock, net of expenses 1,043
28,285
—
—
28,285
Common stock dividends —
—
(100,398 ) —
(100,398 )
Balance, September 30, 2016 108,503
$ 1,657,421
$ 427,990
$ (17,023 ) $ 2,068,388


	Common stock			Retained		Accumulated other comprehensive
(in thousands)	Shares	Amount		Earnings		income (loss)		Total
Balance, December 31, 2022	109,471	$	1,692,697	$	845,830	$	(336,028)	$	2,202,499
Net income for common stock	—	—		54,721		—		54,721
Other comprehensive income, net of taxes	—	—		—		20,488		20,488
Share-based expenses and other, net	101	(307)		—		—		(307)
Common stock dividends (36¢ per share)	—	—		(39,446)		—		(39,446)
Balance, March 31, 2023	109,572	1,692,390		861,105		(315,540)		2,237,955
Net income for common stock	—	—		54,610		—		54,610
Other comprehensive loss, net of tax benefits	—	—		—		(7,609)		(7,609)
Share-based expenses and other, net	40	3,868		—		—		3,868
Common stock dividends (36¢ per share)	—	—		(39,447)		—		(39,447)
Balance, June 30, 2023	109,612	1,696,258		876,268		(323,149)		2,249,377
Net income for common stock	—	—		41,118		—		41,118
Other comprehensive loss, net of tax benefits	—	—		—		(34,875)		(34,875)
Dividend reinvestment and stock purchase plan	474	5,827		—		—		5,827
Share-based expenses and other, net	—	2,362		—		—		2,362
Common stock dividends (36¢ per share)	—	—		(39,455)		—		(39,455)
Balance, September 30, 2023	110,086	$	1,704,447	$	877,931	$	(358,024)	$	2,224,354
Balance, December 31, 2021	109,312	$	1,685,496	$	757,921	$	(52,533)	$	2,390,884
Net income for common stock	—	—		69,167		—		69,167
Other comprehensive loss, net of tax benefits	—	—		—		(117,159)		(117,159)
Share-based expenses and other, net	119	(949)		—		—		(949)
Common stock dividends (35¢ per share)	—	—		(38,301)		—		(38,301)
Balance, March 31, 2022	109,431	1,684,547		788,787		(169,692)		2,303,642
Net income for common stock	—	—		52,541		—		52,541
Other comprehensive loss, net of tax benefits	—	—		—		(87,840)		(87,840)
Share-based expenses and other, net	36	3,462		—		—		3,462
Common stock dividends (35¢ per share)	—	—		(38,301)		—		(38,301)
Balance, June 30, 2022	109,467	1,688,009		803,027		(257,532)		2,233,504
Net income for common stock	—	—		62,082		—		62,082
Other comprehensive loss, net of tax benefits	—	—		—		(96,012)		(96,012)
Share-based expenses and other, net	3	1,663		—		—		1,663
Common stock dividends (35¢ per share)	—	—		(38,315)		—		(38,315)
Balance, September 30, 2022	109,470	$	1,689,672	$	826,794	$	(353,544)	$	2,162,922

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2022 Form 10-K.

Hawaiian Electric Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)


	Nine months ended September 30
(in thousands)	2023		2022
Cash flows from operating activities
Net income	$	151,866	$	185,207
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property, plant and equipment	200,722		190,075
Other amortization	32,744		28,916
Provision for credit losses	10,053		(692)
Loans originated, held for sale	(37,288)		(120,195)
Proceeds from sale of loans, held for sale	36,086		126,357
Gain on sales of investment securities, net and equity-method investment	—		(8,123)
Gain on sale of loans, net	(701)		(1,630)
Deferred income taxes	(5,594)		(21,631)
Share-based compensation expense	8,281		7,337
Allowance for equity funds used during construction	(11,073)		(7,431)
Other	(5,315)		(5,392)
Changes in assets and liabilities
Decrease (increase) in accounts receivable and unbilled revenues, net	41,494		(159,619)
Decrease (increase) in fuel oil stock	38,587		(127,413)
Decrease in regulatory assets	13,908		34,278
Increase in regulatory liabilities	32,454		29,294
Increase in accounts, interest and dividends payable	70,850		39,009
Change in prepaid and accrued income taxes, tax credits and utility revenue taxes	(24,860)		73,279
Decrease in defined benefit pension and other postretirement benefit plans liability	(6,722)		(4,228)
Change in other assets and liabilities	(70,354)		(44,411)
Net cash provided by operating activities	475,138		212,987
Cash flows from investing activities
Available-for-sale investment securities purchased	—		(366,177)
Principal repayments on available-for-sale investment securities	117,042		285,519


Proceeds from repayments or maturities of held-to-maturity investment securities	52,823		10,433
Purchase of stock from Federal Home Loan Bank	(76,040)		(93,000)
Redemption of stock from Federal Home Loan Bank	84,600		88,000
Net increase in loans held for investment	(283,126)		(395,185)

Proceeds from sale of commercial loans	94,665		—
Purchase of loans held for investment	(26,195)		(77,274)
Capital expenditures	(342,364)		(236,278)

Contributions to low income housing investments	(418)		(740)
Acquisition of business	—		(25,706)
Other	9,375		15,646
Net cash used in investing activities	(369,638)		(794,762)

(continued)

Nine months ended September 30
(in thousands) 2017 2016
Cash flows from operating activities

Net income $ 134,344
$ 205,039
Adjustments to reconcile net income to net cash provided by operating activities

Depreciation of property, plant and equipment 150,123
145,684
Other amortization 15,362
7,368
Provision for loan losses 7,231
15,266
Loans receivable originated and purchased, held for sale (105,816 ) (172,657 )
Proceeds from sale of loans receivable, held for sale 119,731
168,490
Deferred income taxes 21,397
30,667
Share-based compensation expense 4,383
3,581
Allowance for equity funds used during construction (8,908 ) (6,010 )
Other (1,350 ) 3,234
Changes in assets and liabilities

Increase in accounts receivable and unbilled revenues, net (26,250 ) (12,104 )
Decrease in fuel oil stock 6,177
6,736
Decrease (increase) in regulatory assets 3,922
(2,251 )
Increase (decrease) in accounts, interest and dividends payable (10,390 ) 3,399
Change in prepaid and accrued income taxes, tax credits and utility revenue taxes 2,828
52,558
Increase in defined benefit pension and other postretirement benefit plans liability 670
150
Change in other assets and liabilities (22,311 ) (39,850 )
Net cash provided by operating activities 291,143
409,300
Cash flows from investing activities

Available-for-sale investment securities purchased (369,467 ) (354,165 )
Principal repayments on available-for-sale investment securities 155,026
172,829
Proceeds from sale of available-for-sale investment securities —
16,423
Purchase of stock from Federal Home Loan Bank (2,868 ) (2,773 )
Redemption of stock from Federal Home Loan Bank 4,380
2,233
Net decrease (increase) in loans held for investment 13,188
(175,303 )
Proceeds from sale of commercial loans 31,427
37,946
Proceeds from sale of real estate acquired in settlement of loans 411
829
Proceeds from sale of real estate held-for-sale —
1,764
Capital expenditures (314,404 ) (259,207 )
Contributions in aid of construction 40,603
23,568
Other 1,345
112
Net cash used in investing activities (440,359 ) (535,744 )
Cash flows from financing activities

Net increase in deposit liabilities 203,397
355,467
Net increase (decrease) in short-term borrowings with original maturities of three months or less 24,498
(103,063 )
Net increase (decrease) in retail repurchase agreements 24,469
(21,121 )
Proceeds from other bank borrowings 59,500
55,835
Repayments of other bank borrowings (123,034 ) (97,902 )
Proceeds from issuance of long-term debt 265,000
75,000
Repayment of long-term debt and funds transferred for redemption of special purpose revenue bonds (265,000 ) (75,000 )
Withheld shares for employee taxes on vested share-based compensation (3,796 ) (2,398 )
Net proceeds from issuance of common stock —
10,901
Common stock dividends (101,149 ) (83,620 )
Preferred stock dividends of subsidiaries (1,417 ) (1,417 )
Other (9,531 ) (2,361 )
Net cash provided by financing activities 72,937
110,321
Net decrease in cash and cash equivalents (76,279 ) (16,123 )
Cash and cash equivalents, beginning of period 278,452
300,478
Cash and cash equivalents, end of period $ 202,173
$ 284,355
Hawaiian Electric Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)(continued)


	Nine months ended September 30
(in thousands)	2023		2022
Cash flows from financing activities
Net increase (decrease) in deposit liabilities	(43,655)		86,673
Net increase (decrease) in short-term borrowings with original maturities of three months or less	(137,650)		117,127
Net increase (decrease) in other bank borrowings with original maturities of three months or less	(596,810)		320,735
Proceeds from issuance of short-term debt	65,000		—
Repayment of short-term debt	(100,000)		—
Proceeds from issuance of other bank borrowings	1,000,000		—
Repayment of other bank borrowings	(250,000)		—
Proceeds from issuance of long-term debt	625,000		67,312
Repayment of long-term debt	(64,317)		(16,752)
Withheld shares for employee taxes on vested share-based compensation	(2,356)		(3,158)
Net proceeds from issuance of common stock	437		—
Common stock dividends	(112,957)		(114,917)
Preferred stock dividends of subsidiaries	(1,417)		(1,417)
Other	(9,409)		(6,112)
Net cash provided by financing activities	371,866		449,491
Net increase (decrease) in cash, cash equivalents and restricted cash	477,366		(132,284)
Cash, cash equivalents and restricted cash, beginning of period	204,927		311,462
Cash, cash equivalents and restricted cash, end of period	682,293		179,178
Less: Restricted cash	(15,164)		(3,898)
Cash and cash equivalents, end of period	$	667,129	$	175,280

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2022 Form 10-K.

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (unaudited)

Three months ended September 30 Nine months ended September 30
(in thousands) 2017 2016 2017 2016
Revenues $ 598,769
$ 572,253
$ 1,674,255
$ 1,549,700
Expenses

Fuel oil 146,258
128,624
431,787
334,263
Purchased power 160,347
157,750
440,538
412,667
Other operation and maintenance 100,102
94,789
306,716
298,260
Depreciation 48,206
46,759
144,578
140,300
Taxes, other than income taxes 56,780
54,519
159,575
148,386
Total expenses 511,693
482,441
1,483,194
1,333,876
Operating income 87,076
89,812
191,061
215,824
Allowance for equity funds used during construction 3,482
2,274
8,908
6,010
Interest expense and other charges, net (16,907 ) (17,323 ) (52,625 ) (49,734 )
Allowance for borrowed funds used during construction 1,339
854
3,371
2,276
Income before income taxes 74,990
75,617
150,715
174,376
Income taxes 27,005
28,145
54,623
64,682
Net income 47,985
47,472
96,092
109,694
Preferred stock dividends of subsidiaries 228
228
686
686
Net income attributable to Hawaiian Electric 47,757
47,244
95,406
109,008
Preferred stock dividends of Hawaiian Electric 270
270
810
810
Net income for common stock $ 47,487
$ 46,974
$ 94,596
$ 108,198


	Three months ended September 30				Nine months ended September 30
(in thousands)	2023		2022		2023		2022
Revenues	$	794,987	$	955,971	$	2,419,539	$	2,483,636
Expenses
Fuel oil	267,438		383,602		881,692		874,543
Purchased power	177,795		225,209		498,990		606,827
Other operation and maintenance	142,508		121,110		407,184		371,259
Depreciation	61,165		58,711		182,781		175,921
Taxes, other than income taxes	74,723		88,290		228,034		231,288
Total expenses	723,629		876,922		2,198,681		2,259,838
Operating income	71,358		79,049		220,858		223,798
Allowance for equity funds used during construction	4,000		2,552		11,073		7,431
Retirement defined benefits credit—other than service costs	1,132		895		3,227		2,876
Interest expense and other charges, net	(22,447)		(19,609)		(63,565)		(56,735)
Allowance for borrowed funds used during construction	1,372		825		3,798		2,401
Income before income taxes	55,415		63,712		175,391		179,771
Income taxes	11,456		13,450		38,126		37,967
Net income	43,959		50,262		137,265		141,804
Preferred stock dividends of subsidiaries	228		228		686		686
Net income attributable to Hawaiian Electric	43,731		50,034		136,579		141,118
Preferred stock dividends of Hawaiian Electric	270		270		810		810
Net income for common stock	$	43,461	$	49,764	$	135,769	$	140,308

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2022 Form 10-K.

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)

Three months ended September 30 Nine months ended September 30
(in thousands) 2017 2016 2017 2016
Net income for common stock $ 47,487
$ 46,974
$ 94,596
$ 108,198
Other comprehensive income (loss), net of taxes:

Derivatives qualifying as cash flow hedges:
Effective portion of foreign currency hedge net unrealized gains arising during the period, net of taxes of nil, $205, nil and $368, respectively —
321
—
578
Reclassification adjustment to net income, net of (taxes) benefits of nil, $(110), $289 and $(110), respectively —
(173 ) 454
(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 of $2,306, $2,110, $6,916 and $6,331, respectively 3,618
3,314
10,857
9,941
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $2,290, $2,109, $6,872 and $6,327, respectively (3,596 ) (3,311 ) (10,790 ) (9,934 )
Other comprehensive income, net of taxes 22
151
521
412
Comprehensive income attributable to Hawaiian Electric Company, Inc. $ 47,509
$ 47,125
$ 95,117
$ 108,610


	Three months ended September 30				Nine months ended September 30
(in thousands)	2023		2022		2023		2022
Net income for common stock	$	43,461	$	49,764	$	135,769	$	140,308
Other comprehensive income (loss), net of taxes:



Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses (gains) recognized during the period in net periodic benefit cost, net of taxes of $(190), $1,877, $(516) and $3,393, respectively	(547)		5,411		(1,487)		9,782
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $163, $(1,839), $458 and $(3,320), respectively	470		(5,303)		1,321		(9,572)
Other comprehensive income (loss), net of taxes	(77)		108		(166)		210
Comprehensive income attributable to Hawaiian Electric Company, Inc.	$	43,384	$	49,872	$	135,603	$	140,518

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2022 Form 10-K.

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)


(dollars in thousands, except par value)	September 30, 2023		December 31, 2022
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	52,098	$	52,060
Plant and equipment	8,199,828		7,979,510
Right-of-use assets - finance lease	124,372		48,371
Less accumulated depreciation	(3,222,030)		(3,086,499)
Construction in progress	357,289		275,353
Utility property, plant and equipment, net	5,511,557		5,268,795
Nonutility property, plant and equipment, less accumulated depreciation of $39 and $63 as of September 30, 2023 and December 31, 2022, respectively	6,942		6,945
Total property, plant and equipment, net	5,518,499		5,275,740
Current assets
Cash and cash equivalents	274,854		39,242
Restricted cash	2,000		—
Customer accounts receivable, net	241,762		288,338
Accrued unbilled revenues, net	179,327		183,280
Other accounts receivable, net	89,823		13,567
Fuel oil stock, at average cost	152,768		191,530
Materials and supplies, at average cost	99,526		79,568
Prepayments and other	54,538		33,482
Regulatory assets	57,921		52,273
Total current assets	1,152,519		881,280
Other long-term assets
Operating lease right-of-use assets	76,061		89,318
Regulatory assets	173,276		190,240
Other	158,092		160,889
Total other long-term assets	407,429		440,447
Total assets	$	7,078,447	$	6,597,467

(continued)

(dollars in thousands, except par value) September 30, 2017
December 31, 2016
Assets

Property, plant and equipment
Utility property, plant and equipment

Land $ 53,913
$ 53,153
Plant and equipment 6,778,254
6,605,732
Less accumulated depreciation (2,460,429 ) (2,369,282 )
Construction in progress 307,492
211,742
Utility property, plant and equipment, net 4,679,230
4,501,345
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
Total property, plant and equipment, net 4,686,639
4,508,752
Current assets

Cash and cash equivalents 9,987
74,286
Customer accounts receivable, net 133,135
123,688
Accrued unbilled revenues, net 109,707
91,693
Other accounts receivable, net 4,097
5,233
Fuel oil stock, at average cost 60,253
66,430
Materials and supplies, at average cost 55,959
53,679
Prepayments and other 29,871
23,100
Regulatory assets 72,773
66,032
Total current assets 475,782
504,141
Other long-term assets

Regulatory assets 864,191
891,419
Unamortized debt expense 661
208
Other 80,228
70,908
Total other long-term assets 945,080
962,535
Total assets $ 6,107,501
$ 5,975,428
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
Premium on capital stock 601,487
601,491
Retained earnings 1,120,571
1,091,800
Accumulated other comprehensive income (loss), net of taxes 199
(322 )
Common stock equity 1,829,075
1,799,787
Cumulative preferred stock — not subject to mandatory redemption 34,293
34,293
Long-term debt, net 1,318,623
1,319,260
Total capitalization 3,181,991
3,153,340
Commitments and contingencies (Note 3)

Current liabilities

Short-term borrowings from non-affiliates 6,000
—
Accounts payable 124,240
117,814
Interest and preferred dividends payable 25,261
22,838
Taxes accrued 183,365
172,730
Regulatory liabilities 3,399
3,762
Other 59,611
55,221
Total current liabilities 401,876
372,365
Deferred credits and other liabilities

Deferred income taxes 767,611
733,659
Regulatory liabilities 462,817
406,931
Unamortized tax credits 88,827
88,961
Defined benefit pension and other postretirement benefit plans liability 581,713
599,726
Other 57,548
76,921
Total deferred credits and other liabilities 1,958,516
1,906,198
Contributions in aid of construction 565,118
543,525
Total capitalization and liabilities $ 6,107,501
$ 5,975,428
Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited) (continued)


(dollars in thousands, except par value)	September 30, 2023		December 31, 2022
Capitalization and liabilities
Capitalization
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 17,854,278 shares at September 30, 2023 and December 31, 2022)	$	119,048	$	119,048
Premium on capital stock	810,955		810,955
Retained earnings	1,450,325		1,411,306
Accumulated other comprehensive income, net of taxes-retirement benefit plans	2,695		2,861
Common stock equity	2,383,023		2,344,170
Cumulative preferred stock — not subject to mandatory redemption	34,293		34,293
Long-term debt, net	1,934,044		1,584,854
Total capitalization	4,351,360		3,963,317
Commitments and contingencies (Notes 2 and 4)
Current liabilities
Current portion of operating lease liabilities	17,012		19,095
Current portion of long-term debt, net	99,996		99,962
Short-term borrowings from non-affiliates	—		87,967

Accounts payable	201,699		202,492
Interest and preferred dividends payable	30,058		17,176
Taxes accrued, including revenue taxes	274,272		289,902
Regulatory liabilities	26,325		31,475
Other	163,307		85,596
Total current liabilities	812,669		833,665
Deferred credits and other liabilities
Operating lease liabilities	66,299		78,715
Finance lease liabilities	118,140		46,048
Deferred income taxes	385,675		384,430
Regulatory liabilities	1,075,449		1,024,175
Unamortized tax credits	89,747		95,300
Defined benefit pension liability	48,884		49,748
Other	130,224		122,069
Total deferred credits and other liabilities	1,914,418		1,800,485
Total capitalization and liabilities	$	7,078,447	$	6,597,467

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2022 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

(in thousands) Shares Amount stock earnings income (loss) Total
Balance, December 31, 2016 16,020
$ 106,818
$ 601,491
$ 1,091,800
$ (322 ) $ 1,799,787
Net income for common stock —
—
—
94,596
—
94,596
Other comprehensive income, net of taxes —
—
—
—
521
521
Common stock dividends —
—
—
(65,825 ) —
(65,825 )
Common stock issuance expenses —
—
(4 ) —
—
(4 )
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
Net income for common stock —
—
—
108,198
—
108,198
Other comprehensive income, net of taxes —
—
—
—
412
412
Common stock dividends —
—
—
(70,199 ) —
(70,199 )
Common stock issuance expenses —
—
(9 ) —
—
(9 )
Balance, September 30, 2016 15,805
$ 105,388
$ 578,921
$ 1,081,081
$ 1,337
$ 1,766,727


	Common stock			Premium on capital		Retained		Accumulated other comprehensive
(in thousands)	Shares	Amount		stock		earnings		income (loss)		Total
Balance, December 31, 2022	17,854	$	119,048	$	810,955	$	1,411,306	$	2,861	$	2,344,170
Net income for common stock	—	—		—		47,009		—		47,009
Other comprehensive loss, net of taxes	—	—		—		—		(45)		(45)
Common stock dividends	—	—		—		(32,250)		—		(32,250)

Balance, March 31, 2023	17,854	119,048		810,955		1,426,065		2,816		2,358,884
Net income for common stock	—	—		—		45,299		—		45,299
Other comprehensive loss, net of taxes	—	—		—		—		(44)		(44)
Common stock dividends	—			—		(32,250)		—		(32,250)
Balance, June 30, 2023	17,854	119,048		810,955		1,439,114		2,772		2,371,889
Net income for common stock	—	—		—		43,461		—		43,461
Other comprehensive loss, net of taxes	—	—		—		—		(77)		(77)
Common stock dividends	—	—		—		(32,250)		—		(32,250)
Balance, September 30, 2023	17,854	$	119,048	$	810,955	$	1,450,325	$	2,695	$	2,383,023
Balance, December 31, 2021	17,753	$	118,376	$	798,526	$	1,348,277	$	(3,280)	$	2,261,899
Net income for common stock	—	—		—		46,409		—		46,409
Other comprehensive income, net of taxes	—	—		—		—		51		51
Common stock dividends	—	—		—		(31,475)		—		(31,475)

Balance, March 31, 2022	17,753	118,376		798,526		1,363,211		(3,229)		2,276,884
Net income for common stock	—	—		—		44,135		—		44,135
Other comprehensive income, net of taxes	—	—		—		—		51		51
Common stock dividends	—	—		—		(31,475)		—		(31,475)

Balance, June 30, 2022	17,753	118,376		798,526		1,375,871		(3,178)		2,289,595
Net income for common stock	—	—		—		49,764		—		49,764
Other comprehensive income, net of taxes	—	—		—		—		108		108
Common stock dividends	—	—		—		(31,475)		—		(31,475)
Balance, September 30, 2022	17,753	$	118,376	$	798,526	$	1,394,160	$	(3,070)	$	2,307,992

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2022 Form 10-K.

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)


	Nine months ended September 30							Nine months ended September 30
(in thousands)	2017			2016			(in thousands)	2023		2022
Cash flows from operating activities							Cash flows from operating activities
Net income	$	96,092		$	109,694		Net income	$	137,265	$	141,804
Adjustments to reconcile net income to net cash provided by operating activities							Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property, plant and equipment	144,578			140,300			Depreciation of property, plant and equipment	182,781		175,921
Other amortization	6,118			5,380			Other amortization	19,639		19,044
Deferred income taxes	29,537			55,648			Deferred income taxes	(8,807)		(27,671)

State refundable credit							State refundable credit	(8,625)		(8,275)
Bad debt expense							Bad debt expense	3,937		4,406
Allowance for equity funds used during construction	(8,908		)	(6,010		)	Allowance for equity funds used during construction	(11,073)		(7,431)

Other	526			3,234			Other	549		94
Changes in assets and liabilities							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							Decrease (increase) in accounts receivable	40,187		(64,404)
Decrease (increase) in accrued unbilled revenues							Decrease (increase) in accrued unbilled revenues	3,759		(91,256)
Decrease (increase) in fuel oil stock							Decrease (increase) in fuel oil stock	38,762		(125,647)
Increase in materials and supplies	(2,280		)	(2,927		)	Increase in materials and supplies	(19,958)		(5,702)
Decrease (increase) in regulatory assets	3,922			(2,251		)
Decrease in accounts payable	(22,841		)	(676		)
Decrease in regulatory assets							Decrease in regulatory assets	13,908		34,278
Increase in regulatory liabilities							Increase in regulatory liabilities	32,454		29,294
Increase in accounts payable							Increase in accounts payable	26,967		18,108
Change in prepaid and accrued income taxes, tax credits and revenue taxes	5,291			(9,595		)	Change in prepaid and accrued income taxes, tax credits and revenue taxes	(18,754)		57,681
Increase in defined benefit pension and other postretirement benefit plans liability	453			360
Decrease in defined benefit pension and other postretirement benefit plans liability							Decrease in defined benefit pension and other postretirement benefit plans liability	(6,202)		(3,647)
Change in other assets and liabilities	(2,662		)	(13,309		)	Change in other assets and liabilities	(20,678)		(22,430)
Net cash provided by operating activities	229,902			275,271			Net cash provided by operating activities	406,111		124,167
Cash flows from investing activities							Cash flows from investing activities
Capital expenditures	(278,004		)	(250,704		)	Capital expenditures	(334,497)		(225,876)
Contributions in aid of construction	40,603			23,568
Other	8,114			1,100			Other	5,216		6,750
Net cash used in investing activities	(229,287		)	(226,036		)	Net cash used in investing activities	(329,281)		(219,126)
Cash flows from financing activities							Cash flows from financing activities
Common stock dividends	(65,825		)	(70,199		)	Common stock dividends	(96,750)		(94,425)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(1,496		)	(1,496		)	Preferred stock dividends of Hawaiian Electric and subsidiaries	(1,496)		(1,496)
Proceeds from issuance of special purpose revenue bonds	265,000			—
Funds transferred for redemption of special purpose revenue bonds	(265,000		)	—
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	6,000			21,000

Proceeds from issuance of long-term debt							Proceeds from issuance of long-term debt	350,000		60,000

Net increase (decrease) in short-term borrowings from non-affiliates and affiliates with original maturities of three months or less							Net increase (decrease) in short-term borrowings from non-affiliates and affiliates with original maturities of three months or less	(87,967)		97,450
Payments of obligations under finance leases							Payments of obligations under finance leases	(2,162)		(266)
Other	(3,593		)	(12		)	Other	(843)		(258)
Net cash used in financing activities	(64,914		)	(50,707		)
Net decrease in cash and cash equivalents	(64,299		)	(1,472		)
Cash and cash equivalents, beginning of period	74,286			24,449
Net cash provided by financing activities							Net cash provided by financing activities	160,782		61,005
Net increase (decrease) in cash, cash equivalents and restricted cash							Net increase (decrease) in cash, cash equivalents and restricted cash	237,612		(33,954)
Cash, cash equivalents and restricted cash, beginning of period							Cash, cash equivalents and restricted cash, beginning of period	39,242		55,258
Cash, cash equivalents and restricted cash, end of period							Cash, cash equivalents and restricted cash, end of period	276,854		21,304
Less: Restricted cash							Less: Restricted cash	(2,000)		—
Cash and cash equivalents, end of period	$	9,987		$	22,977		Cash and cash equivalents, end of period	$	274,854	$	21,304

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2016~~2022 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~~.2022.

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 30, ~~2017~~2023 and December 31, ~~2016~~,2022 and the results of their operations for the three and nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 and ~~their~~ cash flows for the nine months ended September 30, ~~2017~~2023 and ~~2016.~~2022. 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~~.Credit Losses. In March ~~2016, the~~ 2022, Financial Accounting Standards Board ~~(FASB)~~issued Accounting Standards Update (ASU) No. ~~2016-09, “Compensation-Stock Compensation~~2022-02, “Financial Instruments-Credit Losses (Topic ~~718)~~326): ~~Improvements to Employee Share-Based Payment Accounting,~~Troubled Debt Restructurings and Vintage Disclosures,” which ~~simplifies several aspects of~~eliminates 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~~Troubled Debt Restructurings (TDRs) by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the ~~value of withheld shares~~recognition and measurement guidance 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,~~TDRs, an entity ~~was required to perform a two-step test~~must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine ~~the amount, if any,~~whether a modification results in a new loan or a continuation 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.

existing loan. The ~~Company plans to adopt ASU No. 2017-04 prospectively~~amendments 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~~this update also require that an entity ~~should recognize revenue to depict~~disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the ~~transfer~~scope of ~~promised goods or services to customers~~Subtopic 326-20, “Financial Instruments-Credit Losses-Measured at Amortized Cost.” Gross write-off information must be included in ~~an amount~~the vintage disclosures required for public business entities in accordance with paragraph 325-20-50-6, which requires 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~~disclose the ~~contract/s with a customer, (2) identify~~amortized cost basis of financing receivables by credit-quality indicator and class of financing receivable by year of origination. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. ASB updated the ~~performance obligations~~accounting for certain loan refinancings and restructurings, and included the required disclosures in the ~~contract, (3) determine~~Notes herein in accordance with ASU No. 2022-02.

Note 2 · Maui windstorm and wildfires

On August 8, 2023, a number of brush fires in the ~~transaction price, (4) allocate~~West Maui (Lahaina) and Upcountry Maui areas, caused widespread property damage, including damage to property of the ~~transaction price~~Utilities, and at least 99 fatalities in Lahaina (the Maui windstorm and wildfires). The Maui windstorm and wildfires were fueled by extreme winds and drought-like conditions in those parts of Maui. According to the ~~performance obligations~~County of Maui, in addition to the loss of life, over 3,450 acres burned and over 2,500 structures were destroyed. In Lahaina, a fire was reported at about 6:30 a.m. (the “Morning Fire”) and appears to have been caused by power lines that fell in high winds and spread into a field near the Intermediate School. The Maui County Fire Department responded promptly to the Morning Fire, and according to the Fire Department’s public statement that morning, by 9 a.m. the Morning Fire was “100% contained.” The Maui County fire chief subsequently reported that the Fire Department had determined that the Morning Fire was “extinguished.” Shortly before 3 p.m. that day, while the power remained off, Utility crew members saw a small fire in the ~~contract,~~same field about 75 yards away from Lahainaluna Road. They immediately called 911 and ~~(5) recognize revenue when, or as,~~reported the ~~entity satisfies a performance obligation. ASU No. 2014-09 also requires disclosure~~fire (the “Afternoon Fire”). At the time of the ~~nature, amount, timing~~Afternoon Fire, the Company’s power lines in the area where that fire ignited were not energized and ~~uncertainty~~had not been energized for more than six hours. By the time the Maui County Fire Department arrived back on the scene, it was not able to contain the Afternoon Fire and it spread out of ~~revenue~~control toward Lahaina. No determination as to the cause of the Afternoon Fire has been made. The Company believes that most of the property damage and ~~cash flows arising~~all of the fatalities are from ~~contracts with customers.~~the Afternoon Fire.

The circumstances surrounding the Maui windstorm and wildfires are currently the subject of several investigations. As of September 30, ~~2017,~~2023, on a consolidated basis, the Company has ~~identified its revenue streams from, and performance obligations~~incurred $27.6 million of incremental expenses related to ~~contracts with customers~~the Maui windstorm and ~~has performed an analysis of these revenue streams for~~wildfires, which excludes the ~~impacts of Topic 606. The revenue~~

$75 million contribution and insurance receivable as discussed in

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Subsequent event - One ‘Ohana Initiative below. In addition, the Utilities incurred $8.0 million of total capital costs related to the Maui windstorm and wildfires.

Restoration costs and recoveries. The Utilities have since restored electric service to more than 95% of homes and businesses on the island of Maui that were affected by the Maui windstorm and wildfires. Replacement of poles, transformers, power lines and other equipment in and around Lahaina and Upcountry Maui that were damaged is ongoing. On August 21, 2023, Maui Electric filed an application with the Public Utilities Commission of the State of Hawaii (PUC), requesting the PUC’s approval for the deferral accounting treatment for incremental non-labor expenses related to the Utilities’ response and restoration efforts and other expenses arising from and associated with the Maui windstorm and wildfires, beginning from August 8, 2023 and until December 31, 2024, to preserve the Utilities’ ability to seek cost recovery through a separate request when the total costs and impacts are better known. On October 13, 2023, the Utilities filed an amended application to add Hawaiian Electric and Hawaii Electric Light as applicants. As of September 30, 2023, the amended application was subject to ~~Topic 606 is largely~~ the ~~Utilities’ electric sales revenue~~PUC’s approval and no costs have been deferred.

While the Utilities plan to seek recovery of damage to covered electrical infrastructure under their insurance programs, the timing and amount of any insurance recoveries are not determinable at this time and as such, an insurance receivable has not been recorded as of the date of this filing. The Company’s property insurance has a total policy limit of $500 million with a $1 million retention for damages related to Utility-owned non-generating assets, including overhead transmission and distribution assets within 1,000 feet of such assets. The Utilities believe capital expenditures related to restoration that are not covered by insurance will be managed under their current regulatory mechanisms, the recovery of which would be subject to PUC approval.

ASB’s Lahaina branch, including most of its contents and automated teller machine, was destroyed in the fire. The Bank leased the property of its Lahaina location.

Third-party claims and other proceedings. Multiple civil and class action lawsuits related to the Maui windstorm and wildfires have been filed in the Maui and Oahu Circuit Courts against HEI, the Utilities, and other defendants, including the County of Maui, the State of Hawaii and related state entities, private landowners and developers, and telecommunications companies (collectively “tort-related legal claims”). Most of these lawsuits allege that the defendants were responsible for, and/or negligent in failing to prevent or respond to the wildfires that led to the property destruction and loss of life. Other claims include, among other things, personal injury, wrongful death, emotional distress and inverse condemnation. One lawsuit asserting similar theories and claims was filed by the County of Maui against HEI and the ~~Utilities’~~Utilities. Additional lawsuits may be filed against the Company and ~~ASB’s fee income.~~other defendants in the future. The plaintiffs seek to recover damages and other costs, including punitive damages. For a discussion of the Company’s assessment of potential exposure to claims, see Subsequent event - One ‘Ohana Initiative below.

On August 24, 2023, a putative securities class action captioned Bhangal v. Hawaiian Electric Industries, Inc., et al., No.: 3:23-cv-04332-JSC was filed in the United States District Court for the Northern District of California. The lawsuit alleges violations of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against HEI and certain of its current and former officers, and Section 20(a) of the Exchange Act against certain of HEI’s current and former officers. Plaintiff broadly alleges that HEI and certain of its current and former officers made materially false and misleading statements or omissions regarding HEI’s wildfire prevention and safety protocols and related matters. Plaintiffs seek unspecified monetary damages. On October 5, 2023, the court entered an order extending Defendants’ time to respond to the complaint until after a lead plaintiff has been appointed by the court in accordance with relevant procedures of the Private Securities Litigation Reform Act of 1995 and Defendants have not yet responded to the complaint. A hearing on competing motions for appointment of lead plaintiff is scheduled for November 30, 2023. The Company intends to vigorously defend against this action. There is no assurance that the Company will be successful in the defense of the litigation or that insurance will be available or adequate to fund any potential settlement or judgment or the litigation costs of the action. The Company is unable to predict the outcome or reasonably estimate a range of possible loss at this time.

Also, on September 11, 2023, a putative shareholder derivative action captioned Rice v. Connors, et al., No. 1CCV-23-0001181 was filed in the Circuit Court of the First Circuit, State of Hawai‘i. This action is purportedly brought by a shareholder on behalf of nominal defendants HEI and Hawaiian Electric ~~do not expect a material impact~~against certain current and former officers and directors of HEI and Hawaiian Electric. Plaintiff asserts Hawai‘i state law breach of fiduciary duty, abuse of control, corporate waste and unjust enrichment claims allegedly arising from the fires that occurred on ~~the timing or pattern~~Maui in August 2023 and certain of ~~revenue recognition upon adoption~~HEI’s prior public disclosures. Plaintiff seeks, on behalf of ~~ASU No. 2014-09, but do expect to provide expanded disclosures around the amount, timing, nature~~HEI and ~~uncertainty of our revenues from contracts with customers. The Company plans to adopt ASU No. 2014-09 (and subsequently issued revenue-related ASUs)~~Hawaiian Electric, compensatory and punitive damages, restitution and equitable relief 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~~HEI’s corporate governance, policies and culture. On October 27, 2023, the ~~impact~~plaintiff filed an amended complaint adding claims for aiding and abetting state law breach of ~~adoption will not be material to the Company’s~~fiduciary duty, and ~~Hawaiian Electric’s consolidated financial statements.~~

~~Cash Flows~~. ~~In August 2016, the FASB issued ASU No. 2016-15, “Statement~~for purported violations 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~~Hawai‘i’s Nonprofit Corporations Act §414D-302. Defendants have not yet ~~determined~~been served, and no substantive proceedings have occurred. While 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~~Company has obligations to indemnify and/or advance 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.~~

defendants’ legal

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

fees and costs in connection with this lawsuit, any monetary recovery in the derivative litigation should accrue to the Company. The Company is unable to predict the ultimate outcome and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome.

Legal costs in connection with the litigation and loss contingencies are expensed as incurred. For the three months ended September 30, 2023, the Company incurred and accrued $10.8 million ($6.3 million by the Utilities) of legal expenses to address these lawsuits and other legal matters related to the Maui windstorm and wildfires. The Company has $165 million of excess liability insurance for third party claims, including claims related to wildfires, with a possible retention of up to $1.5 million. Reimbursement of legal costs under the policy are recorded as a reduction of expense when probable and reasonably estimable.

Subsequent event - One ‘Ohana Initiative. On November 8, 2023, Hawaii Governor Josh Green announced the One ‘Ohana Initiative (the Initiative) as a collective path forward to recovery from the Maui windstorm and wildfires. The Initiative is a new humanitarian aid fund expected to exceed $150 million, with the objective to compensate, in an expedited manner, those who have lost loved ones and those who have suffered severe injuries in the Maui windstorm and wildfires. The Initiative provides an alternative to a lengthy and expensive legal process. Beneficiaries are anticipated to receive payments of more than $1 million each as early as the second quarter of 2024 after an administrator is selected and processes are established. In exchange for receiving such a payment, beneficiaries will be required to waive their ability to pursue legal claims for wrongful death and severe injuries.

Hawaiian Electric fully supports this humanitarian initiative and has pledged to contribute up to $75 million. The Governor announced that other parties, including the State of Hawaii, the County of Maui, and Kamehameha Schools have all agreed to contribute to the fund, and additional contributions from other parties are possible. Hawaiian Electric’s contribution to the Initiative will be less than half of the total, and Hawaiian Electric's insurance carriers have agreed to fund its share of the contributions to the fund. Hawaiian Electric’s contribution is reflective of its commitment to join with community partners to provide solutions to promote Maui’s recovery. Hawaiian Electric’s commitment to contribute to the Initiative is not an admission of guilt or reflection of fault or liability related to the wildfires.

In connection with its commitment to contribute to the Initiative, the Utilities accrued, as of September 30, 2023, $75 million, and concurrently, recorded an insurance reimbursement receivable of an equivalent amount as the recovery of the Utilities’ contribution to the Initiative under its excess liability insurance policy is deemed probable. The Initiative contemplates additional phases, including a process to potentially resolve remaining tort-related legal claims, as well as seeking legislation to reduce wildfire risk and provide financial support to help ensure a strong energy future for all of Hawaii. While the Utilities plan to participate in a process with the State and community partners to explore solutions to support Maui’s recovery and compensate victims for damages, the Utilities are unable to reasonably estimate any additional potential loss, or range of loss. If additional liabilities were to be incurred, the loss could be material to the Utilities’ results of operations, financial positions and cash flows. If any such losses were to be sufficiently high, the Utilities may not have liquidity or the ability to access liquidity at levels necessary to satisfy such losses.

The ~~Hawaii Electric Light 2016 test year~~Utilities charged the pending contribution to expense, included in “Expenses-Other operation and maintenance” and “Expenses-Electric utility” in the Hawaiian Electric ~~consolidated 2014~~ and ~~2017 test year revenue requirements were based on their current accounting for retirement benefits,~~subsidiaries Condensed Consolidated Statements of Income and ~~reflect~~HEI and subsidiaries’ Condensed Consolidated Statements of Income, respectively, which was offset by the ~~capitalization~~probable insurance recovery.


(in millions)	September 30, 2023
2023 Maui windstorm and wildfires
One ‘Ohana Initiative contribution1	$	75
Insurance recovery2	(75)

1 As 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 costsSeptember 30, 2023, One ‘Ohana Initiative contribution is included in ~~rates). In Hawaii~~“Current liabilities-Other” and “Liabilities-Other” in the Hawaiian Electric ~~Light’s (2016 test year)~~ and ~~Hawaiian Electric’s (consolidated 2014~~subsidiaries’ Condensed Consolidated Balance Sheet and ~~2017 test years) on-going rate cases, each utility proposed that for 2018~~HEI and ~~until its next rate case, the non-service cost portion~~subsidiaries’ Condensed Consolidated Balance Sheet, respectively.

2 As of ~~the test year pension and OPEB costs that are estimated to be capitalized, be deferred and~~September 30, 2023, One ‘Ohana Initiative insurance recoveries is included in ~~the pension~~“Current assets-Other accounts receivables, net” and ~~OPEB tracking mechanisms,~~“Assets-Accounts receivable 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 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 assetunbilled revenues, net” in the condensed consolidated statement 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.Hawaiian Electric and subsidiaries’ Condensed Consolidated Balance Sheet and HEI and subsidiaries’ Condensed Consolidated Balance Sheet, respectively.

~~The Company plans to adopt ASU No. 2016-02 in the first quarter of 2019 and has not yet determined the method or impact of adoption.~~

~~Credit 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 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 debt security has been below the amortized cost will no longer impact the determination of whether a credit loss exists. The AFS 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).

~~The Company plans to adopt~~ ~~ASU No.~~ ~~2016-13 in the first quarter of 2020 and has not yet determined the impact of adoption.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

2Note 3 · Segment financial information

(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


(in thousands)	Electric utility		Bank		Other		Total
Three months ended September 30, 2023
Revenues	$	794,987	$	100,974	$	5,912	$	901,873


Income (loss) before income taxes	$	55,415	$	12,749	$	(19,054)	$	49,110
Income taxes (benefit)	11,456		1,384		(5,319)		7,521
Net income (loss)	43,959		11,365		(13,735)		41,589
Preferred stock dividends of subsidiaries	498		—		(27)		471
Net income (loss) for common stock	$	43,461	$	11,365	$	(13,708)	$	41,118
Nine months ended September 30, 2023
Revenues	$	2,419,539	$	291,716	$	14,540	$	2,725,795


Income (loss) before income taxes	$	175,391	$	61,511	$	(48,121)	$	188,781
Income taxes (benefit)	38,126		11,380		(12,591)		36,915
Net income (loss)	137,265		50,131		(35,530)		151,866
Preferred stock dividends of subsidiaries	1,496		—		(79)		1,417
Net income (loss) for common stock	$	135,769	$	50,131	$	(35,451)	$	150,449
Total assets (at September 30, 2023)	$	7,078,447	$	9,657,428	$	255,943	$	16,991,818
Three months ended September 30, 2022


Revenues	$	955,971	$	81,411	$	4,815	$	1,042,197
Income (loss) before income taxes	$	63,712	$	27,281	$	(11,088)	$	79,905
Income taxes (benefit)	13,450		6,525		(2,623)		17,352
Net income (loss)	50,262		20,756		(8,465)		62,553
Preferred stock dividends of subsidiaries	498		—		(27)		471
Net income (loss) for common stock	$	49,764	$	20,756	$	(8,438)	$	62,082
Nine months ended September 30, 2022
Revenues from external customers and other sources	$	2,483,632	$	231,850	$	7,390	$	2,722,872
Intersegment revenues (eliminations)	4		—		(4)		—
Revenues	$	2,483,636	$	231,850	$	7,386	$	2,722,872
Income (loss) before income taxes	$	179,771	$	79,605	$	(25,774)	$	233,602
Income taxes (benefit)	37,967		17,513		(7,085)		48,395
Net income (loss)	141,804		62,092		(18,689)		185,207
Preferred stock dividends of subsidiaries	1,496		—		(79)		1,417
Net income (loss) for common stock	$	140,308	$	62,092	$	(18,610)	$	183,790
Total assets (at December 31, 2022)	$	6,597,467	$	9,545,970	$	140,807	$	16,284,244

Intercompany electricity sales of the Utilities to ~~the bank~~ASB 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.~~Sales from Hamakua Energy, LLC ~~has agreed~~(Hamakua Energy) 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)

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.

3Note 4 ·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~~Power purchase agreements. HECO Capital Trust III (Trust III) was created and exists for the exclusive purposes of (i) issuing 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 Hawaiian Electric, (ii) investing the proceeds 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. The 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 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. Trust III’s income statements for the nine months ended September 30, 2017 consisted of $2.5 million of interest income received from the 2004 Debentures; $2.4 million of distributions to holders of the Trust Preferred Securities; and $75,000 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 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.

~~Power purchase agreements~~. ~~As of~~ ~~September 30, 2017~~,2023, the Utilities had ~~five~~ ~~PPAs~~four power purchase agreements (PPAs) for firm capacity 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~~two 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~~two 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. However, 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. The Utilities are subject in the normal course of business to ~~pending~~legal, regulatory and ~~threatened legal~~environmental proceedings. ~~Management~~Excluding the potential liabilities from the Maui windstorm and wildfires, 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. The Utilities record loss contingencies when the outcome of such proceedings is probable and when the amount of the loss is reasonably estimable. The Utilities also evaluate, on a continuous basis, whether developments in such proceedings could cause these assessments or estimates to change. Assessment regarding future events is required when evaluating whether a loss is probable or reasonably possible, and as to whether such loss or a range of such loss is estimable. Management is often unable to estimate a reasonably possible loss, or a range of loss, particularly in cases in which: (i) the damages sought are indeterminate or the basis for the damages claimed is not clear; (ii) proceedings are in early stages; (iii) discovery is not complete; (iv) the matters involve novel or unsettled legal theories; (v) significant facts are in dispute; (vi) a large number of parties are represented (including circumstances in which it is uncertain how liability, if any, would be shared among multiple defendants); (vii) a lower court or administrative agency’s decision or ruling has been appealed; and/or (vii) a wide range of potential outcomes exist. In such cases, there may be considerable uncertainty regarding the timing or ultimate resolution, including any possible loss, fine, penalty, or business impact.

August 2023 Maui windstorm and wildfires. See Note 2 of the Condensed Consolidated Financial Statements

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
(in millions)		2023		2022		2023		2022
Kalaeloa		$	77	$	101	$	211	$	244
AES Hawaii 1		—		21		—		82
HPOWER		17		18		51		56
Hamakua Energy		13		16		52		46
Puna Geothermal Venture		7		13		24		37
Wind IPPs		42		37		99		93
Solar IPPs		21		18		57		44
Other IPPs 2		1		1		5		5
Total IPPs		$	178	$	225	$	499	$	607

1 The term of the PPA with AES Hawaii expired on September 1, 2022 and the AES Hawaii coal plant ceased operations.

Three months ended September 30 Nine months ended September 30
(in millions) 2017 2016 2017 2016
Kalaeloa $ 48
$ 44
$ 136
$ 109
AES Hawaii 39
38
103
112
HPOWER 18
19
51
52
Puna Geothermal Venture 10
7
28
19
HEP 8
8
25
23
Other IPPs ¹
38
42
98
98
Total IPPs $ 161
$ 158
$ 441
$ 413
2 Includes hydro power and other PPAs.


¹	~~Includes wind power, solar power, feed-in tariff projects and other 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 purchase 180 megawatts (MW) of firm capacity for a period of 25 years beginning in May 1991. In October 2004, 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 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. Hawaiian Electric and Kalaeloa have agreed that neither party will terminate the PPA prior to October 31, 2018.

~~AES Hawaii, Inc.~~ ~~Under a PPA entered into in March 1988, as amended (through Amendment No. 2) for a period of 30 years beginning September 1992, Hawaiian Electric agreed~~is committed to purchase ~~180~~208 MW of firm capacity from ~~AES Hawaii.~~Kalaeloa. 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, butOctober 2021, Hawaiian Electric and ~~AES Hawaii were not able to reach an agreement on~~Kalaeloa signed the amendment. In June 2015, AES Hawaii filed an arbitration demand regarding a dispute about whether Hawaiian Electric was obligated to buy up to 9 MW of additional capacity based on a 1992 letter. Hawaiian Electric responded to the arbitration demandAmended and ~~in October 2015, AES Hawaii~~Restated Power Purchase Agreement for Firm Dispatchable Capacity 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 negotiationEnergy (Amended and ~~PUC approval of an amendment to the existing PPA.~~

In November 2015, Hawaiian Electric entered into Amendment No. 3 for which 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)~~

~~of the Settlement Agreement and resolved AES Hawaii's claims. Following the PUC's decision, the parties agreed~~Restated PPA) to extend the ~~stay~~PPA for an additional term of 10 years. The Amended and Restated PPA was approved by the PUC on November 23, 2022. The new pricing provisions in the Amended and Restated PPA took effect on January 1, 2023.

Stage 1 Renewable PPAs. In February 2018, the Utilities issued their Stage 1 renewable request for proposals and have procured eight renewable PPAs with a total of 274.5 MW capacity. The total annual payments to be made by the Utilities under the eight renewable PPAs are estimated at $71.2 million. The Utilities have received PUC approvals to recover the total projected annual payments under the eight renewable PPAs through the purchased power adjustment clause (PPAC) to the extent such costs are not included in base rates. The Utilities have accounted for the battery portion of three PPAs that were placed in service, including the AES Waikoloa Solar project that began commercial operation on April 21, 2023, which has a capacity of 30 MW with 120 MWh batteries, as finance leases and recorded lease liabilities with corresponding right-of-use assets of $124 million. The timing of the ~~arbitration proceeding, while settlement discussions continue.~~Utilities’ recognition of the expense conforms to ratemaking treatment for the Utilities’ recovery of the cost of electricity and is included in purchased power for the interest and amortization of financing leases related to PPAs. Any material differences between expense recognition and timing of payments are deferred as a regulatory asset or liability in order to match what is being recovered for ratemaking purposes.

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~~which resulted in the ~~PPA and failed to provide adequate assurances that it could perform or had~~termination of the ~~financial means to perform. Hawaii Electric Light terminated~~original PPA. Following the ~~PPA on March 1, 2016. On November 30, 2016,~~termination, Hu Honua filed a ~~civil complaint~~lawsuit in the ~~United States~~U.S. District Court for the District of Hawaii. The parties reached a settlement that provided that they would execute an amended and restated PPA dated May 9, 2017, provided that the amended and restated PPA was still subject to PUC approval. On May 23, 2022, the PUC issued a decision and order denying the amended and restated PPA, based on, among other things, findings that: (1) the project will result in significant greenhouse gas (GHG) emissions, (2) Hu Honua’s proposed carbon commitment to sequester more GHG emissions than produced by the project are speculative and unsupported, (3) the amended and restated PPA is likely to result in high costs to customers through its relatively high cost of electricity and through potential displacement of other, lower cost, renewable resources, and (4) based on the foregoing, approving the amended and restated PPA is not prudent or in the public interest. On June 2, 2022, Hawaii Electric Light and Hu Honua filed their separate motions for reconsideration, which were denied by the PUC on June 24, 2022. On June 29, 2022, Hu Honua filed its notice of appeal to the Hawaii Supreme Court of the PUC’s May 23, 2022 decision and order denying the amended and restated PPA. On March 13, 2023, the Hawaii Supreme Court affirmed the PUC’s decision denying the amended and restated PPA between Hu Honua and Hawaii Electric Light and entered its judgment on appeal on April 12, 2023. On June 7, 2023, Hu Honua filed a status report with the U.S. District Court for the District of Hawaii, stating, among other things, that ~~included claims purportedly arising out~~because settlement 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 agreementunderlying federal lawsuit was contingent on ~~the PUC’s~~timely, non-appealable, final approval of anthe amended and restated PPA by the PUC, that the Hawaii Supreme Court’s opinion made fulfillment of the condition impossible, and therefore the settlement agreement between the Hawaiian Electric defendants (HEI, Hawaiian Electric, and Hawaii Electric ~~Light~~Light) and Hu Honua ~~dated May 5, 2017.~~ is null and void and of no further effect. Furthermore, Hu Honua indicated that it intends to reassert its federal antitrust and other claims against the Hawaiian Electric defendants. Hu Honua also stated that to take into account the numerous relevant events which have occurred since its filing of its second amended complaint on

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January 29, 2018, Hu Honua intends to move for leave to file an amended and supplemental complaint. Hu Honua has yet to file a motion for leave.

Molokai New Energy Partners (MNEP). In July ~~2017,~~2018, the PUC approved Maui Electric’s PPA with MNEP to purchase solar energy from a photovoltaic (PV) plus battery storage project. The 4.88 MW PV and 3 MW Battery Energy Storage System project was to deliver no more than 2.64 MW at any time to the Molokai system. On March 25, 2020, MNEP filed a complaint in the United Stated District Court for the District of Hawaii against Maui Electric claiming breach of contract. On June 3, 2020, Maui Electric provided a Notice of Default and Termination of the PPA to MNEP terminating the PPA with an effective date of July 10, 2020. Thereafter, MNEP filed an amended complaint to include claims relating to the termination and Hawaiian Electric filed its answer to the amended complaint on September 11, 2020, disputing the facts presented by MNEP and ~~restated PPA. On August 25, 2017,~~all claims within the ~~PUC’s approval was appealed by a third party. The appeal~~original and amended complaint. Currently, the discovery phase is ~~still pending. Hu Honua is expected to be on-line by the end of 2018.~~ongoing.

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 or community support 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~~Waena Switchyard/Synchronous Condenser Project. ~~On August 11, 2016,~~In October 2020, to support efforts to increase renewable energy generation and reduce fossil fuel consumption by deactivating current generating units, Maui Electric filed a PUC application to construct a switchyard, which includes the extension of two 69 kV transmission lines and the relocation of another 69 kV transmission line; and the conversion of two generating units to synchronous condensers at Kahului Power Plant in central Maui. In November 2021, the PUC approved ~~the Utilities’~~Maui Electric’s 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 minimum 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 forcommit 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 facilityestimated 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~~$38.8 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 permitsrecover capital expenditures for the project ~~including a 35 year site lease from~~under Exceptional Project Recovery Mechanism (EPRM) not to exceed $38.8 million, which shall be further reduced to reflect the ~~U.S. Army. Construction~~total project cost exclusive of overhead costs not directly attributable to the ~~facility began in October 2016, and the facility is expected to be~~project. The Waena Switchyard was placed in service ~~in the second quarter of 2018. A request to recover the costs~~on October 25, 2023. The conversion of the ~~project~~two generating units will be performed after the retirement of Kahului Power Plant Units 3 and ~~related operations and maintenance expense through the newly-established Major Project Interim Recovery (MPIR) adjustment mechanism~~4, which 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 the Department of the Navy at a Navy/Air Force joint base. In June 2017, the PUC approved the expenditure of fundstargeted for the ~~project, including Hawaiian Electric’s proposed project cost cap~~end of ~~$67 million and a performance guarantee to provide energy at 9.56 cents/KWH or less. Project costs incurred as of September 30, 2017 amounted to $0.7 million.~~2027.

In approving the project, the PUC ~~agreed~~recognized that the project ~~is eligible for recovery of costs offset by related net benefits~~will facilitate the ability to accommodate increased renewable energy, as contemplated under the ~~newly-established 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 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 based 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.

Hawaiian Electric has initiated a dispute resolution process to collect 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 payment of the purchase price of such interest in the poles to be offset in part by the receivables owed by Hawaiian Telcom to the Utilities.EPRM guidelines. As of September 30, ~~2017, total receivables under the joint pole agreement, including interest, from Hawaiian Telcom are $22.2~~2023, $24.7 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~~been incurred for the ~~accrued interest of $4.9 million on the receivables.~~project.

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.~~1985 and left the property in 1987. The federal 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~~State of 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~~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~~$2.6 million as of September 30, ~~2017,~~2023, representing the probable and reasonably ~~estimated~~estimable undiscounted cost ~~to complete the additional investigation and estimated cleanup costs at~~for remediation of the Site and the ~~Adjacent Parcel;~~adjacent parcel based on presently available information; however, final costs of remediation will depend on the ~~results~~cleanup approach implemented.

Additionally, on November 24, 2021, the current landowners of the Site, Misaki’s, Inc., filed a lawsuit against Hawaiian Electric (as alleged successor in interest to Molokai Electric, the prior owner of the Site) in the Circuit Court of the Second Circuit of the State of Hawaii (removed to the U.S. District Court for the District of Hawaii). The complaint, which was subsequently amended to include Maui Electric, alleges that Hawaiian Electric is responsible for remediation of the Site based on the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), and the Hawaii Environmental Response Law under Hawaii Revised Statutes Chapter 128D, as well as being liable on contractual claims

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

related to a short leaseback period during the transition of ownership from Molokai Electric. On August 24, 2023, a settlement was reached between the parties.

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 under CERCLA 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 30, ~~2017,~~2023, the reserve account balance recorded by Hawaiian Electric to address the PCB contamination was ~~$4.9~~$9.7 million. The reserve balance represents the probable and reasonably estimable undiscounted cost ~~to complete~~for the onshore and offshore ~~investigations~~investigation and ~~the remediation of PCB contamination in the offshore sediment.~~remediation. The final remediation costs will depend on the ~~results~~actual onshore and offshore cleanup costs.

Kapolei pipeline. James Campbell Company (JCC) through its wholly owned subsidiary, Aina Nui Corporation discovered petroleum contamination in ground water during construction of a project in Kapolei in late 2022 and incurred approximately $0.8 million in remediation costs. JCC made a joint demand for these costs in June 2023 to the two companies, including Hawaiian Electric, that have pipelines in the area of the ~~onshore investigation and assessment~~contamination. This demand was updated on September 1, 2023 to $1.2 million to incorporate additional costs. Based on the nature of ~~potential source control requirements, as well as~~ the ~~further investigation~~contamination, it is not clear whether it is consistent with what was in the Utilities’ pipelines or is wholly or partially the responsibility of ~~contaminated sediment 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 projectsother pipeline owner. At this time, the parties are ~~on-going. The retired generating unit removal projects are expected to be completed by the end of 2017,~~engaging in settlement discussions and the ~~related AROs have been reassessed. Hawaiian Electric has determined that~~Utilities are unable to determine the ~~AROs for~~ultimate outcome or the ~~retired generating units should be minimal, and thus $24.4 million~~amount 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. any possible loss.

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~~Decoupling delinks the utility’s revenues from the utility’s sales, removing the disincentive to promote energy efficiency and ~~includes~~accept more renewable energy. Decoupling continues under the PBR Framework.

Performance-based regulation framework. On December 23, 2020, the PUC issued a decision and order (PBR D&O) establishing the PBR Framework to govern the Utilities. The PBR Framework incorporates an annual ~~rate adjustments. The~~revenue adjustment (ARA) and a suite of new regulatory mechanisms in addition to previously established regulatory mechanisms. Under the PBR Framework, the decoupling mechanism ~~has three components:~~(i.e., the Revenue Balancing Account (RBA)) established by the previous regulatory framework will continue. The existing cost recovery mechanisms will continue as currently implemented (e.g., the Energy Cost Recovery Clause, PPAC, Demand Side Management surcharge, Renewable Energy Infrastructure Program, Demand Response Adjustment Clause, Pension and Other Post-Employment Benefits (OPEB) tracking mechanisms). In addition to annual revenues provided by the ARA, the Utilities may seek relief for extraordinary projects or programs through the Exceptional Project Recovery Mechanism (EPRM) (formerly known as the Major Project Interim Recovery adjustment mechanism) and earn financial rewards for exemplary performance as provided through a portfolio of Performance Incentive Mechanisms (PIMs) and Shared Savings Mechanisms (SSMs). The PBR Framework incorporates a variety of additional performance mechanisms, including Scorecards, Reported Metrics, and an expedited Pilot Process. The PBR Framework also contains a number of safeguards, including a symmetric Earnings Sharing Mechanism (ESM) which protects the Utilities and customers from excessive earnings or losses, as measured by the Utilities’ achieved rate-making ROACE and a Re-Opener mechanism, under which the PUC will open an examination, at its discretion, to determine if adjustments or modifications to specific PBR mechanisms are appropriate. The PBR Framework became fully effective on June 1, 2021.

On June 17, 2022, the PUC issued a decision and order (June 2022 D&O) establishing additional PIMs under the PBR Framework for the Utilities. The June 2022 D&O approved two new PIMs, a new SSM, and extended the timeframe for an existing PIM. Specifically, the PUC approved (1) a ~~sales decoupling component via a revenue balancing account (RBA),~~new (penalty-only) generation-caused interruption reliability PIM, (2) a ~~revenue escalation component via~~new (penalty/reward) interconnection requirements study (IRS) PIM, (3) a new (reward-only) Collective Shared Savings Mechanism (CSSM), and (4) a modification and extension of the existing Interim Grid Services PIM (reward-only). On November 23, 2022, the PUC approved the Utilities’ proposed tariffs to implement the aforementioned PIMs with an effective date of January 1, 2023.

In addition, the June 2022 D&O instructed the Utilities to prepare and submit: a detailed fossil fuel retirement report (FF Retirement Report) outlining necessary steps to safely and reliably retire certain existing fossil fuel power plants during the first multi-year rate period (MRP); and a functional integration plan (FIP) for distributed energy resources (DER) to increase transparency into the Utilities’ plans and progress for utilizing cost-effective grid services from DERs and ensure that the necessary functionalities and requisite technologies are in place to do so. The PUC also instructed the PBR Working Group to

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

continue its ongoing collaborative efforts to consider other potential new incentive mechanisms and to address other issues raised during the proceeding. On March 30, 2023, the PUC held a PBR Working Group coordination meeting to initiate subgroups on the Long-Term Grid Services PIM, modification/evaluation of existing PIMs, and comprehensive PBR Framework review priority topics.

In accordance with the June 2022 D&O, the Utilities filed their FIP on September 30, 2022, Long-Term Grid Services PIM proposal on July 3, 2023, and FF Retirement Report on October 13, 2023.

On October 16, 2023, the Utilities filed a request for limited suspension of the Transmission and Distribution (T&D) System Average Interruption Duration Index (SAIDI) PIM, the T&D System Average Interruption Frequency Index (SAIFI) PIM, and the target heat rate provision of Maui Electric Maui Division’s Energy Cost Recovery Clause (ECRC) tariff starting from August 8, 2023. The Utilities requested PUC approval of the suspension request by December 28, 2023.

On November 3, 2023, the Utilities, Ulupono Initiative LLC, and the County of Hawaii filed a stipulation on proposed modifications to the RPS-A, Call Center, AMI Utilization, and IRS PIM. The proposed PIM tariff modifications are intended to become effective on January 1, 2024, to the extent they can be approved by December 31, 2023. A decision on the stipulation is pending PUC approval.

Revenue adjustment mechanism. Prior to the implementation of the PBR Framework, the revenue adjustment mechanism (RAM) ~~and (3) an earnings sharing mechanism, which would provide for~~was 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~~major component of the ~~applicable year through May 31 of the following year. Subsequent to 2016, Hawaiian Electric reverted to the~~previously established regulatory framework. 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 the decoupling mechanism to be capped at~~was 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). Under the PBR Framework, the ARA mechanism replaced the RAM, and became effective on June 1, 2021. RAM revenue adjustments approved by the PUC in 2020 will continue to be included in the RBA provision’s target revenue and RBA rate adjustment unless modified with PUC approval.

Annual revenue adjustment mechanism. The ~~2015 Decoupling Order provided~~PBR Framework established a ~~specific basis for calculating the target revenues until the next~~five-year MRP during which there will be no general rate ~~case, at which time the target~~cases. Target revenues will ~~reset upon~~be adjusted according to an index-driven ARA based on (i) an inflation factor, (ii) a predetermined X-factor to encompass productivity, which is set at zero, (iii) a Z-factor to account for exceptional circumstances not in the ~~issuance~~Utilities’ control and (iv) a customer dividend consisting of ~~an interim or final D&O~~a negative adjustment of 0.22% of adjusted revenue requirements compounded annually and a flow through of the “pre-PBR” savings commitment from the management audit recommendations developed in a prior docket at a rate ~~case.~~of $6.6 million per year from 2021 to 2025. The ~~triennial rate case cycle required under~~implementation of the ~~decoupling mechanism continues~~ARA occurred on June 1, 2021.

Pursuant to ~~serve as~~PUC orders, the ~~maximum period between~~Utilities deferred certain COVID-19 related costs in regulatory asset accounts through December 31, 2021. In June 2022, the ~~filing of general rate cases.~~

~~The RAM Cap impacted the Utilities'~~Utilities submitted an application to seek recovery of ~~capital investments as follows:~~

~~Hawaiian Electric's RAM revenues were~~the COVID-19 related deferred costs, not to exceed the amount of $27.8 million, through the Z-factor over three years. Annual requests will be limited to actual costs incurred. The Utilities also proposed to accelerate flow-through of the ~~RAM Cap~~Enterprise Resource Planning system benefits savings currently tracked in ~~2015, 2016~~regulatory liability accounts to Hawaii Electric Light and ~~2017.~~

Maui ~~Electric's RAM revenues were limited~~Electric customers as part of the customer dividend in the ARA if the PUC approves the application. As of September 30, 2023, the Utilities have recorded $8.8 million in regulatory assets for deferral of COVID-19 related costs. The updated amounts have been reflected in the Utilities’ COVID-19 Quarterly Reports to the ~~RAM Cap in 2015 and 2016; however, the 2017 RAM revenues were~~PUC filed on October 31, 2023.

Earnings sharing mechanism. The PBR Framework established a symmetrical ESM for achieved rate-making ROACE outside of a 300 basis points dead band above or below the ~~RAM Cap.~~current authorized ROACE of 9.5% for each of the Utilities. There is a 50/50 sharing between customers and Utilities for the achieved rate-making ROACE falling within 150 basis points outside of the dead band in either direction, and a 90/10 sharing for any further difference. A reopening or review of the PBR terms may be triggered if the Utilities credit rating outlook indicates a potential credit downgrade below investment grade status, or if its achieved rate-making ROACE enters the outer most tier of the ESM.

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

~~2017 decoupling order~~. On ~~April 27, 2017,~~August 31, 2023, the PUC issued an ~~Order (the 2017 Decoupling Order) that requires~~order temporarily suspending the ~~establishment~~ESM until further notice. The intent of ~~specific performance incentive mechanisms~~the order is to address the unintended consequence of customers potentially bearing the costs associated with the Maui windstorm and wildfires through the operation of the ESM without prior PUC review.

Exceptional project recovery mechanism. Prior to the implementation of the PBR Framework, the PUC established the Major Project Interim Recovery (MPIR) adjustment mechanism and MPIR Guidelines. The MPIR mechanism provides ~~guidelines~~the opportunity to recover revenues for ~~interim recovery~~net costs of ~~revenues to support major~~approved eligible projects placed in service between general rate cases. In establishing the PBR Framework, the MPIR Guidelines were terminated and replaced with the EPRM Guidelines. Although the MPIR Guidelines were terminated and replaced by the EPRM Guidelines, the MPIR mechanism will continue within the PBR Framework to provide recovery of project costs previously approved for recovery under the MPIR. The established EPRM Guidelines permit the Utilities to include the full amount of approved costs in the EPRM for recovery in the first year the

~~In May 2017,~~

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project goes into service, pro-rated for the portion of the year the project is in service. Deferred and O&M expense projects are also eligible for EPRM recovery under the EPRM Guidelines. EPRM recoverable costs will be limited to the lesser of actual incurred project costs or PUC‑approved amounts, net of savings.

As of September 30, 2023, the Utilities annualized MPIR and EPRM revenue amounts totaled $31.1 million, including revenue taxes, for the Schofield Generating Station ($16.5 million), West Loch PV project ($3.3 million), Grid Modernization Strategy (GMS) Phase 1 project ($11.2 million for all three utilities) and Waiawa UFLS project ($0.1 million) that included the 2023 return on project amount (based on approved amounts) in rate base, depreciation and incremental O&M expenses. The PUC approved the Utilities’ recovery of the annualized 2023 MPIR amounts for the Schofield Generating Station, West Loch PV, GMS Phase 1, and Waiawa UFLS projects effective June 1, 2023 through the RBA rate adjustment.

As of September 30, 2023, the PUC approved two EPRM applications for projects totaling $41 million to the extent that the project costs are not included in rates. Currently, the Utilities are seeking EPRM recovery for five projects with total project costs up to $488 million, subject to PUC approval.

Pilot process. As part of the PBR Framework, the PUC approved a Pilot Process to foster innovation by establishing an expedited implementation process for pilots that tests new technologies, programs, business models, and other arrangements. Under the Pilot Process, the Utilities submit specific pilot proposals (Pilot Notices) that are within the scope of the approved Workplan to the PUC for their expedited review. The PUC will strive to issue an order addressing a proposed pilot within 45 days of the filing date of a Pilot Notice. If the PUC does not take affirmative action on a Pilot Notice by the end of the 45-day period, the Pilot Notice shall be considered approved as submitted. The PUC may modify the pilot as originally proposed, and the Utilities shall have 15 days to notify the PUC whether the Utilities accept the modification, propose further modification, or withdraw the Pilot Notice. The PUC may also, where necessary, suspend the Pilot Notice for further investigation.

The approved Pilot Process includes a cost recovery process that generally allows the Utilities to defer and recover total annual expenditures of approved pilot projects net of revenues, subject to an annual cap of $10 million, over 12 months beginning June 1 of the year following pilot implementation through the RBA rate adjustment, although the PUC may determine on a case-by-case basis that a particular project’s deferred costs should be amortized over a period greater than 12 months.

On February 28, 2023, the Utilities filed their annual Pilot Update report covering pilot projects that were active during 2022, including reporting on pilot projects that were initiated prior to the commencement of the Pilot Process. The Pilot Update reported on approximately $0.4 million of 2022 recorded pilot project costs including revenue taxes for the Utilities. The 2022 recorded pilot project costs were included in the Utilities’ proposed ~~initial tariffs~~adjustments to ~~implement conventional stand-alone performance~~target revenue in the 2023 spring revenue report filed on March 28, 2023.

On March 22, 2023, the PUC issued an order temporarily suspending the filing of Pilot Notices, pending a stakeholder meeting which was convened on June 15, 2023 to discuss potential improvements to the Pilot Process.

On July 28, 2023, the PUC issued an order providing additional guidance on the Pilot Process, specifying expectations for future Pilot Notices submitted pursuant to the Pilot Process. The order lifted the temporary suspension on submitting Pilot Notices and the Utilities may file Pilot Notices consistent with the approved Workplan.

Performance incentive mechanisms ~~namely for:~~. The PUC has established the following PIMs and SSMs: (1) Service Quality performance incentives, (2) Phase 1 Request for proposal (RFP) PIM for procurement of low-cost renewable energy, (3) Phase 2 RFP PIMs for generation and generation plus storage project, and grid services and standalone storage, (4) PIMs established in the PBR D&O and (5) PIMs and a SSM established in the June 2022 D&O.

•Service Quality performance incentives (ongoing). 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 remain constant in interim periods, unless otherwise amended by order of the PUC.

•Service Reliability Performance measured by Transmission and Distribution-caused 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$6.8 million ~~penalty~~- for both indices in total for the three utilities). For the 2022 evaluation period, the Utilities incurred $0.1 million in penalties.

•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 8eight quarters with a deadband of 3%

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

above and below the target. The maximum penalty or ~~incentive~~reward is 8 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties or rewards of approximately ~~$1.2~~$1.4 million ~~penalty or incentive~~- in total for the three utilities).

~~The 2017 Decoupling Order also established guidelines for MPIR. Projects eligible for recovery~~•Phase 1 RFP PIM. Procurement of low-cost variable renewable resources through the RFP process in 2018 is measured by comparison of the procurement price to target prices. The first portion of the incentive was earned upon PUC approval of the PPAs. Based on the seven PPAs approved in 2019, the Utilities recognized $1.7 million in 2019 with the remaining award to be recognized in the year following the in-service date of the projects prorated in proportion to the actual amount of energy utilized, which is estimated to occur from 2023 to 2025. In September 2023, the Utilities accrued $0.1 million (for Hawaiian Electric) in incentives related to one PPA. The net reward was reflected in the 2023 fall revenue report filing.

•Phase 2 RFP PIMs. The PUC order issued on October 9, 2019 establishes pricing thresholds, timelines to complete contracting, and other performance criteria for the performance incentive eligibility. The PIMs provide incentives only without penalties. On July 9, 2020, the Utilities filed two Grid Services Purchase Agreements (GSPA) for the Grid Service RFP that potentially qualify for a demand response PIM; however, details of the incentive metrics will be determined by the PUC. On September 15, 2020, the Utilities filed one PPA that qualified for a PIM incentive and on February 16, 2021, the Utilities filed one additional PPA that qualified for a declining PIM incentive. The PUC approved two PPAs in September 2021 and November 2021 and two GSPAs on December 31, 2020. Based on the two approved PPAs, the Utilities recognized $0.1 million in rewards in 2021. In December 2022 and March 2023, these two PPAs were terminated or declared null and void.

•The PUC previously established the following two PIMs in its PBR D&O, which were approved in an order issued on March 23, 2021 and became effective on June 1, 2021. In its June 2022 D&O, the PUC modified and extended the Interim Grid Services PIM.

•Renewable portfolio standard (RPS) - A PIM that provides a financial reward for accelerating the achievement of RPS goals. The Utilities may earn a reward for the amount of system generation above the interpolated statutory RPS goal at $20/MWh in 2021 and 2022, $15/MWh in 2023, and $10/MWh for the remainder of the MRP. Penalties are already prescribed in the RPS as $20/MWh for failing to meet RPS targets in 2030, 2040 and 2045. The evaluation period commenced on January 1, 2021.

•Interim Grid Services - A PIM that provides financial rewards on a $/kW basis for the acquisition of eligible grid services. The eligibility period for this PIM initially commenced on January 1, 2021 and was scheduled to end on December 31, 2022. However, the June 2022 D&O extended the eligibility period for this PIM through December 31, 2023. The June 2022 D&O also increased the incentive rate for the acquisition of load reduction grid services. During the PIM performance period, newly acquired committed capacity in the Oahu Scheduled Dispatch Program (SDP), the Oahu Fast DR program (up to the 7 MW cap), and the Maui SDP program shall qualify for the incentive. The Utilities can earn a maximum reward of $1.5 million from 2021 through 2023. In 2022, the Utilities earned $0.04 million in rewards.

•The PUC also previously established the following three PIMs in its PBR D&O, which were approved by the PUC on May 17, 2021 and became effective on June 1, 2021.

•Interconnection Approval PIM that provides financial rewards and penalties for interconnection times for DER systems <100 kW in size. The Utilities can earn a total annual maximum reward of $3.0 million or a total annual maximum penalty of $0.9 million. In 2022, the Utilities earned $3.0 million in rewards.

•Low-to-Moderate Income (LMI) Energy Efficiency PIM that provides financial rewards for collaboration between the Utilities and the third-party Public Benefits Fee Administrator to deliver energy savings for low- and moderate-income customers. The Utilities can earn a total annual maximum reward of $2.0 million. The PIM will initially have a duration of three years and be subject to an annual review. The evaluation period is based on Hawaii Energy’s program year with the initial evaluation year being the period of July 1, 2021 through June 30, 2022. The Utilities earned $0.5 million in rewards for the program period ending June 30, 2022.

•Advanced Metering Infrastructure Utilization PIM that provides financial rewards for leveraging grid modernization investments and engaging customers beyond what is already planned in the Phase 1 Grid Modernization program. The Utilities can earn a total annual maximum reward of $2.0 million. The PIM will initially have a duration of three years after which it will be re-evaluated. The evaluation period commenced on January 1, 2021.

•The PUC established the following PIMs and SSM in its June 2022 D&O, which became effective on January 1, 2023.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

•Generation-caused System Average Interruption Duration and Frequency Indexes PIMs to incentivize achievement of generation-based reliability targets, measured by Generation 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 standard deviation. The maximum penalty for each performance index is 3 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties of approximately $1 million - for both indices in total for the three utilities).

•An IRS PIM to incentivize the timely completion of the IRS process for large-scale renewable energy projects (rewards and penalties) measured by the number of months between final model checkout and delivery of IRS results to the developer. Target performance is ten months with an asymmetrical deadband of two-months for penalties and no deadband for rewards. The maximum penalty and reward will depend on the specifics of the upcoming procurement.

•A CSSM to incentivize cost control over the Utilities’ fuel, purchased power, and EPRM/MPIR ~~adjustment mechanism~~costs (collectively, non-ARA costs). This is a reward only incentive where the Utilities retain 20% share of savings when non-ARA costs in a performance year are ~~major projects (i.e., projects with capital expenditures~~lower than target year non-ARA costs, which are adjusted for changes in fuel prices, inflation, and system generation from a base year (calendar year 2021). The CSSM does not have a potential penalty and does not have a cap for maximum reward.

For the 2022 evaluation period, the Utilities earned $3.4 million ($2.5 million for Hawaiian Electric, $0.4 million for Hawaii Electric Light and $0.5 million for Maui Electric) in rewards net of ~~customer contributions~~penalties. The net rewards related to 2022 were reflected in ~~excess~~the 2023 PIMs annual report and 2023 spring revenue report filings.

Annual review cycle. PBR D&O established an annual review cycle for revenue adjustments under the PBR Framework, including the biannual submission of ~~$2.5 million), including but not restricted~~the revenue reports. The Utilities’ fall revenue report was filed on October 31, 2023, which is subject to ~~renewable energy, energy efficiency, utility scale generation, grid modernization and smaller qualifying projects grouped into programs for review.~~PUC approval. The ~~MPIR adjustment mechanism provides~~Utilities reflected in the ~~opportunity to recover revenues for net~~2023 fall revenue report the COVID-19 related deferred costs of approved eligible projects placed in service between general rate cases wherein cost recovery is limited by a revenue cap and is not provided by other effective recovery mechanisms. The request for PUC approval must include a business case and all costs that are allowed to be recovered, ~~through~~and the ~~MPIR adjustment mechanism shall~~Enterprise Resource Planning system benefits savings to be ~~offset by any related benefits.~~returned to Hawaii Electric Light and Maui Electric customers, respectively in 2024. These adjustments to the ARA are pending the PUC’s review and approval. (See discussion under “Regulatory assets and liabilities” in Note 4 of the Condensed Consolidated Financial Statements). The ~~guidelines provide~~filing reflected ARA revenues for ~~accrual of revenues approved for recovery upon in-service date~~2023 to be collected from ~~customers~~January 1 through December 31, 2024, as follows:


(in millions)	Hawaiian Electric		Hawaii Electric Light		Maui Electric		Total
2024 ARA revenues	$	16.6	$	4.1	$	4.0	$	24.7
Management Audit savings commitment	(4.6)		(1.0)		(1.0)		(6.6)
Enterprise Resource Planning system benefits savings	—		(1.3)		(1.9)		(3.2)
COVID-19 related cost recovery	2.6		0.2		0.6		3.4
Net 2024 ARA revenues	$	14.6	$	2.0	$	1.7	$	18.3

Note: Columns may not foot due to rounding.

The proposed net incremental amounts between the ~~annual RBA tariff. Capital projects which~~2023 spring and fall revenue reports are ~~not recovered through the MPIR would be included~~shown in the ~~RAM~~following table. The amounts are to be collected (refunded) from January 1 through December 31, 2024 under the RBA rate tariffs, which were proposed in the 2023 fall revenue report filing and beare subject to PUC approval.


(in millions)	Hawaiian Electric		Hawaii Electric Light		Maui Electric		Total
Incremental RAM revenues and ARA revenues	$	19.2	$	3.0	$	2.7	$	24.9
Annual change in accrued RBA balance through September 30, 2023 (and associated revenue taxes)	3.6		(0.3)		0.1		3.4
Incremental Performance Incentive Mechanisms (net)	0.1		—		—		0.1





Net incremental amount to be collected under the RBA rate tariffs	$	22.9	$	2.7	$	2.8	$	28.4

Note: Columns may not foot due to rounding.

Regulatory assets and liabilities.

Regulatory liabilities for Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM). The ERP/EAM Implementation Project went live in October 2018. Hawaii Electric Light and Hawaiian Electric began to incorporate their portion of the ~~RAM cap, until~~deferred project costs in rate base and started the ~~next rate case when~~amortization over a 12-year period in January 2020 and

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

November 2020, respectively. The PUC required a minimum of $246 million ERP/EAM project-related benefit to be delivered to customers over the ~~utilities would request recovery in base rates.~~system’s 12-year service life.

In ~~the 2017 Decoupling Order,~~February 2019, the PUC ~~indicated that in pending and subsequent rate cases,~~approved a methodology for passing the ~~PUC intends~~future cost saving benefits of the new ERP/EAM system 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,~~customers developed by the Utilities ~~submitted~~in collaboration with the Consumer Advocate. The Utilities filed a benefits clarification document on June 10, 2019, reflecting $150 million in future net other operation and maintenance (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 ~~PUC, their annual decoupling filings. Maui Electric amended its annual decoupling filing on May 22, 2017, to update and revise certain cost information. On May 31, 2017,~~Utilities would reduce future rates for such amounts. In October 2019, the PUC approved the ~~annual decoupling filings for tariffed rates that will be effective from June 1, 2017 through May 31, 2018. The net annual incremental amounts to be collected (refunded) 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

~~Most recent rate proceedings.~~

Utilities and the Consumer Advocate’s Stipulated Performance Metrics and Tracking Mechanism. As part of the settlement agreement approved in the Hawaiian Electric ~~consolidated 2014 test year abbreviated and 2017~~2020 test year rate ~~cases~~. ~~On December 16, 2016,~~case, the regulatory liability for Hawaiian Electric will be amortized over five years, beginning in November 2020, and the O&M benefits for Hawaiian Electric was considered flowed through to customers. In June 2022, to mitigate the impact of the Utilities’ request for recovery of the COVID-19 related costs on customers, the Utilities also proposed to accelerate flow-through of the ERP benefits savings currently tracked in regulatory liability accounts to Hawaii Electric Light and Maui Electric customers as part of the customer dividend in the ARA, pending the PUC’s approval. See “Regulatory assets for COVID-19 related costs” section below.

As of September 30, 2023, the Utilities’ regulatory liability was $11.9 million ($3.0 million for Hawaiian Electric, $3.5 million for Hawaii Electric Light and $5.4 million for Maui Electric) for the O&M expense savings that are being amortized or to be included in future rates. At the PUC’s direction, the Utilities have been filing Annual Enterprise System Benefits (AESB) report on the achieved benefits savings. The most recent AESB report was filed on February 14, 2023 for the period January 1 through December 31, 2022.

Regulatory assets for COVID-19 related costs. On May 4, 2020, the PUC issued an order, authorizing all utilities, including the Utilities, to establish regulatory assets to record costs resulting from the suspension of disconnections of service during the pendency of the Governor’s Emergency Proclamation and until otherwise ordered by the PUC. In future proceedings, the PUC will consider the reasonableness of the costs, the appropriate period of recovery, any amount of carrying costs thereon, and any savings directly attributable to suspension of disconnects, and other related matters. As part of the order, the PUC prohibits the Utilities from charging late payment fees on past due payments. As the moratorium on customer disconnections ended on May 31, 2021, the Utilities have resumed charging late payment fees in July 2021. Pursuant to PUC orders, the deferral of COVID-19 related costs by the Utilities ended on December 31, 2020. On October 1, 2021, the PUC approved the Utilities’ request to extend the deferral period to December 31, 2021. In December 2021, to keep customers connected and provide some relief to customers experiencing financial difficulty during the pandemic, the Utilities committed to issuing $2 million in bill credits to qualified customers. The Utilities will not seek recovery for the issued bill credits, resulting in a reduction to the cumulative deferred costs. On June 9, 2022, the Utilities filed an application with the PUC, ~~for~~requesting recovery of a ~~general rate increase~~portion of ~~$106.4~~the COVID-19 related deferral costs, net of cost savings realized, not to exceed the amount of $27.8 million over revenues at current effective rates (for a 6.9% increase in revenues), based on a 2017 test year and an 8.28% 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. The requested increase is primarilythree years, through the Z-factor, from June 2023 through May 2026. Annual requests will be limited to ~~pay for operating~~actual 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 relatingincurred. This adjustment 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~~ARA is subject to ~~customers, and an additional trigger that would allow a re-establishment of fuel usage efficiency targets under certain conditions.~~

PUC approval. On ~~December 23, 2016,~~January 25, 2023, the PUC issued an order ~~consolidating~~to modify the ~~Hawaiian Electric filings~~procedural schedule to allow more time for more discovery and consideration of the application. As of September 30, 2023, the Utilities have recorded $8.8 million in regulatory assets for deferral of COVID-19 related costs.

Regulatory assets for suspension of disconnections related costs. Based on the circumstances related to the Maui windstorm and wildfires, on August 31, 2023 and subsequently on October 13, 2023, the PUC issued orders directing all regulated utilities located on, or providing utility service on Maui, including the Utilities, among other things, (i) to suspend disconnections of services and associated disconnection fees beginning from August 8, 2023, through the end of the emergency relief period established by the Governor’s Emergency Proclamations related to the Maui windstorm and wildfires, which currently continues through January 5, 2024 (Suspension Period); (ii) to suspend any and all rules and provisions of individual utility tariffs that prevent or condition re-connection of disconnected customers during the Suspension Period; (iii) not to charge customers interest on past due payments or impose any late payment fees through the Suspension Period; (iv) to establish regulatory assets to record costs directly related to the suspension of disconnections, and to record receipt of governmental aid and donation-based aid, loans or grants, and/or all other assistance measures, and any cost savings realized; and (v) to file a notice with the PUC regarding any upcoming application or other request pursuant to HRS Sections 269-16.3, -17, -17.5, -18, -19 or -19.5 and/or regarding any significant financial change to the Maui utility, at least 60 days prior to filing such application or other request with the PUC. The orders also discourage the filing of emergency or general rate increases in response to the emergency situation. In future proceedings, the PUC will assess the utility’s request for recovery of these regulatory assets including whether it is reasonable and necessary, the appropriate period of recovery for the ~~2014 test year abbreviated rate case~~approved amount of regulatory assets, any amount of carrying costs thereon, any savings directly attributable to suspension of disconnects, and 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 disposition 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.”

other related

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

matters. As of September 30, 2023, the Utilities have recorded $0.1 million in regulatory assets for the incremental costs incurred due to the suspension of disconnections.

Army privatization. On ~~January 4, 2017,~~October 30, 2020, the PUC approved Hawaiian Electric’s 50-year contract with the U.S. Army to own, operate and maintain the electric distribution system serving the U.S. Army’s 12 installations on Oahu, including Schofield Barracks, Wheeler Army Airfield, Tripler Army Medical Center, Fort Shafter, and Army housing areas. On March 1, 2022, Hawaiian Electric ~~filed~~acquired the Army’s existing distribution system for a ~~motion for clarification and/or partial reconsideration~~purchase price of $14.5 million, and will pay the Army in the form of a monthly credit against the monthly utility services charge over the 50-year term of the ~~PUC’s order. On March 14, 2017,~~contract. The acquisition of additional assets contemplated in the ~~PUC issued~~contract, with an ~~order to address Hawaiian Electric’s motion, stating that the PUC~~estimated value of $4 million, is ~~not initiating an investigation/enforcement proceeding against~~ planned for 2024.

Hawaiian Electric ~~regarding~~took ownership and all responsibilities for operation and maintenance of the system on March 1, 2022 for a 50-year term after a one-year transition period. Under the contract, Hawaiian Electric will make initial capital upgrades over the first six years of the contract and replace aging infrastructure over the 50-year term. In addition to its ~~compliance with~~regular monthly electricity bill, the ~~decoupling order,~~Army will pay Hawaiian Electric a monthly utility services charge to cover operations and maintenance expenses and provide recovery for capital upgrades, capital replacements, 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 adjustmentexisting distribution system based on ~~evidence and findings in the consolidated~~a rate ~~case proceeding.”~~

~~On October 12, 2017, Maui Electric filed its 2018 test year rate case application with~~of return determined by 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.regulated utility investments, as well as depreciation expense. The ~~requested rate increase is primarily~~PUC requires Hawaiian Electric 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 basedfile regular periodic reports 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 increaseactivities and investments 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~~fulfillment of the ~~issues in~~contract and will review the ~~proceeding, except for whether~~major projects planned on behalf of 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.Army.

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 nine month periods ended September 30, 2023 and 2022, and as of ~~the dates indicated.~~September 30, 2023 and December 31, 2022.

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, and (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.~~thereunder. 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 30, ~~2017~~2023


(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated			(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated
Revenues	$	429,267		84,334		85,198		—	(30	)	$	598,769		Revenues	$	570,323	116,192	108,472	—	—	$	794,987
Expenses														Expenses
Fuel oil	103,959			15,754		26,545		—	—		146,258			Fuel oil	196,223		30,956	40,259	—	—	267,438
Purchased power	123,893			21,332		15,122		—	—		160,347			Purchased power	132,536		30,265	14,994	—	—	177,795
Other operation and maintenance	66,221			16,593		17,288		—	—		100,102			Other operation and maintenance	83,528		21,351	37,629	—	—	142,508
Depreciation	32,722			9,685		5,799		—	—		48,206			Depreciation	41,276		10,635	9,254	—	—	61,165
Taxes, other than income taxes	40,824			7,928		8,028		—	—		56,780			Taxes, other than income taxes	53,511		10,857	10,355	—	—	74,723

Total expenses	367,619			71,292		72,782		—	—		511,693			Total expenses	507,074		104,064	112,491	—	—	723,629
Operating income	61,648			13,042		12,416		—	(30	)	87,076
Operating income (loss)														Operating income (loss)	63,249		12,128	(4,019)	—	—	71,358
Allowance for equity funds used during construction	3,108			167		207		—	—		3,482			Allowance for equity funds used during construction	3,005		366	629	—	—	4,000
Equity in earnings of subsidiaries	12,767			—		—		—	(12,767	)	—			Equity in earnings of subsidiaries	3,005		—	—	—	(3,005)	—
Retirement defined benefits credit (expense)—other than service costs														Retirement defined benefits credit (expense)—other than service costs	992		163	(23)	—	—	1,132
Interest expense and other charges, net	(11,786		)	(2,899	)	(2,252	)	—	30		(16,907		)	Interest expense and other charges, net	(16,295)		(2,988)	(3,164)	—	—	(22,447)
Allowance for borrowed funds used during construction	1,173			72		94		—	—		1,339			Allowance for borrowed funds used during construction	1,047		117	208	—	—	1,372
Income before income taxes	66,910			10,382		10,465		—	(12,767	)	74,990
Income (loss) before income taxes														Income (loss) before income taxes	55,003		9,786	(6,369)	—	(3,005)	55,415
Income taxes	19,153			3,815		4,037		—	—		27,005			Income taxes	11,272		2,234	(2,050)	—	—	11,456
Net income	47,757			6,567		6,428		—	(12,767	)	47,985
Net income (loss)														Net income (loss)	43,731		7,552	(4,319)	—	(3,005)	43,959
Preferred stock dividends of subsidiaries	—			133		95		—	—		228			Preferred stock dividends of subsidiaries	—		133	95	—	—	228
Net income attributable to Hawaiian Electric	47,757			6,434		6,333		—	(12,767	)	47,757
Net income (loss) attributable to Hawaiian Electric														Net income (loss) attributable to Hawaiian Electric	43,731		7,419	(4,414)	—	(3,005)	43,731
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270			Preferred stock dividends of Hawaiian Electric	270		—	—	—	—	270
Net income for common stock	$	47,487		6,434		6,333		—	(12,767	)	$	47,487
Net income (loss) for common stock														Net income (loss) for common stock	$	43,461	7,419	(4,414)	—	(3,005)	$	43,461

~~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 30, ~~2016~~2023


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated
Net income (loss) for common stock	$	43,461	7,419	(4,414)	—	(3,005)	$	43,461
Other comprehensive loss, net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net gains recognized during the period in net periodic benefit cost, net of taxes	(547)		(55)	(71)	—	126	(547)
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	470		54	63	—	(117)	470
Other comprehensive loss, net of taxes	(77)		(1)	(8)	—	9	(77)
Comprehensive income (loss) attributable to common shareholder	$	43,384	7,418	(4,422)	—	(2,996)	$	43,384

(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

Three months ended September 30, 2022


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated
Revenues	$	693,281	130,858	131,910	—	(78)	$	955,971
Expenses
Fuel oil	280,447		40,540	62,615	—	—	383,602
Purchased power	171,470		37,263	16,476	—	—	225,209
Other operation and maintenance	77,115		21,882	22,113	—	—	121,110
Depreciation	39,474		10,350	8,887	—	—	58,711
Taxes, other than income taxes	64,051		12,026	12,213	—	—	88,290

Total expenses	632,557		122,061	122,304	—	—	876,922
Operating income	60,724		8,797	9,606	—	(78)	79,049
Allowance for equity funds used during construction	2,063		206	283	—	—	2,552
Equity in earnings of subsidiaries	10,577		—	—	—	(10,577)	—
Retirement defined benefits credit (expense)—other than service costs	760		166	(31)	—	—	895
Interest expense and other charges, net	(14,221)		(2,716)	(2,750)	—	78	(19,609)
Allowance for borrowed funds used during construction	674		63	88	—	—	825
Income before income taxes	60,577		6,516	7,196	—	(10,577)	63,712
Income taxes	10,543		1,424	1,483	—	—	13,450
Net income	50,034		5,092	5,713	—	(10,577)	50,262
Preferred stock dividends of subsidiaries	—		133	95	—	—	228
Net income attributable to Hawaiian Electric	50,034		4,959	5,618	—	(10,577)	50,034
Preferred stock dividends of Hawaiian Electric	270		—	—	—	—	270
Net income for common stock	$	49,764	4,959	5,618	—	(10,577)	$	49,764

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Three months ended September 30, 2022


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated
Net income for common stock	$	49,764	4,959	5,618	—	(10,577)	$	49,764
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 taxes	5,411		768	732	—	(1,500)	5,411
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(5,303)		(766)	(733)	—	1,499	(5,303)
Other comprehensive income (loss), net of taxes	108		2	(1)	—	(1)	108
Comprehensive income attributable to common shareholder	$	49,872	4,961	5,617	—	(10,578)	$	49,872

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Nine months ended September 30, ~~2017~~2023


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated
Revenues	$	1,742,542	343,554	333,573	—	(130)	$	2,419,539
Expenses
Fuel oil	663,521		79,187	138,984	—	—	881,692
Purchased power	362,275		101,597	35,118	—	—	498,990
Other operation and maintenance	255,728		64,367	87,089	—	—	407,184
Depreciation	123,114		31,906	27,761	—	—	182,781
Taxes, other than income taxes	164,510		31,983	31,541	—	—	228,034

Total expenses	1,569,148		309,040	320,493	—	—	2,198,681
Operating income	173,394		34,514	13,080	—	(130)	220,858
Allowance for equity funds used during construction	8,604		1,004	1,465	—	—	11,073
Equity in earnings of subsidiaries	25,960		—	—	—	(25,960)	—
Retirement defined benefits credit (expense)—other than service costs	2,801		500	(74)	—	—	3,227
Interest expense and other charges, net	(45,594)		(8,794)	(9,307)	—	130	(63,565)
Allowance for borrowed funds used during construction	2,995		321	482	—	—	3,798
Income before income taxes	168,160		27,545	5,646	—	(25,960)	175,391
Income taxes	31,581		6,261	284	—	—	38,126
Net income	136,579		21,284	5,362	—	(25,960)	137,265
Preferred stock dividends of subsidiaries	—		400	286	—	—	686
Net income attributable to Hawaiian Electric	136,579		20,884	5,076	—	(25,960)	136,579
Preferred stock dividends of Hawaiian Electric	810		—	—	—	—	810
Net income for common stock	$	135,769	20,884	5,076	—	(25,960)	$	135,769

(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 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 $ 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 months ended September 30, 2016~~

(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 months ended September 30, ~~2016~~2023


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated
Net income for common stock	$	135,769	20,884	5,076	—	(25,960)	$	135,769
Other comprehensive loss, net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net gains recognized during the period in net periodic benefit cost, net of taxes	(1,487)		(166)	(200)	—	366	(1,487)
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	1,321		157	177	—	(334)	1,321
Other comprehensive loss, net of taxes	(166)		(9)	(23)	—	32	(166)
Comprehensive income attributable to common shareholder	$	135,603	20,875	5,053	—	(25,928)	$	135,603

(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

Nine months ended September 30, 2022


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated
Revenues	$	1,769,995	363,888	349,866	—	(113)	$	2,483,636
Expenses
Fuel oil	619,169		98,856	156,518	—	—	874,543
Purchased power	460,855		106,710	39,262	—	—	606,827
Other operation and maintenance	243,478		63,427	64,354	—	—	371,259
Depreciation	118,459		31,053	26,409	—	—	175,921
Taxes, other than income taxes	165,350		33,436	32,502	—	—	231,288

Total expenses	1,607,311		333,482	319,045	—	—	2,259,838
Operating income	162,684		30,406	30,821	—	(113)	223,798
Allowance for equity funds used during construction	5,999		616	816	—	—	7,431
Equity in earnings of subsidiaries	36,475		—	—	—	(36,475)	—
Retirement defined benefits credit (expense)—other than service costs	2,471		500	(95)	—	—	2,876
Interest expense and other charges, net	(40,833)		(7,967)	(8,048)	—	113	(56,735)
Allowance for borrowed funds used during construction	1,962		190	249	—	—	2,401
Income before income taxes	168,758		23,745	23,743	—	(36,475)	179,771
Income taxes	27,640		5,351	4,976	—	—	37,967
Net income	141,118		18,394	18,767	—	(36,475)	141,804
Preferred stock dividends of subsidiaries	—		400	286	—	—	686
Net income attributable to Hawaiian Electric	141,118		17,994	18,481	—	(36,475)	141,118
Preferred stock dividends of Hawaiian Electric	810		—	—	—	—	810
Net income for common stock	$	140,308	17,994	18,481	—	(36,475)	$	140,308

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Nine months ended September 30, 2022


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated
Net income for common stock	$	140,308	17,994	18,481	—	(36,475)	$	140,308
Other comprehensive income, 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 taxes	9,782		1,366	1,938		(3,304)	9,782
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(9,572)		(1,362)	(1,938)		3,300	(9,572)
Other comprehensive income, net of taxes	210		4	—	—	(4)	210
Comprehensive income attributable to common shareholder	$	140,518	17,998	18,481	—	(36,479)	$	140,518

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

September 30, ~~2017~~

2023


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsi- diary	Consoli- dating adjustments	Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	42,859	5,645	3,594	—	—	$	52,098
Plant and equipment	5,422,393		1,448,183	1,329,252	—	—	8,199,828
Right-of-use assets - finance lease	88,297		36,075	—	—	—	124,372
Less accumulated depreciation	(1,953,609)		(663,303)	(605,118)	—	—	(3,222,030)
Construction in progress	258,204		35,281	63,804	—	—	357,289
Utility property, plant and equipment, net	3,858,144		861,881	791,532	—	—	5,511,557
Nonutility property, plant and equipment, less accumulated depreciation	5,295		115	1,532	—	—	6,942
Total property, plant and equipment, net	3,863,439		861,996	793,064	—	—	5,518,499
Investment in wholly owned subsidiaries, at equity	703,311		—	—	—	(703,311)	—
Current assets
Cash and cash equivalents	233,518		32,716	8,543	77	—	274,854
Restricted cash	2,000		—	—	—	—	2,000

Customer accounts receivable, net	172,730		34,550	34,482	—	—	241,762
Accrued unbilled revenues, net	132,552		22,062	24,713	—	—	179,327
Other accounts receivable, net	115,498		7,124	11,778	—	(44,577)	89,823
Fuel oil stock, at average cost	112,468		14,400	25,900	—	—	152,768
Materials and supplies, at average cost	58,834		13,077	27,615	—	—	99,526
Prepayments and other	41,304		5,468	7,766	—	—	54,538
Regulatory assets	49,489		5,110	3,322	—	—	57,921
Total current assets	918,393		134,507	144,119	77	(44,577)	1,152,519
Other long-term assets
Operating lease right-of-use assets	36,627		29,193	10,241	—	—	76,061
Regulatory assets	146,735		14,583	11,958	—	—	173,276
Other	112,601		33,011	29,468	—	(16,988)	158,092
Total other long-term assets	295,963		76,787	51,667	—	(16,988)	407,429
Total assets	$	5,781,106	1,073,290	988,850	77	(764,876)	$	7,078,447
Capitalization and liabilities
Capitalization
Common stock equity	$	2,383,023	352,170	351,064	77	(703,311)	$	2,383,023
Cumulative preferred stock—not subject to mandatory redemption	22,293		7,000	5,000	—	—	34,293
Long-term debt, net	1,426,353		249,308	258,383	—	—	1,934,044
Total capitalization	3,831,669		608,478	614,447	77	(703,311)	4,351,360
Current liabilities
Current portion of operating lease liabilities	7,308		6,942	2,762	—	—	17,012
Current portion of long-term debt	49,998		19,999	29,999	—	—	99,996


Accounts payable	141,738		25,436	34,525	—	—	201,699
Interest and preferred dividends payable	21,304		3,924	4,830	—	—	30,058
Taxes accrued, including revenue taxes	196,037		40,706	37,529	—	—	274,272
Regulatory liabilities	9,999		6,842	9,484	—	—	26,325
Other	148,400		23,182	36,302	—	(44,577)	163,307
Total current liabilities	574,784		127,031	155,431	—	(44,577)	812,669
Deferred credits and other liabilities
Operating lease liabilities	35,967		22,575	7,757	—	—	66,299
Finance lease liabilities	82,935		35,205	—	—	—	118,140
Deferred income taxes	274,577		50,405	60,693	—	—	385,675
Regulatory liabilities	770,268		197,045	108,136	—	—	1,075,449
Unamortized tax credits	65,153		12,410	12,184	—	—	89,747
Defined benefit pension liability	65,872		—	—	—	(16,988)	48,884
Other	79,881		20,141	30,202	—	—	130,224
Total deferred credits and other liabilities	1,374,653		337,781	218,972	—	(16,988)	1,914,418
Total capitalization and liabilities	$	5,781,106	1,073,290	988,850	77	(764,876)	$	7,078,447

(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~~2022


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsi-diary	Consoli- dating adjustments	Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	42,860	5,606	3,594	—	—	$	52,060
Plant and equipment	5,260,685		1,425,442	1,293,383	—	—	7,979,510
Finance lease right-of-use assets	48,371		—	—	—	—	48,371
Less accumulated depreciation	(1,855,150)		(644,457)	(586,892)	—	—	(3,086,499)
Construction in progress	215,560		23,989	35,804	—	—	275,353
Utility property, plant and equipment, net	3,712,326		810,580	745,889	—	—	5,268,795
Nonutility property, plant and equipment, less accumulated depreciation	5,298		115	1,532	—	—	6,945
Total property, plant and equipment, net	3,717,624		810,695	747,421	—	—	5,275,740
Investment in wholly owned subsidiaries, at equity	701,833		—	—	—	(701,833)	—
Current assets
Cash and cash equivalents	27,579		5,092	6,494	77	—	39,242

Advances to affiliates	—		4,500	21,700	—	(26,200)	—
Customer accounts receivable, net	216,802		39,339	32,197	—	—	288,338
Accrued unbilled revenues, net	136,508		23,839	22,933	—	—	183,280
Other accounts receivable, net	23,746		5,519	6,686	—	(22,384)	13,567
Fuel oil stock, at average cost	153,342		16,964	21,224	—	—	191,530
Materials and supplies, at average cost	48,130		9,783	21,655	—	—	79,568
Prepayments and other	24,040		6,346	4,137	—	(1,041)	33,482
Regulatory assets	46,504		2,435	3,334	—	—	52,273
Total current assets	676,651		113,817	140,360	77	(49,625)	881,280
Other long-term assets
Operating lease right-of-use assets	42,752		34,283	12,283	—	—	89,318
Regulatory assets	154,040		21,816	14,384	—	—	190,240
Other	115,028		32,654	29,495	—	(16,288)	160,889
Total other long-term assets	311,820		88,753	56,162	—	(16,288)	440,447
Total assets	$	5,407,928	1,013,265	943,943	77	(767,746)	$	6,597,467
Capitalization and liabilities
Capitalization
Common stock equity	$	2,344,170	344,720	357,036	77	(701,833)	$	2,344,170
Cumulative preferred stock—not subject to mandatory redemption	22,293		7,000	5,000	—	—	34,293
Long-term debt, net	1,126,915		224,439	233,500	—	—	1,584,854
Total capitalization	3,493,378		576,159	595,536	77	(701,833)	3,963,317
Current liabilities
Current portion of operating lease liabilities	9,775		6,690	2,630	—	—	19,095
Current portion of long-term debt	49,981		19,992	29,989	—	—	99,962
Short-term borrowings-non-affiliate	87,967		—	—	—	—	87,967
Short-term borrowings-affiliate	26,200		—	—	—	(26,200)	—
Accounts payable	143,253		32,113	27,126	—	—	202,492
Interest and preferred dividends payable	12,398		2,576	2,282	—	(80)	17,176
Taxes accrued, including revenue taxes	207,798		42,436	40,709	—	(1,041)	289,902
Regulatory liabilities	13,145		8,553	9,777	—	—	31,475
Other	64,659		20,856	22,385	—	(22,304)	85,596
Total current liabilities	615,176		133,216	134,898	—	(49,625)	833,665
Deferred credits and other liabilities
Operating lease liabilities	41,049		27,817	9,849	—	—	78,715
Finance lease liabilities	46,048		—	—	—	—	46,048
Deferred income taxes	271,234		50,615	62,581	—	—	384,430
Regulatory liabilities	729,683		194,222	100,270	—	—	1,024,175
Unamortized tax credits	69,614		13,150	12,536	—	—	95,300
Defined benefit pension and other postretirement benefit plans liability	65,907		129	—	—	(16,288)	49,748
Other	75,839		17,957	28,273	—	—	122,069
Total deferred credits and other liabilities	1,299,374		303,890	213,509	—	(16,288)	1,800,485
Total capitalization and liabilities	$	5,407,928	1,013,265	943,943	77	(767,746)	$	6,597,467

(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 months ended September 30, ~~2017~~

(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
2023


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated
Balance, December 31, 2022	$	2,344,170	344,720	357,036	77	(701,833)	$	2,344,170
Net income for common stock	135,769		20,884	5,076	—	(25,960)	135,769
Other comprehensive loss, net of taxes	(166)		(9)	(23)	—	32	(166)
Common stock dividends	(96,750)		(13,425)	(11,025)	—	24,450	(96,750)


Balance, September 30, 2023	$	2,383,023	352,170	351,064	77	(703,311)	$	2,383,023

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Changes in Common Stock Equity

Nine months ended September 30, ~~2016~~ 2022


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated
Balance, December 31, 2021	$	2,261,899	332,900	343,260	77	(676,237)	$	2,261,899
Net income for common stock	140,308		17,994	18,481	—	(36,475)	140,308
Other comprehensive income, net of taxes	210		4	—	—	(4)	210
Common stock dividends	(94,425)		(12,300)	(11,400)	—	23,700	(94,425)
Balance, September 30, 2022	$	2,307,992	338,598	350,341	77	(689,016)	$	2,307,992

(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 months ended September 30, ~~2017~~2023


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated























Net cash provided by operating activities	$	336,248	59,029	35,284	—	(24,450)	$	406,111
Cash flows from investing activities
Capital expenditures	(217,276)		(47,609)	(69,612)	—	—	(334,497)

Advances from affiliates	—		4,500	21,700	—	(26,200)	—
Other	3,179		912	1,125	—	—	5,216
Net cash used in investing activities	(214,097)		(42,197)	(46,787)	—	(26,200)	(329,281)
Cash flows from financing activities
Common stock dividends	(96,750)		(13,425)	(11,025)	—	24,450	(96,750)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(810)		(400)	(286)	—	—	(1,496)


Proceeds from issuance of long-term debt	300,000		25,000	25,000	—	—	350,000

Net decrease in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	(114,167)		—	—	—	26,200	(87,967)
Payments of obligations under finance leases	(1,914)		(248)	—			(2,162)
Other	(571)		(135)	(137)	—	—	(843)
Net cash provided by financing activities	85,788		10,792	13,552	—	50,650	160,782
Net increase in cash, cash equivalents and restricted cash	207,939		27,624	2,049	—	—	237,612
Cash, cash equivalents and restricted cash, beginning of period	27,579		5,092	6,494	77	—	39,242
Cash, cash equivalents and restricted cash, end of period	235,518		32,716	8,543	77	—	276,854
Less: Restricted cash	(2,000)		—	—	—	—	(2,000)
Cash and cash equivalents, end of period	$	233,518	32,716	8,543	77	—	$	274,854

(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 months ended September 30, ~~2016~~2022


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated























Net cash provided by operating activities	$	74,053	38,302	35,512	—	(23,700)	$	124,167
Cash flows from investing activities
Capital expenditures	(152,015)		(34,055)	(39,806)	—	—	(225,876)
Advances from (to) affiliates	1,000		(1,500)	(16,000)	—	16,500	—
Other	4,545		825	1,380	—	—	6,750
Net cash used in investing activities	(146,470)		(34,730)	(54,426)	—	16,500	(219,126)
Cash flows from financing activities
Common stock dividends	(94,425)		(12,300)	(11,400)	—	23,700	(94,425)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(810)		(400)	(286)	—	—	(1,496)


Proceeds from issuance of long-term debt	40,000		10,000	10,000	—	—	60,000

Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	114,950		(1,000)	—	—	(16,500)	97,450
Payments of obligations under finance leases	(266)		—	—	—	—	(266)
Other	(170)		(44)	(44)	—	—	(258)
Net cash provided by (used in) financing activities	59,279		(3,744)	(1,730)	—	7,200	61,005
Net decrease in cash and cash equivalents	(13,138)		(172)	(20,644)	—	—	(33,954)
Cash and cash equivalents, beginning of period	26,433		5,326	23,422	77	—	55,258


Cash and cash equivalents, end of period	$	13,295	5,154	2,778	77	—	$	21,304

(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)

4 Note 5 · Bank segment

Selected financial information

American Savings Bank, F.S.B.

Statements of Income and Comprehensive Income Data


	Three months ended September 30				Nine months ended September 30
(in thousands)	2023		2022		2023		2022
Interest and dividend income
Interest and fees on loans	$	71,540	$	53,365	$	204,348	$	147,499
Interest and dividends on investment securities	14,096		15,052		42,508		43,729
Total interest and dividend income	85,636		68,417		246,856		191,228
Interest expense
Interest on deposit liabilities	14,446		1,704		30,944		3,572
Interest on other borrowings	8,598		1,055		25,171		1,199
Total interest expense	23,044		2,759		56,115		4,771
Net interest income	62,592		65,658		190,741		186,457
Provision for credit losses	8,835		(186)		10,053		(692)
Net interest income after provision for credit losses	53,757		65,844		180,688		187,149
Noninterest income
Fees from other financial services	4,703		4,763		14,391		15,066
Fee income on deposit liabilities	4,924		4,879		14,027		14,122
Fee income on other financial products	2,440		2,416		7,952		7,663
Bank-owned life insurance	2,303		122		5,683		661
Mortgage banking income	341		181		701		1,630
Gain on sale of real estate	—		—		495		1,002

Other income, net	627		633		2,106		1,480
Total noninterest income	15,338		12,994		45,355		41,624
Noninterest expense
Compensation and employee benefits	29,902		28,597		89,500		83,478
Occupancy	5,154		5,577		16,281		16,996
Data processing	5,133		4,509		15,240		13,144
Services	3,627		2,751		8,911		7,712
Equipment	3,125		2,432		8,728		7,163
Office supplies, printing and postage	1,022		1,123		3,296		3,256
Marketing	984		925		2,834		2,877

Other expense	7,399		5,643		19,742		14,542
Total noninterest expense	56,346		51,557		164,532		149,168
Income before income taxes	12,749		27,281		61,511		79,605
Income taxes	1,384		6,525		11,380		17,513
Net income	11,365		20,756		50,131		62,092
Other comprehensive income (loss), net of taxes	(34,231)		(98,942)		(23,011)		(310,218)
Comprehensive income (loss)	$	(22,866)	$	(78,186)	$	27,120	$	(248,126)

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)

~~American Savings Bank, F.S.B.~~

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


	Three months ended September 30				Nine months ended September 30
(in thousands)	2023		2022		2023		2022
Interest and dividend income	$	85,636	$	68,417	$	246,856	$	191,228
Noninterest income	15,338		12,994		45,355		41,624
Less: Gain on sale of real estate	—		—		495		1,002

*Revenues-Bank	100,974		81,411		291,716		231,850
Total interest expense	23,044		2,759		56,115		4,771
Provision for credit losses	8,835		(186)		10,053		(692)
Noninterest expense	56,346		51,557		164,532		149,168
Less: Gain on sale of real estate	—		—		495		1,002
Less: Retirement defined benefits credit—other than service costs	(190)		(181)		(564)		(552)
*Expenses-Bank	88,415		54,311		230,769		152,797
*Operating income-Bank	12,559		27,100		60,947		79,053
Add back: Retirement defined benefits credit—other than service costs	(190)		(181)		(564)		(552)

Income before income taxes	$	12,749	$	27,281	$	61,511	$	79,605

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, 2023				December 31, 2022
Assets
Cash and due from banks			$	139,059			$	153,042
Interest-bearing deposits			124,531				3,107
Cash and cash equivalents			263,590				156,149

Investment securities
Available-for-sale, at fair value			1,266,412				1,429,667
Held-to-maturity, at amortized cost (fair value of $1,052,221 and $1,150,971, respectively)			1,212,005				1,251,747
Stock in Federal Home Loan Bank, at cost			18,000				26,560
Loans held for investment			6,191,006				5,978,906
Allowance for credit losses			(76,366)				(72,216)
Net loans			6,114,640				5,906,690
Loans held for sale, at lower of cost or fair value			2,171				824
Other			698,420				692,143
Goodwill			82,190				82,190
Total assets			$	9,657,428			$	9,545,970
Liabilities and shareholder’s equity
Deposit liabilities—noninterest-bearing			$	2,573,010			$	2,811,077
Deposit liabilities—interest-bearing			5,651,341				5,358,619
Other borrowings			750,000				695,120
Other			224,136				212,269
Total liabilities			9,198,487				9,077,085

Common stock			1				1
Additional paid-in capital			357,742				355,806
Retained earnings			460,824				449,693
Accumulated other comprehensive loss, net of tax benefits
Net unrealized losses on securities	$	(350,234)			$	(328,904)
Retirement benefit plans	(9,392)		(359,626)		(7,711)		(336,615)
Total shareholder’s equity			458,941				468,885
Total liabilities and shareholder’s equity			$	9,657,428			$	9,545,970

Other assets
Bank-owned life insurance			$	186,143			$	182,986
Premises and equipment, net			189,950				195,324
Accrued interest receivable			29,361				25,077
Mortgage-servicing rights			8,376				9,047
Low-income housing investments			103,580				106,978


Deferred tax asset			127,735				116,441
Real estate acquired in settlement of loans, net			—				115
Other			53,275				56,175
			$	698,420			$	692,143
Other liabilities
Accrued expenses			$	102,540			$	97,295
Federal and state income taxes payable			845				863
Cashier’s checks			38,483				36,401
Advance payments by borrowers			4,289				9,637
Other			77,979				68,073
			$	224,136			$	212,269

(in thousands) September 30, 2017 December 31, 2016
Assets

Cash and due from banks
$ 120,492

$ 137,083
Interest-bearing deposits 69,223
52,128
Restricted cash —
1,764
Available-for-sale investment securities, at fair value
1,320,110

1,105,182
Stock in Federal Home Loan Bank, at cost
9,706

11,218
Loans receivable held for investment
4,676,281

4,738,693
Allowance for loan losses
(53,047 )
(55,533 )
Net loans
4,623,234

4,683,160
Loans held for sale, at lower of cost or fair value
15,728

18,817
Other
378,224

329,815
Goodwill
82,190

82,190
Total assets
$ 6,618,907

$ 6,421,357

Liabilities and shareholder’s equity

Deposit liabilities—noninterest-bearing
$ 1,710,698

$ 1,639,051
Deposit liabilities—interest-bearing
4,041,628

3,909,878
Other borrowings
153,552

192,618
Other
107,558

101,635
Total liabilities
6,013,436

5,843,182
Commitments and contingencies

Common stock
1

1
Additional paid in capital 344,512
342,704
Retained earnings
279,956

257,943
Accumulated other comprehensive loss, net of tax benefits

Net unrealized losses on securities $ (5,479 )
$ (7,931 )
Retirement benefit plans (13,519 ) (18,998 ) (14,542 ) (22,473 )
Total shareholder’s equity
605,471

578,175
Total liabilities and shareholder’s equity
$ 6,618,907

$ 6,421,357

Other assets

Bank-owned life insurance
$ 147,391

$ 143,197
Premises and equipment, net
123,326

90,570
Prepaid expenses
5,356

3,348
Accrued interest receivable
17,488

16,824
Mortgage-servicing rights
9,070

9,373
Low-income housing equity investments 54,515
47,081
Real estate acquired in settlement of loans, net
1,183

1,189
Other
19,895

18,233

$ 378,224

$ 329,815
Other liabilities

Accrued expenses
$ 41,698

$ 36,754
Federal and state income taxes payable
6,829

4,728
Cashier’s checks
27,448

24,156
Advance payments by borrowers
4,867

10,335
Other
26,716

25,662

$ 107,558

$ 101,635

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~~FHLB advances and ~~advances~~borrowings from the Federal ~~Home Loan Bank (FHLB) of~~ ~~$104 million~~ ~~and~~ ~~$50 million, respectively, as of~~ ~~September 30, 2017~~ ~~and $93 million and $100 million, respectively, as of~~ ~~December 31, 2016~~.Reserve Bank.

~~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
September 30, 2023
Available-for-sale
U.S. Treasury and federal agency obligations	$	82,252	$	—	$	(7,252)	$	75,000	—	$	—	$	—	14	$	75,000	$	(7,252)
Mortgage-backed securities*	1,427,186		—		(282,019)		1,145,167		5	12,650		(3,432)		178	1,132,517		(278,587)
Corporate bonds	35,273		—		(3,522)		31,751		—	—		—		3	31,751		(3,522)
Mortgage revenue bonds	14,494		—		—		14,494		—	—		—		—	—		—
	$	1,559,205	$	—	$	(292,793)	$	1,266,412	5	$	12,650	$	(3,432)	195	$	1,239,268	$	(289,361)
Held-to-maturity
U.S. Treasury and federal agency obligations	$	59,912	$	—	$	(9,541)	$	50,371	—	$	—	$	—	3	$	50,371	$	(9,541)
Mortgage-backed securities*	1,152,093		—		(150,243)		1,001,850		62	612,587		(42,892)		41	389,263		(107,351)
	$	1,212,005	$	—	$	(159,784)	$	1,052,221	62	$	612,587	$	(42,892)	44	$	439,634	$	(116,892)
December 31, 2022
Available-for-sale
U.S. Treasury and federal agency obligations	$	88,344	$	—	$	(7,281)	$	81,063	12	$	41,201	$	(2,120)	4	$	39,862	$	(5,161)
Mortgage-backed securities*	1,530,582		—		(237,614)		1,292,968		113	455,836		(56,999)		70	837,132		(180,615)
Corporate bonds	44,377		—		(3,643)		40,734		4	29,644		(2,028)		1	11,090		(1,615)
Mortgage revenue bonds	14,902		—		—		14,902		—	—		—		—	—		—
	$	1,678,205	$	—	$	(248,538)	$	1,429,667	129	$	526,681	$	(61,147)	75	$	888,084	$	(187,391)
Held-to-maturity
U.S. Treasury and federal agency obligations	$	59,894	$	—	$	(8,478)	$	51,416	1	$	16,874	$	(3,222)	2	$	34,542	$	(5,256)
Mortgage-backed securities*	1,191,853		2,670		(94,968)		1,099,555		22	183,629		(10,593)		51	567,250		(84,375)
	$	1,251,747	$	2,670	$	(103,446)	$	1,150,971	23	$	200,503	$	(13,815)	53	$	601,792	$	(89,631)

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
September 30, 2017

Available-for-sale
U.S. Treasury and federal agency obligations $ 182,535
$ 882
$ (1,299 ) $ 182,118
15
$ 91,203
$ (1,064 ) 2
$ 13,072
$ (235 )
Mortgage-related securities- FNMA, FHLMC and GNMA 1,131,245
2,127
(10,807 ) 1,122,565
84
686,186
(7,709 ) 29
138,051
(3,098 )
Mortgage revenue bond 15,427
—
—
15,427
—
—
—
—
—
—
$ 1,329,207
$ 3,009
$ (12,106 ) $ 1,320,110
99
$ 777,389
$ (8,773 ) 31
$ 151,123
$ (3,333 )
December 31, 2016
Available-for-sale
U.S. Treasury and federal agency obligations $ 193,515
$ 920
$ (2,154 ) $ 192,281
18
$ 123,475
$ (2,010 ) 1
$ 3,485
$ (144 )
Mortgage-related securities- FNMA, FHLMC and GNMA 909,408
1,742
(13,676 ) 897,474
88
709,655
(12,143 ) 13
47,485
(1,533 )
Mortgage revenue bond 15,427
—
—
15,427
—
—
—
—
—
—
$ 1,118,350
$ 2,662
$ (15,830 ) $ 1,105,182
106
$ 833,130
$ (14,153 ) 14
$ 50,970
$ (1,677 )
* Issued or guaranteed by U.S. Government agencies or sponsored agencies

ASB does not believe that the investment securities that were in an unrealized loss position at September 30, ~~2017,~~2023 and December 31, 2022, represent ~~an other-than-temporary impairment (OTTI).~~a credit loss. 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 rated 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~~ASB’s investment securities portfolio did not ~~recognize OTTI~~require an allowance for ~~the quarters and nine month periods ended~~credit losses at September 30, ~~2017~~2023 and ~~2016.~~December 31, 2022.

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

In addition, expected maturities will differ from contractual maturities because borrowers have the right to prepay the underlying mortgages.

The contractual maturities of ~~available-for-sale~~ investment securities were as follows:


September 30, 2023	Amortized cost		Fair value
(in thousands)
Available-for-sale
Due in one year or less	$	1,811	$	1,782
Due after one year through five years	115,714		104,970
Due after five years through ten years	14,494		14,494
Due after ten years	—		—
	132,019		121,246
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,427,186		1,145,166
Total available-for-sale securities	$	1,559,205	$	1,266,412
Held-to-maturity
Due in one year or less	$	—	$	—
Due after one year through five years	39,824		34,133
Due after five years through ten years	20,088		16,238
Due after ten years	—		—
	59,912		50,371
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,152,093		1,001,850
Total held-to-maturity securities	$	1,212,005	$	1,052,221

September 30, 2017 Amortized cost Fair value
(in thousands)
Due in one year or less $ 9,998
$ 9,999
Due after one year through five years 77,138
77,331
Due after five years through ten years 81,464
81,170
Due after ten years 29,362
29,045
197,962
197,545
Mortgage-related securities-FNMA, FHLMC and GNMA 1,131,245
1,122,565
Total available-for-sale securities $ 1,329,207
$ 1,320,110

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

~~Proceeds from the sale~~There were no sales of available-for-sale securities ~~were nil~~ for ~~both~~ the three ~~month periods ended September 30, 2017~~months and ~~2016 and nil and $16.4 million for the~~ nine months ended September 30, ~~2017~~2023 and 2016, respectively. Gross realized gains were nil for both the three month periods ended September 30, 2017 and 2016, and nil and $0.6 million for the nine months ended September 30, 2017 and 2016, respectively. Gross realized losses were nil or not material for all periods presented.2022.

~~Loans receivable.~~

The components of loans ~~receivable~~ were summarized as follows:

September 30, 2017 December 31, 2016
(in thousands)

Real estate:

Residential 1-4 family $ 2,066,023
$ 2,048,051
Commercial real estate 745,583
800,395
Home equity line of credit 905,249
863,163
Residential land 18,611
18,889
Commercial construction 128,407
126,768
Residential construction 13,031
16,080
Total real estate 3,876,904
3,873,346
Commercial 589,669
692,051
Consumer 211,571
178,222
Total loans 4,678,144
4,743,619
Less: Deferred fees and discounts (1,863 ) (4,926 )
Allowance for loan losses (53,047 ) (55,533 )
Total loans, net $ 4,623,234
$ 4,683,160


	September 30, 2023		December 31, 2022
(in thousands)
Real estate:
Residential 1-4 family	$	2,566,300	$	2,479,637
Commercial real estate	1,400,570		1,358,123
Home equity line of credit	1,032,749		1,002,905
Residential land	20,245		20,679
Commercial construction	168,539		88,489
Residential construction	17,295		20,788
Total real estate	5,205,698		4,970,621
Commercial	732,458		779,691
Consumer	282,946		254,709
Total loans	6,221,102		6,005,021
Less: Deferred fees and discounts	(30,096)		(26,115)
Allowance for credit losses	(76,366)		(72,216)
Total loans, net	$	6,114,640	$	5,906,690

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,~~property purchases, the loan-to-value ratio may not exceed ~~80%~~75% of the lower of the appraised value or purchase price at origination. ~~ASB is subject to the risk that the insurance company cannot satisfy the bank's claim on policies.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Allowance for ~~loan~~credit losses.The allowance for ~~loan~~credit losses (balances and changes) ~~and financing receivables~~by portfolio segment 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 September 30, 2023
Allowance for credit losses:
Beginning balance	$	4,708	$	20,278	$	7,139	$	653	$	2,549	$	26	$	11,358	$	22,357	$	69,068
Charge-offs	—		—		—		—		—		—		(125)		(2,667)		(2,792)
Recoveries	57		—		131		1		—		—		725		841		1,755
Provision	1,702		2,180		505		(33)		1,075		16		(1,175)		4,065		8,335
Ending balance	$	6,467	$	22,458	$	7,775	$	621	$	3,624	$	42	$	10,783	$	24,596	$	76,366
Three months ended September 30, 2022
Allowance for credit losses:
Beginning balance	$	8,520	$	20,900	$	6,096	$	677	$	2,634	$	46	$	12,413	$	18,170	$	69,456
Charge-offs	—		—		—		—		—		—		(143)		(1,503)		(1,646)
Recoveries	2		—		14		—		—		—		303		963		1,282
Provision	(938)		136		(167)		12		(1,635)		3		378		3,525		1,314
Ending balance	$	7,584	$	21,036	$	5,943	$	689	$	999	$	49	$	12,951	$	21,155	$	70,406
Nine months ended September 30, 2023
Allowance for credit losses:
Beginning balance	$	6,270	$	21,898	$	6,125	$	717	$	1,195	$	46	$	12,426	$	23,539	$	72,216
Charge-offs	(990)		—		(360)		—		—		—		(509)		(7,558)		(9,417)
Recoveries	63		—		165		4		—		—		1,329		2,653		4,214
Provision	1,124		560		1,845		(100)		2,429		(4)		(2,463)		5,962		9,353
Ending balance	$	6,467	$	22,458	$	7,775	$	621	$	3,624	$	42	$	10,783	$	24,596	$	76,366



Nine months ended September 30, 2022
Allowance for credit losses:
Beginning balance	$	6,545	$	24,696	$	5,657	$	646	$	2,186	$	18	$	15,798	$	15,584	$	71,130
Charge-offs	—		—		—		—		—		—		(367)		(4,354)		(4,721)
Recoveries	13		—		56		101		—		—		1,055		2,964		4,189
Provision	1,026		(3,660)		230		(58)		(1,187)		31		(3,535)		6,961		(192)
Ending balance	$	7,584	$	21,036	$	5,943	$	689	$	999	$	49	$	12,951	$	21,155	$	70,406

(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)

Allowance for loan commitments.The allowance for loan commitments by portfolio segment were as follows:


(in thousands)	Home equity line of credit		Commercial construction		Commercial loans		Total
Three months ended September 30, 2023
Allowance for loan commitments:
Beginning balance	$	600	$	3,800	$	200	$	4,600
Provision	—		500		—		500
Ending balance	$	600	$	4,300	$	200	$	5,100
Three months ended September 30, 2022
Allowance for loan commitments:
Beginning balance	$	400	$	4,100	$	1,400	$	5,900
Provision	—		(1,500)		—		(1,500)
Ending balance	$	400	$	2,600	$	1,400	$	4,400
Nine months ended September 30, 2023
Allowance for loan commitments:
Beginning balance	$	400	$	2,600	$	1,400	$	4,400
Provision	200		1,700		(1,200)		700
Ending balance	$	600	$	4,300	$	200	$	5,100
Nine months ended September 30, 2022
Allowance for loan commitments:
Beginning balance	$	400	$	3,700	$	800	$	4,900

Provision	—		(1,100)		600		(500)
Ending balance	$	400	$	2,600	$	1,400	$	4,400

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.

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~~ASB 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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

The credit risk profile by vintage date based on payment activity or internally assigned grade for loans was as follows:


	Term Loans by Origination Year												Revolving Loans
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving		Converted to term loans		Total
September 30, 2023
Residential 1-4 family
Current	$	199,880	$	414,053	$	741,401	$	405,552	$	107,566	$	692,167	$	—	$	—	$	2,560,619
30-59 days past due	—		—		—		267		—		2,654		—		—		2,921
60-89 days past due	—		—		—		—		—		973		—		—		973
Greater than 89 days past due	—		—		—		—		—		1,787		—		—		1,787
	199,880		414,053		741,401		405,819		107,566		697,581		—		—		2,566,300
Current YTD period
Gross charge-offs	—		—		—		—		—		990		—		—		990
Home equity line of credit
Current	—		—		—		—		—		—		976,029		54,579		1,030,608
30-59 days past due	—		—		—		—		—		—		463		246		709
60-89 days past due	—		—		—		—		—		—		350		321		671
Greater than 89 days past due	—		—		—		—		—		—		495		266		761
	—		—		—		—		—		—		977,337		55,412		1,032,749
Current YTD period
Gross charge-offs	—		—		—		—		—		—		77		283		360
Residential land
Current	3,077		5,118		7,549		3,518		—		983		—		—		20,245
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	3,077		5,118		7,549		3,518		—		983		—		—		20,245
Current YTD period
Gross charge-offs	—		—		—		—		—		—		—		—		—
Residential construction
Current	2,780		11,019		3,496		—		—		—		—		—		17,295
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	2,780		11,019		3,496		—		—		—		—		—		17,295
Current YTD period
Gross charge-offs	—		—		—		—		—		—		—		—		—
Consumer
Current	82,282		164,693		12,203		2,394		1,010		222		10,345		3,413		276,562
30-59 days past due	822		1,882		122		43		49		1		46		156		3,121
60-89 days past due	362		933		108		35		52		—		32		81		1,603
Greater than 89 days past due	375		785		102		33		26		2		151		186		1,660
	83,841		168,293		12,535		2,505		1,137		225		10,574		3,836		282,946
Current YTD period
Gross charge-offs	850		4,637		840		163		363		39		279		387		7,558
Commercial real estate
Pass	81,287		390,352		177,125		265,808		66,112		329,235		15,482		—		1,325,401
Special Mention	—		—		11,214		3,381		14,452		22,367		—		—		51,414
Substandard	5,386		—		1,549		—		11,048		5,772		—		—		23,755
Doubtful	—		—		—		—		—		—		—		—		—
	86,673		390,352		189,888		269,189		91,612		357,374		15,482		—		1,400,570

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)


	Term Loans by Origination Year												Revolving Loans
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving		Converted to term loans		Total
Current YTD period
Gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial construction
Pass	10,643		21,440		66,143		356		—		—		69,957		—		168,539
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
	10,643		21,440		66,143		356		—		—		69,957		—		168,539
Current YTD period
Gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial
Pass	82,145		209,364		124,453		75,753		46,291		81,409		81,627		9,560		710,602
Special Mention	1,945		—		970		—		272		—		7,151		—		10,338
Substandard	—		3,054		2,040		230		763		3,409		1,506		516		11,518
Doubtful	—		—		—		—		—		—		—		—		—
	84,090		212,418		127,463		75,983		47,326		84,818		90,284		10,076		732,458
Current YTD period
Gross charge-offs	—		—		51		—		—		—		177		281		509
Total loans	$	470,984	$	1,222,693	$	1,148,475	$	757,370	$	247,641	$	1,140,981	$	1,163,634	$	69,324	$	6,221,102

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)


	Term Loans by Origination Year												Revolving Loans
(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving		Converted to term loans		Total
December 31, 2022
Residential 1-4 family
Current	$	432,707	$	755,056	$	423,455	$	113,096	$	51,860	$	698,354	$	—	$	—	$	2,474,528
30-59 days past due	—		—		—		—		448		1,098		—		—		1,546
60-89 days past due	—		—		268		—		—		90		—		—		358
Greater than 89 days past due	—		—		—		—		809		2,396		—		—		3,205
	432,707		755,056		423,723		113,096		53,117		701,938		—		—		2,479,637
Home equity line of credit
Current	—		—		—		—		—		—		959,131		40,814		999,945
30-59 days past due	—		—		—		—		—		—		1,103		209		1,312
60-89 days past due	—		—		—		—		—		—		209		226		435
Greater than 89 days past due	—		—		—		—		—		—		587		626		1,213
	—		—		—		—		—		—		961,030		41,875		1,002,905
Residential land
Current	5,245		9,010		5,222		203		522		477		—		—		20,679
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	5,245		9,010		5,222		203		522		477		—		—		20,679
Residential construction
Current	7,986		11,624		1,178		—		—		—		—		—		20,788
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	7,986		11,624		1,178		—		—		—		—		—		20,788
Consumer
Current	199,574		21,330		5,543		7,580		527		140		10,810		4,782		250,286
30-59 days past due	1,110		287		65		239		30		—		81		167		1,979
60-89 days past due	756		163		88		137		19		—		45		107		1,315
Greater than 89 days past due	621		105		37		176		28		—		20		142		1,129
	202,061		21,885		5,733		8,132		604		140		10,956		5,198		254,709
Commercial real estate
Pass	390,206		177,130		283,321		51,542		63,084		278,280		8,235		—		1,251,798
Special Mention	—		11,250		3,446		40,423		—		24,466		—		—		79,585
Substandard	—		—		665		11,357		—		14,718		—		—		26,740
Doubtful	—		—		—		—		—		—		—		—		—
	390,206		188,380		287,432		103,322		63,084		317,464		8,235		—		1,358,123
Commercial construction
Pass	15,094		47,478		44		—		—		—		25,873		—		88,489
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
	15,094		47,478		44		—		—		—		25,873		—		88,489
Commercial
Pass	239,852		185,013		85,220		68,161		46,142		53,192		60,871		13,964		752,415
Special Mention	—		—		—		2,374		—		645		9,005		8		12,032
Substandard	3,322		2,305		401		1,304		1,346		3,849		1,664		1,053		15,244
Doubtful	—		—		—		—		—		—		—		—		—
	243,174		187,318		85,621		71,839		47,488		57,686		71,540		15,025		779,691
Total loans	$	1,296,473	$	1,220,751	$	808,953	$	296,592	$	164,815	$	1,077,705	$	1,077,634	$	62,098	$	6,005,021

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Revolving loans converted to term loans during the nine months ended September 30, 2023 in the commercial, home equity line of credit and consumer portfolios were $6.1 million, $20.4 million and $1.1 million, respectively. Revolving loans converted to term loans during the nine months ended September 30, 2022 in the commercial, home equity line of credit and consumer portfolios were $1.6 million, $12.9 million and $2.7 million, respectively.

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		Amortized cost> 90 days and accruing
September 30, 2023
Real estate:
Residential 1-4 family	$	2,921	$	973	$	1,787	$	5,681	$	2,560,619	$	2,566,300	$	—
Commercial real estate	—		—		—		—		1,400,570		1,400,570		—
Home equity line of credit	709		671		761		2,141		1,030,608		1,032,749		—
Residential land	—		—		—		—		20,245		20,245		—
Commercial construction	—		—		—		—		168,539		168,539		—
Residential construction	—		—		—		—		17,295		17,295		—
Commercial	575		100		77		752		731,706		732,458		—
Consumer	3,121		1,603		1,660		6,384		276,562		282,946		—
Total loans	$	7,326	$	3,347	$	4,285	$	14,958	$	6,206,144	$	6,221,102	$	—
December 31, 2022
Real estate:
Residential 1-4 family	$	1,546	$	358	$	3,205	$	5,109	$	2,474,528	$	2,479,637	$	—
Commercial real estate	508		217		—		725		1,357,398		1,358,123		—
Home equity line of credit	1,312		435		1,213		2,960		999,945		1,002,905		—
Residential land	—		—		—		—		20,679		20,679		—
Commercial construction	—		—		—		—		88,489		88,489		—
Residential construction	—		—		—		—		20,788		20,788		—
Commercial	614		18		77		709		778,982		779,691		—
Consumer	1,979		1,315		1,129		4,423		250,286		254,709		—
Total loans	$	5,959	$	2,343	$	5,624	$	13,926	$	5,991,095	$	6,005,021	$	—

(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~~were as follows:


(in thousands)	September 30, 2023						December 31, 2022
	With a Related ACL		Without a Related ACL		Total		With a Related ACL		Without a Related ACL		Total
Real estate:
Residential 1-4 family	$	573	$	2,500	$	3,073	$	4,198	$	2,981	$	7,179
Commercial real estate	—		—		—		—		—		—
Home equity line of credit	2,764		1,017		3,781		3,654		1,442		5,096
Residential land	106		—		106		420		—		420
Commercial construction	—		—		—		—		—		—
Residential construction	—		—		—		—		—		—
Commercial	508		—		508		2,183		—		2,183
Consumer	2,414		—		2,414		1,588		—		1,588
Total	$	6,365	$	3,517	$	9,882	$	12,043	$	4,423	$	16,466

ASB did not recognize interest on nonaccrual loans ~~90 days or more past due~~for the nine months ended September 30, 2023 and ~~TDR loans was as follows:~~2022.

(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)

Modifications Made to Borrowers Experiencing Financial Difficulty. The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination. The starting point for the estimate of the allowance for credit losses is historical loan information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. ASB uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made at the time of the modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generally not recorded upon modification.

Modifications may include interest rate reductions, interest only payments for an extended period of time, protracted terms such as amortization and maturity beyond the customary length of time found in the normal marketplace, and other actions intended to minimize economic loss and to provide alternatives to foreclosure or repossession of collateral.

During the nine months ended September 30, 2023, no loans received a material modification based on borrower financial difficulty.

Troubled debt restructurings. Prior to January 1, 2023, a loan modification was deemed to be a TDR when the borrower was determined to be experiencing financial difficulties and ASB granted a concession it would not otherwise consider. With the adoption of ASU No. 2022-02, accounting guidance for TDRs by creditors is eliminated. Loan refinancing and restructuring guidance is applied to determine whether a modification results in a new loan or a continuation of an existing loan. ASB will continue TDR disclosures for years prior to the adoption of ASU No. 2022-02.

The ~~total carrying amount~~credit risk profile based on loans whose terms have been modified and ~~the total unpaid principal balance of impaired loans~~accruing interest were as follows:


(in thousands)	December 31, 2022
Real estate:
Residential 1-4 family	$	8,821
Commercial real estate	9,477
Home equity line of credit	4,404
Residential land	782
Commercial construction	—
Residential construction	—
Commercial	6,596
Consumer	50
Total troubled debt restructured loans accruing interest	$	30,130

Loans modified as a TDR. Loan modifications that occurred during the three and nine months ended September 30, 2022.


	Three months ended September 30, 2022					Nine months ended September 30, 2022
(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	2	$	512	$	—	3	$	893	$	135
Commercial real estate	—	—		—		—	—		—
Home equity line of credit	—	—		—		—	—		—
Residential land	1	204		16		1	204		16
Commercial construction	—	—		—		—	—		—
Residential construction	—	—		—		—	—		—
Commercial	—	—		—		1	288		20
Consumer	—	—		—		—	—		—
	3	$	716	$	16	5	$	1,385	$	171

1The 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.

September 30, 2017 Three months ended September 30, 2017 Nine months ended September 30, 2017
(in thousands)
Recorded
investment

Unpaid
principal
balance

Related
Allowance

Average
recorded
investment

Interest
income
recognized*

Average
recorded
investment

Interest
income
recognized*
With no related allowance recorded

Real estate:

Residential 1-4 family $ 9,987
$ 10,541
$ —
$ 9,650
$ 70
$ 9,503
$ 230
Commercial real estate —
—
—
—
—
121
11
Home equity line of credit 1,565
1,889
—
1,918
32
2,108
97
Residential land 1,134
1,425
—
1,209
73
1,080
107
Commercial construction —
—
—
—
—
—
—
Residential construction —
—
—
—
—
—
—
Commercial 2,901
6,257
—
1,808
29
2,888
37
Consumer —
—
—
—
—
—
—
$ 15,587
$ 20,112
$ —
$ 14,585
$ 204
$ 15,700
$ 482
With an allowance recorded

Real estate:

Residential 1-4 family $ 9,770
$ 9,972
$ 1,317
$ 9,788
$ 97
$ 9,963
$ 333
Commercial real estate 1,281
1,281
72
1,284
13
1,292
41
Home equity line of credit 5,513
5,543
409
5,076
68
4,670
164
Residential land 1,251
1,251
373
1,251
12
1,620
73
Commercial construction —
—
—
—
—
—
—
Residential construction —
—
—
—
—
—
—
Commercial 2,585
2,595
667
2,482
225
4,104
694
Consumer 67
67
30
67
1
55
2
$ 20,467
$ 20,709
$ 2,868
$ 19,948
$ 416
$ 21,704
$ 1,307
Total

Real estate:

Residential 1-4 family $ 19,757
$ 20,513
$ 1,317
$ 19,438
$ 167
$ 19,466
$ 563
Commercial real estate 1,281
1,281
72
1,284
13
1,413
52
Home equity line of credit 7,078
7,432
409
6,994
100
6,778
261
Residential land 2,385
2,676
373
2,460
85
2,700
180
Commercial construction —
—
—
—
—
—
—
Residential construction —
—
—
—
—
—
—
Commercial 5,486
8,852
667
4,290
254
6,992
731
Consumer 67
67
30
67
1
55
2
$ 36,054
$ 40,821
$ 2,868
$ 34,533
$ 620
$ 37,404
$ 1,789

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

December 31, 2016 Three months ended September 30, 2016 Nine months ended September 30, 2016
(in thousands)
Recorded
investment

Unpaid
principal
balance

Related
allowance

Average
recorded
investment

Interest
income
recognized*

Average
recorded
investment

Interest
income
recognized*
With no related allowance recorded

Real estate:

Residential 1-4 family $ 9,571
$ 10,400
$ —
$ 10,069
$ 65
$ 10,378
$ 268
Commercial real estate 223
228
—
1,206
—
1,177
—
Home equity line of credit 1,500
1,900
—
1,220
6
1,035
15
Residential land 1,218
1,803
—
1,521
16
1,532
47
Commercial construction —
—
—
—
—
—
—
Residential construction —
—
—
—
—
—
—
Commercial 6,299
8,869
—
14,352
141
9,240
154
Consumer —
—
—
10
—
3
—
$ 18,811
$ 23,200
$ —
$ 28,378
$ 228
$ 23,365
$ 484
With an allowance recorded

Real estate:

Residential 1-4 family $ 10,283
$ 10,486
$ 1,352
$ 11,800
$ 119
$ 11,933
$ 356
Commercial real estate 1,346
1,346
80
2,444
—
1,939
—
Home equity line of credit 4,658
4,712
215
4,165
36
3,470
91
Residential land 2,411
2,411
789
2,915
44
3,090
165
Commercial construction —
—
—
—
—
—
—
Residential construction —
—
—
—
—
—
—
Commercial 14,240
14,240
1,641
11,433
65
15,075
275
Consumer 10
10
6
11
—
12
—
$ 32,948
$ 33,205
$ 4,083
$ 32,768
$ 264
$ 35,519
$ 887
Total

Real estate:

Residential 1-4 family $ 19,854
$ 20,886
$ 1,352
$ 21,869
$ 184
$ 22,311
$ 624
Commercial real estate 1,569
1,574
80
3,650
—
3,116
—
Home equity line of credit 6,158
6,612
215
5,385
42
4,505
106
Residential land 3,629
4,214
789
4,436
60
4,622
212
Commercial construction —
—
—
—
—
—
—
Residential construction —
—
—
—
—
—
—
Commercial 20,539
23,109
1,641
25,785
206
24,315
429
Consumer 10
10
6
21
—
15
—
$ 51,759
$ 56,405
$ 4,083
$ 61,146
$ 492
$ 58,884
$ 1,371


*	~~Since loan was classified as impaired.~~

~~Troubled debt restructurings.~~ ~~A loan modification is deemed to be a troubled debt restructuring (TDR) when ASB grants a concession it would not otherwise consider~~There were it not for the borrower’s financial difficulty. When a borrower experiencing financial difficulty fails to make a required payment on a loan or is in imminent default, ASB takes a number of steps to improve the collectibility of the loan and maximize the likelihood of full repayment. At times, ASB may modify or restructure a loan to help a distressed borrower improve its financial position to eventually be able to fully repay the loan, provided the borrower has demonstrated both the willingness and the ability to fulfill the modified terms. TDRno loans ~~are considered an alternative to foreclosure or liquidation with the goal of minimizing losses to ASB and maximizing recovery.~~

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)~~

extending the amortization period, or capitalizing certain delinquent amounts owed not to exceed the original loan balance. Land loans at origination are typically structured as a three-year term, interest-only monthly payment with a balloon payment due at maturity. Land loan TDR modifications typically involve extending the maturity date up to five years and converting the payments from interest-only to principal and interest monthly, at the same or higher interest rate. Commercial loan modifications generally involve extensions of maturity dates, extending the amortization period and temporary deferral or reduction of principal payments. ASB generally does not reduce the interest rate on commercial loan TDR modifications. Occasionally, additional collateral and/or guaranties are obtained.

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.

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

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
(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
$ 83
$ 83
$ —
7
$ 955
$ 963
$ 45
Commercial real estate —
—
—
—
—
—
—
—
Home equity line of credit 15
862
862
184
28
1,386
1,372
277
Residential land —
—
—
—
—
—
—
—
Commercial construction —
—
—
—
—
—
—
—
Residential construction —
—
—
—
—
—
—
—
Commercial 1
330
330
38
2
672
672
38
Consumer —
—
—
—
1
59
59
27
18
$ 1,275
$ 1,275
$ 222
38
$ 3,072
$ 3,066
$ 387

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


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.~~

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

~~Loans~~ modified in TDRs that experienced a payment default of 90 days or more during the third ~~quarters~~quarter and first nine months of ~~2017 and 2016, and for which the payment of default occurred within one year of the modification, were as follows:~~2022.

Three months ended September 30, 2017 Nine months ended September 30, 2017
(dollars in thousands) Number of contracts Recorded investment Number of contracts Recorded investment
Troubled debt restructurings that
subsequently defaulted

Real estate:

Residential 1-4 family — $ —
1 $ 222
Commercial real estate — —
— —
Home equity line of credit — —
— —
Residential land — —
— —
Commercial construction — —
— —
Residential construction — —
— —
Commercial — —
— —
Consumer — —
— —
— $ —
1 $ 222

Three months ended September 30, 2016 Nine months ended September 30, 2016
(dollars in thousands) Number of contracts Recorded investment Number of contracts Recorded investment
Troubled debt restructurings that
subsequently defaulted
Real estate:

Residential 1-4 family 1 $ 239
1 $ 239
Commercial real estate — —
— —
Home equity line of credit — —
— —
Residential land — —
— —
Commercial construction — —
— —
Residential construction — —
— —
Commercial — —
1 25
Consumer — —
— —
1 $ 239
2 $ 264

If ~~loans~~a loan modified in a TDR subsequently ~~default,~~defaults, 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 30, 2017~~ ~~and~~ December 31, ~~2016, respectively.~~2022.

~~The Company~~Collateral-dependent loans. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the collateral. Loans considered collateral-dependent were as follows:


	Amortized cost
(in thousands)	September 30, 2023		December 31, 2022		Collateral type
Real estate:
Residential 1-4 family	$	2,584	$	3,959	Residential real estate property

Home equity line of credit	1,017		1,425		Residential real estate property



Total	$	3,601	$	5,384

ASB had ~~$4.9~~$3.4 million and ~~$3.9~~$4.2 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure at September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively.

Mortgage servicing rights (MSRs).In its mortgage banking business, ASB sells residential mortgage loans to government-sponsored entities and other parties, who may issue securities backed by pools of such loans. ASB retains no beneficial interests in these loans other than the servicing rights of certain loans sold.

ASB received proceeds from the sale of residential mortgages of ~~$39.8~~$21.5 million and ~~$70.0~~$12.1 million for the three months ended September 30, ~~2017~~2023 and ~~2016~~2022, respectively, and ~~$119.7~~recognized gains on such sales of $0.3 million and ~~$168.5~~$0.2 million for the three months ended September 30, 2023 and 2022, respectively. ASB received proceeds from the sale of residential mortgages of $36.1 million and $126.4 million for the nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022, respectively, and recognized gains on such sales of ~~$0.5~~$0.7 million and ~~$2.4 million for the three months ended September 30, 2017 and 2016 and $1.9 million and $5.1~~$1.6 million for the nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022, respectively.

There were no repurchased mortgage loans for the three and nine months ended September 30, ~~2017~~2023 and ~~2016. The repurchase reserve was $0.1 million as of~~one repurchased mortgage loan for the three and nine months ended September 30, ~~2017 and 2016.~~

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

2022.

Mortgage servicing fees, a component of other income, net, were ~~$0.8~~$0.9 million and ~~$0.7~~$1.0 million for the three months ended September 30, ~~2017~~2023 and ~~2016,~~2022, respectively, and ~~$2.3~~$2.7 million and ~~$2.1~~$2.8 million for the nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022 respectively.

Changes in the carrying value of ~~mortgage servicing rights~~MSRs were as follows:


(in thousands)	Gross carrying amount		Accumulated amortization		Valuation allowance		Net carrying amount
September 30, 2023	$	18,125	$	(9,749)	$	—	$	8,376
December 31, 2022	19,544		(10,497)		—		9,047

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

(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

¹ ~~Reflects the impact of loans paid in full.~~

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

Three months ended September 30 Nine months ended September 30
(in thousands) 2017 2016 2017 2016
Mortgage servicing rights
Beginning balance $ 9,181
$ 9,016
$ 9,373
$ 8,884
Amount capitalized 394
824
1,192
1,944
Amortization (505 ) (649 ) (1,495 ) (1,637 )
Other-than-temporary impairment —
—
—
—
Carrying amount before valuation allowance 9,070
9,191
9,070
9,191
Valuation allowance for mortgage servicing rights
Beginning balance —
—
—
—
Provision (recovery) —
—
—
—
Other-than-temporary impairment —
—
—
—
Ending balance —
—
—
—
Net carrying value of mortgage servicing rights $ 9,070
$ 9,191
$ 9,070
$ 9,191


	Three months ended September 30				Nine months ended September 30
(in thousands)	2023		2022		2023		2022
Mortgage servicing rights
Beginning balance	$	8,495	$	9,696	$	9,047	$	9,950
Amount capitalized	184		117		319		1,040
Amortization	(303)		(462)		(990)		(1,639)
Other-than-temporary impairment	—		—		—		—
Carrying amount before valuation allowance	8,376		9,351		8,376		9,351
Valuation allowance for mortgage servicing rights
Beginning balance	—		—		—		—
Provision	—		—		—		—
Other-than-temporary impairment	—		—		—		—
Ending balance	—		—		—		—
Net carrying value of mortgage servicing rights	$	8,376	$	9,351	$	8,376	$	9,351

ASB capitalizes ~~mortgage servicing rights~~MSRs acquired ~~through either the purchase or~~ upon the sale of mortgage loans with servicing rights retained. On a monthly basis, ASB compares the net carrying value of the ~~mortgage servicing rights~~MSRs to its fair value to determine if there are any changes to the valuation allowance and/or other-than-temporary impairment for the mortgage servicing rights. ASB’s MSRs are stratified based on predominant risk characteristics of the underlying loans including loan type such as fixed-rate 15 and 30 year mortgages and note rate in bands of 50 to 100 basis points. For each stratum, fair value is calculated by discounting expected net income streams using discount rates that reflect industry pricing for similar assets. Changes in mortgage interest rates impact the value of ASB’s mortgage servicing rights. Rising interest rates typically result in slower prepayment speeds in the loans being serviced for others, which increases the value of mortgage servicing rights, whereas declining interest rates typically result in faster prepayment speeds which decrease the value of mortgage servicing rights and increase the amortization of the mortgage servicing rights. 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.MSRs.

ASB uses a present value cash flow model ~~using techniques described above~~ to estimate the fair value of MSRs. 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 condensed consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable.

~~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)	September 30, 2023			December 31, 2022
Unpaid principal balance	$	1,412,412		$	1,451,322
Weighted average note rate	3.44		%	3.38		%
Weighted average discount rate	10.00		%	10.00		%
Weighted average prepayment speed	5.58		%	6.56		%

(dollars in thousands) September 30, 2017
December 31, 2016
Unpaid principal balance $ 1,212,730
$ 1,188,380
Weighted average note rate 3.94 % 3.96 %
Weighted average discount rate 10.0 % 9.4 %
Weighted average prepayment speed 9.2 % 8.5 %

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) 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 )


(dollars in thousands)	September 30, 2023		December 31, 2022
Prepayment rate:
25 basis points adverse rate change	$	(90)	$	(92)
50 basis points adverse rate change	(207)		(214)
Discount rate:
25 basis points adverse rate change	(206)		(182)
50 basis points adverse rate change	(407)		(361)

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 September 30, 2023 and December 31, 2022, ASB had $200.0 million and $414.0 million of FHLB advances outstanding, respectively, and borrowings with the Federal Reserve Bank of $550.0 million and nil, respectively. As of September 30, 2023, ASB was in compliance with all FHLB Advances, Pledge and Security Agreement requirements and all requirements to borrow at the Federal Reserve Discount Window Primary Credit Facility under 12 CFR 201.4(a) guidelines.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Securities sold under agreements to repurchase are accounted for as financing transactions and the obligations to repurchase these securities are recorded as liabilities in the condensed consolidated balance sheets. ASB pledges investment securities as collateral for securities sold under agreements to repurchase. All such agreements are subject to master netting arrangements, which provide for a conditional right of set-off in case of default by either party; however, ASB presents 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:


(in millions)	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, 2023	$	—	$	—	$	—
December 31, 2022	281		—		281

(in millions)
Gross amount of
recognized liabilities

Gross amount offset in
the Balance Sheet

Net amount of liabilities presented
in the Balance Sheet
Repurchase agreements
September 30, 2017 $104 $— $104
December 31, 2016 93 — 93

Gross amount not offset in the Balance Sheet
(in millions)
Net amount of liabilities presented
in the Balance Sheet

Financial
instruments

Cash
collateral
pledged
September 30, 2017

Financial institution $ —
$ —
$ —
Government entities —
—
—
Commercial account holders 104
165
—
Total $ 104
$ 165
$ —
December 31, 2016

Financial institution $ —
$ —
$ —
Government entities 14
15
—
Commercial account holders 79
101
—
Total $ 93
$ 116
$ —

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


	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



September 30, 2023	$	—	$	—	$	—




December 31, 2022	281		327		—

The securities underlying the agreements to repurchase are book-entry securities and were delivered by appropriate entry into the counterparties’ accounts or into segregated tri-party custodial accounts at the FHLB. The securities underlying the agreements to repurchase continue to be reflected in ASB’s asset accounts.

Derivative financial instruments. ASB enters into interest rate lock commitments (IRLCs) with borrowers, and forward commitments to sell loans or to-be-announced mortgage-backed securities to investors to hedge against the inherent interest rate and pricing risks associated with selling loans.

ASB enters into IRLCs for residential mortgage loans, which commit ASB to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose ASB to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.

ASB enters into forward commitments to hedge the interest rate risk for rate locked mortgage applications in process and closed mortgage loans held for sale. These commitments are primarily forward sales of to-be-announced mortgage backed securities. Generally, when mortgage loans are closed, the forward commitment is liquidated and replaced with a mandatory delivery forward sale of the mortgage to a secondary market investor. In some cases, a best-efforts forward sale agreement is utilized as the forward commitment. These commitments are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.

Changes in the fair value of IRLCs and forward commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time.

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


	September 30, 2023				December 31, 2022
(in thousands)	Notional amount		Fair value		Notional amount		Fair value
Interest rate lock commitments	$	4,910	$	54	$	1,720	$	9
Forward commitments	3,500		15		1,500		18

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	September 30, 2023				December 31, 2022
(in thousands)	Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	54	$	—	$	9	$	—
Forward commitments	15		—		18		—
	$	69	$	—	$	27	$	—

Derivative Financial Instruments Not Designated as Hedging Instruments ¹
September 30, 2017 December 31, 2016
(in thousands) Asset derivatives
Liability
derivatives
Asset derivatives Liability
derivatives
Interest rate lock commitments $ 7
$ —
$ 445
$ 24
Forward commitments —
2
8
185
$ 7
$ 2
$ 453
$ 209

¹ Asset derivatives are included in other assets and liability derivatives are included in other liabilities in the balance sheets.

The following table presents ASB’s derivative financial instruments and the amount and location of the net gains or losses recognized in ASB’s statements of income:


Derivative Financial Instruments Not Designated as Hedging Instruments	Location of net gains (losses) recognized in the Statements of Income	Three months ended September 30				Nine months ended September 30
(in thousands)		2023		2022		2023		2022
Interest rate lock commitments	Mortgage banking income	$	(34)	$	(129)	$	45	$	(722)
Forward commitments	Mortgage banking income	(36)		145		(3)		182
		$	(70)	$	16	$	42	$	(540)

Derivative Financial Instruments Not Designated as Hedging Instruments Location of net gains (losses) recognized in the Statement of Income Three months ended September 30 Nine months ended September 30
(in thousands) 2017 2016 2017 2016
Interest rate lock commitments Mortgage banking income $ (119 ) $ 48
$ (414 ) $ 459
Forward commitments Mortgage banking income (90 ) 103
175
(134 )
$ (209 ) $ 151
$ (239 ) $ 325

Low-Income Housing Tax Credit (LIHTC). ASB’s unfunded commitments to fund its LIHTC investment partnerships were ~~$18.6~~$77.1 million and ~~$14.0~~$70.1 million at September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, 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 30, ~~2017,~~2023, ASB did not have any impairment losses resulting from forfeiture or ineligibility of tax credits or other circumstances related to its LIHTC investment partnerships.

~~Contingencies.~~ ASB is 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, ASB cannot rule out the possibility that such outcomes could have a material adverse effect on the results of operations or liquidity for a particular reporting period in the future.

5Note 6 · Credit agreements and ~~long-term~~changes in debt

~~Credit agreements.~~ On May 14, 2021, HEI and Hawaiian Electric each entered into a separate agreement with a syndicate of ~~eight~~nine 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~~$175 million HEI ~~Facility extended the term of the facility to June 30, 2022.~~Facility’s initial termination date was May 14, 2026. The $200 million Hawaiian Electric Facility’s initial termination date was May 13, 2022, but on February 18, 2022, the PUC approved Hawaiian Electric’s request to extend the term of the $200 million Hawaiian Electric Facility ~~has~~to May 14, 2026. In addition to extending the term, Hawaiian Electric also received PUC approval to exercise its options of two one-year extensions of the commitment termination date and to increase its aggregate revolving commitment amount from $200 million to $275 million, should there be a need.

On April 21, 2023, HEI and Hawaiian Electric executed Amendment No. 1 to the Credit Facilities (Amendment). The Amendment was executed to reflect the transition from the London Inter-Bank Offered Rate (LIBOR) to the Term Secured Overnight Financing Rate (SOFR) as the benchmark interest rate for non-Alternate Base Rate (ABR) Loans under the Credit Facilities.

On May 14, 2023, HEI and Hawaiian Electric exercised their first of two, one-year extensions to the commitment termination date with eight of the nine financial institutions to extend the Credit Facilities to May 14, 2027. The committed capacities under the HEI Facility and Hawaiian Electric Facility are $175 million and $200 million, respectively, through May 14, 2026, and step down to approximately $157 million and $180 million, respectively, through May 14, 2027.

After multiple downgrades of the Companies’ credit ratings to ratings below investment grade, by Fitch, Moody’s and S&P due to the Maui windstorm and wildfires, on August 15, 2023, HEI made an initial ~~term~~$2.5 million draw on its $175 million existing revolving credit facility to repay maturing commercial paper. By August 23, 2023, HEI drew its remaining and Hawaiian Electric drew its full committed capacity on their respective existing revolving credit facilities, totaling $175 million and $200 million, respectively. The draws were made to provide access to liquidity and support the Company’s restoration efforts on Maui. The cash proceeds were primarily invested in highly liquid short-term investments, were used to repay $100 million of Hawaiian Electric’s long-term debt that ~~expires~~matured on ~~June 29, 2018, but its term will extend to June 30, 2022 upon approval by the PUC during the initial term, which approval is currently being requested.~~November 1, 2023, and used for general corporate purposes.

Changes in debt. As of September 30, ~~2017~~2023, the Company and ~~December 31, 2016, no amounts~~Hawaiian Electric were ~~outstanding under the Facilities or previously existing facilities.~~in compliance with all applicable financial covenants.

The Facilities will be maintained to support each company’s respective short-term commercial paper program, but may be drawn on to meet each company’s respective working capital needs and general corporate purposes.

~~Changes in long-term debt.~~ HEI private placement.On ~~June 29, 2017, the Department of Budget and Finance of the State of Hawaii (Department) for the benefit of the Utilities, issued, at par:~~

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

~~Proceeds from the sale were applied to redeem at par bonds previously issued by the Department for the benefit of the Utilities:~~

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

~~Subsequent event - changes in debt.~~

~~October 2017 loan. On October 6, 2017,~~March 16, 2023, HEI entered into a note purchase agreement (HEI NPA) under which HEI has authorized the issue and sale of $100 million of unsecured senior notes that were drawn on May 30, 2023. The proceeds of the notes were used to repay the $100 million term loan facility on May 31, 2023. The terms of the notes are as follows:

HEI Series 2023A

HEI Series 2023B

Aggregate principal amount

$39 million

$61 million

Fixed coupon interest rate

6.04%

6.10%

Maturity date

6/15/2028

6/15/2033

Interest on the notes is paid semiannually on June 15th and December 15th. The HEI NPA contains certain restrictive financial covenants that are substantially the same as the financial covenants contained in HEI’s revolving unsecured credit facility, as amended. The HEI notes may be prepaid in whole or in part at any time at the prepayment price of the principal amount, together with interest accrued to the date of prepayment plus a “Make-Whole Amount,” as defined in the agreements.

HEI term loan. On October 20, 2022, HEI entered into a term loan facility in the aggregate principal amount of $100 million. On December 28, 2022, HEI drew $35 million on the term loan, and on March 31, 2023, HEI drew the remaining $65 million at an initial interest rate of 5.81% for an initial one month interest period. On May 31, 2023, HEI fully repaid the term loan facility at which time it was terminated. Borrowings under the facility bore interest at Term Secured Overnight Financing Rate (SOFR), as defined in the agreement, ~~with~~plus an applicable margin and a SOFR spread adjustment. The ~~Bank of Tokyo-Mitsubishi UFJ, Ltd.~~term loan facility contained certain restrictive financial covenants that were substantially the same as the financial covenants contained in the HEI Facility.

Utilities private placement.On January 10, 2023, the Utilities executed through a private placement pursuant to separate Note Purchase Agreements (the NPAs), ~~which agreement includes~~the following unsecured senior notes bearing taxable interest (2023 Notes).The 2023 Notes had a delayed draw feature and the Utilities drew down all the proceeds on February 9, 2023.


	Series 2023A	Series 2023B	Series 2023C
Aggregate principal amount	$90 million	$40 million	$20 million
Fixed coupon interest rate
Hawaiian Electric	6.11%	6.25%	6.70%
Hawaii Electric Light	6.25%	—	—
Maui Electric	6.25%	—	—
Maturity date
Hawaiian Electric	2/9/2030	2/9/2033	2/9/2053
Hawaii Electric Light	2/9/2033	—	—
Maui Electric	2/9/2033	—	—
Principal amount by company
Hawaiian Electric	$40 million	$40 million	$20 million
Hawaii Electric Light	$25 million	—	—
Maui Electric	$25 million	—	—

The 2023 Notes include substantially the same financial ~~covenant~~covenants and customary conditions as Hawaiian Electric’s credit agreement. Hawaiian Electric is also a party as guarantor under the ~~loan agreement with~~NPAs entered into by Hawaii Electric Light and Maui Electric. The ~~Bank~~Utilities did not obtain any of ~~Tokyo-Mitsubishi UFJ, Ltd.~~the proceeds at execution and ~~U.S. Bank, National Association that matured~~instead drew down all the proceeds 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%.February 9, 2023. The proceeds ~~from this loan~~ were used to ~~pay off~~finance their respective capital expenditures, repay short-term debt used to finance or refinance capital expenditures and/or reimburse funds used for the ~~$125 million maturing loan.~~payment of capital expenditures. The 2023 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 NPAs.

Note 7 · ~~Shareholders’~~Shareholders' equity

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, 2022	$	(328,904)	$	1,991	$	(9,115)	$	(336,028)	$	2,861
Current period other comprehensive income (loss)	(21,330)		(827)		161		(21,996)		(166)
Balance, September 30, 2023	$	(350,234)	$	1,164	$	(8,954)	$	(358,024)	$	2,695
Balance, December 31, 2021	$	(32,037)	$	(3,638)	$	(16,858)	$	(52,533)	$	(3,280)
Current period other comprehensive income (loss)	(308,229)		6,561		657		(301,011)		210
Balance, September 30, 2022	$	(340,266)	$	2,923	$	(16,201)	$	(353,544)	$	(3,070)

~~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								Affected line item in the Statements of Income / Balance Sheets
	Three months ended September 30				Nine months ended September 30
(in thousands)	2023		2022		2023		2022

HEI consolidated


Net unrealized gains (losses) on available-for sale investment securities - amortization of unrealized holding losses on held-to-maturity securities	$	3,699	$	—	$	11,065	$	—	Bank revenues


Net realized losses (gains) on derivatives qualifying as cash flow hedges	(47)		53		(143)		161		Interest expense
Retirement benefit plans:
Amortization of prior service credit and net losses (gains) recognized during the period in net periodic benefit cost	(446)		5,606		(1,160)		10,229		See Note 9 for additional details
Impact of D&Os of the PUC included in regulatory assets	470		(5,303)		1,321		(9,572)		See Note 9 for additional details
Total reclassifications	$	3,676	$	356	$	11,083	$	818
Hawaiian Electric consolidated


Retirement benefit plans:
Amortization of prior service credit and net losses (gains) recognized during the period in net periodic benefit cost	$	(547)	$	5,411	$	(1,487)	$	9,782	See Note 9 for additional details
Impact of D&Os of the PUC included in regulatory assets	470		(5,303)		1,321		(9,572)		See Note 9 for additional details
Total reclassifications	$	(77)	$	108	$	(166)	$	210

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 September 30, 2023								Nine months ended September 30, 2023
(in thousands)	Electric utility		Bank		Other		Total		Electric utility		Bank		Other		Total
Revenues from contracts with customers
Electric energy sales - residential	$	257,790	$	—	$	—	$	257,790	$	753,207	$	—	$	—	$	753,207
Electric energy sales - commercial	257,876		—		—		257,876		762,454		—		—		762,454
Electric energy sales - large light and power	284,607		—		—		284,607		855,396		—		—		855,396
Electric energy sales - other	4,688		—		—		4,688		14,628		—		—		14,628
Bank fees	—		12,067		—		12,067		—		36,370		—		36,370
Other sales	—		—		5,016		5,016		—		—		13,361		13,361
Total revenues from contracts with customers	804,961		12,067		5,016		822,044		2,385,685		36,370		13,361		2,435,416
Revenues from other sources
Regulatory revenue	(20,927)		—		—		(20,927)		3,716		—		—		3,716
Bank interest and dividend income	—		85,636		—		85,636		—		246,856		—		246,856
Other bank noninterest income	—		3,271		—		3,271		—		8,490		—		8,490
Other	10,953		—		896		11,849		30,138		—		1,179		31,317
Total revenues from other sources	(9,974)		88,907		896		79,829		33,854		255,346		1,179		290,379
Total revenues	$	794,987	$	100,974	$	5,912	$	901,873	$	2,419,539	$	291,716	$	14,540	$	2,725,795
Timing of revenue recognition
Services/goods transferred at a point in time	$	—	$	12,067	$	—	$	12,067	$	—	$	36,370	$	—	$	36,370
Services/goods transferred over time	804,961		—		5,016		809,977		2,385,685		—		13,361		2,399,046
Total revenues from contracts with customers	$	804,961	$	12,067	$	5,016	$	822,044	$	2,385,685	$	36,370	$	13,361	$	2,435,416


	Three months ended September 30, 2022								Nine months ended September 30, 2022
(in thousands)	Electric utility		Bank		Other		Total		Electric utility		Bank		Other		Total
Revenues from contracts with customers
Electric energy sales - residential	$	306,417	$	—	$	—	$	306,417	$	790,424	$	—	$	—	$	790,424
Electric energy sales - commercial	309,940		—		—		309,940		794,238		—		—		794,238
Electric energy sales - large light and power	351,763		—		—		351,763		886,733		—		—		886,733
Electric energy sales - other	5,400		—		—		5,400		11,699		—		—		11,699
Bank fees	—		12,058		—		12,058		—		36,851		—		36,851
Other sales	—		—		4,760		4,760		—		—		7,208		7,208
Total revenues from contracts with customers	973,520		12,058		4,760		990,338		2,483,094		36,851		7,208		2,527,153
Revenues from other sources
Regulatory revenue	(26,301)		—		—		(26,301)		(24,843)		—		—		(24,843)
Bank interest and dividend income	—		68,417		—		68,417		—		191,228		—		191,228
Other bank noninterest income	—		936		—		936		—		3,771		—		3,771
Other	8,752		—		55		8,807		25,385		—		178		25,563
Total revenues from other sources	(17,549)		69,353		55		51,859		542		194,999		178		195,719
Total revenues	$	955,971	$	81,411	$	4,815	$	1,042,197	$	2,483,636	$	231,850	$	7,386	$	2,722,872
Timing of revenue recognition
Services/goods transferred at a point in time	$	—	$	12,058	$	—	$	12,058	$	—	$	36,851	$	—	$	36,851
Services/goods transferred over time	973,520		—		4,760		978,280		2,483,094		—		7,208		2,490,302
Total revenues from contracts with customers	$	973,520	$	12,058	$	4,760	$	990,338	$	2,483,094	$	36,851	$	7,208	$	2,527,153

There are no material contract assets or liabilities associated with revenues from contracts with customers existing at December 31, 2022 or as of September 30, 2023. 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

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

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.

7As of September 30, 2023, 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 months of ~~2017~~,2023, the Company contributed ~~$50~~$6 million ($496 million by the Utilities) to its pension and other postretirement benefit plans, compared to ~~$49~~$32 million ($4831 million by the Utilities) in the first nine months of ~~2016.~~2022. The Company’s current estimate of total contributions to its pension and other postretirement benefit plans in ~~2017~~2023 is ~~$67~~$8 million ($668 million by the ~~Utilities, $1 million by HEI and~~ ~~nil~~ ~~by ASB)~~Utilities), compared to ~~$65~~$43 million ($6442 million by the ~~Utilities,~~ ~~$1 million~~ ~~by HEI and nil by ASB)~~Utilities) in ~~2016~~.2022. In addition, the Company expects to pay directly $2$3 million ($1 million by the Utilities) of benefits in ~~2017, comparable~~2023, compared to ~~benefits~~$2 million ($1 million by the Utilities) paid ~~directly~~ in ~~2016~~.2022.

The components of ~~NPPC~~net periodic pension costs (NPPC) and ~~NPBC~~net periodic benefit costs (NPBC) for HEI consolidated and Hawaiian Electric consolidated were as follows:


	Three months ended September 30								Nine months ended September 30
	Pension benefits				Other benefits				Pension benefits				Other benefits
(in thousands)	2023		2022		2023		2022		2023		2022		2023		2022
HEI consolidated
Service cost	$	11,418	$	18,831	$	385	$	624	$	34,210	$	58,478	$	1,072	$	1,937
Interest cost	26,022		20,274		2,075		1,593		77,265		59,895		6,389		4,868
Expected return on plan assets	(35,238)		(35,163)		(3,426)		(3,394)		(105,630)		(105,827)		(10,236)		(10,189)
Amortization of net prior period gain	—		—		(218)		(232)		—		—		(656)		(696)
Amortization of net actuarial (gain)/losses	138		7,782		(518)		(3)		515		20,376		(1,416)		(9)
Net periodic pension/benefit cost (return)	2,340		11,724		(1,702)		(1,412)		6,360		32,922		(4,847)		(4,089)
Impact of PUC D&Os	17,663		8,758		1,536		1,289		53,929		27,861		4,385		3,725
Net periodic pension/benefit cost (return) (adjusted for impact of PUC D&Os)	$	20,003	$	20,482	$	(166)	$	(123)	$	60,289	$	60,783	$	(462)	$	(364)
Hawaiian Electric consolidated
Service cost	$	11,071	$	18,248	$	380	$	617	$	33,108	$	56,883	$	1,060	$	1,915
Interest cost	24,116		18,850		1,981		1,525		71,513		55,773		6,107		4,670
Expected return on plan assets	(33,029)		(33,314)		(3,374)		(3,343)		(98,972)		(100,405)		(10,081)		(10,035)
Amortization of net prior period gain	—		—		(218)		(232)		—		—		(654)		(694)
Amortization of net actuarial (gain)/losses	(16)		7,519		(503)		—		21		19,769		(1,370)		—
Net periodic pension/benefit cost (return)	2,142		11,303		(1,734)		(1,433)		5,670		32,020		(4,938)		(4,144)
Impact of PUC D&Os	17,663		8,758		1,536		1,289		53,929		27,861		4,385		3,725
Net periodic pension/benefit cost (return) (adjusted for impact of PUC D&Os)	$	19,805	$	20,061	$	(198)	$	(144)	$	59,599	$	59,881	$	(553)	$	(419)

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 ~~$25~~$33 million ($~~22 million by the Utilities) and~~ ~~$26 million~~ ~~($23~~32 million by the Utilities) in the first nine months of ~~2017~~2023 and ~~2016, respectively,~~$35 million ($34 million by the Utilities) in the first nine months of 2022 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~~any actual costs determined in accordance with GAAP that are over/under amounts allowed in rates are charged/credited to a regulatory asset/liability. The regulatory asset/liability for each utility will then be amortized over 5five 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 months of ~~2017~~2023 and ~~2016,~~2022, 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 million~~ ~~and~~ ~~$4.1 million, respectively, and cash contributions were~~ ~~$5.0 million~~ ~~and~~ ~~$4.6 million, respectively. For the first~~ ~~nine~~ ~~months of~~ ~~2017~~ ~~and 2016, the Utilities’ expenses for its defined contribution pension plan under the HEIRSP were $1.4~~$7.0 million and ~~$1.2~~$6.5 million, respectively, and cash contributions were ~~$1.4~~$7.6 million and ~~$1.2~~$5.4 million, respectively.

For the first

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

nine months of 2023 and 2022, the Utilities’ expenses and cash contributions for its defined contribution plan under the HEIRSP were $4.3 million and $2.9 million, respectively.

Note 10 ·Share-based compensation

Under the 2010 Equity and Incentive Plan, as amended and restated effective March 1, 2014 (EIP), 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 original 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 30, ~~2017,~~2023, approximately ~~3.3~~2.7 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~~0.7 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).

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. As of September 30, ~~2017,~~2023, there were ~~85,428~~168,177 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
(in millions)	2023		2022		2023		2022
HEI consolidated
Share-based compensation expense 1	$	2.4	$	1.7	$	8.3	$	7.3
Income tax benefit	0.5		0.4		1.6		1.5
Hawaiian Electric consolidated
Share-based compensation expense 1	0.7		0.6		2.5		2.1
Income tax benefit	0.1		0.1		0.5		0.5

Three months ended September 30 Nine months ended September 30
(in millions) 2017 2016 2017 2016
HEI consolidated
Share-based compensation expense ¹
$ 1.1
$ 1.6
$ 4.4
$ 3.6
Income tax benefit 0.4
0.5
1.5
1.2
Hawaiian Electric consolidated
Share-based compensation expense ¹
0.4
0.5
1.6
1.0
Income tax benefit 0.2
0.2
0.6
0.4


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

1 For the three and nine months ended September 30, 2023 and 2022, 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 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


	Three months ended September 30				Nine months ended September 30
(dollars in millions)	2023		2022		2023		2022
Shares granted	—		965		40,450		35,720
Fair value	$	—	$	—	$	1.5	$	1.5
Income tax benefit	—		—		0.4		0.4

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~~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
	2023				2022				2023				2022
	Shares		(1)		Shares		(1)		Shares		(1)		Shares		(1)
Outstanding, beginning of period	199,130		$	41.22	208,953		$	39.71	182,528		$	39.75	233,448		$	38.10
Granted	—		—		—		—		100,088		42.41		98,463		41.31
Vested	—		—		(4,244)		39.49		(81,112)		39.37		(95,658)		37.73
Forfeited	—		—		(16,540)		39.99		(2,374)		41.79		(48,084)		39.19
Outstanding, end of period	199,130		$	41.22	188,169		$	39.69	199,130		$	41.22	188,169		$	39.69
Total weighted-average grant-date fair value of shares granted (in millions)	$	—			$	—			$	4.2			$	4.1

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

Three months ended September 30 Nine months ended September 30
2017 2016 2017 2016
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
Granted —

—
766
30.65
97,873

33.47
95,048

29.91
Vested (687 ) 24.48
(4,419 ) 27.26
(89,681 ) 28.84
(83,583 ) 27.88
Forfeited —
—
(2,352 ) 29.69
(23,079 ) 31.50
(2,352 ) 29.69
Outstanding, end of period 205,796
$ 31.53
219,747
$ 29.64
205,796
$ 31.53
219,747
$ 29.64
Total weighted-average grant-date fair value of shares granted ($ millions) $ —
$ —
$ 3.3
$ 2.8


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

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

For the ~~first~~ nine months ~~of 2017~~ended September 30, 2023 and ~~2016,~~2022, total restricted stock units ~~that vested~~ and related dividends that vested had a fair value of ~~$3.4~~$3.7 million and ~~$2.7~~$4.2 million,, respectively, and the related tax benefits were ~~$1.1~~$0.8 million and ~~$0.9~~$0.6 million,, respectively.

As of September 30, ~~2017,~~2023, there was ~~$4.8~~$5.2 million of total unrecognized compensation cost related to the nonvested restricted stock units. The cost is expected to be recognized over a weighted-average period of ~~2.6~~1.9 years.

Long-term incentive plan payable in stock. The ~~2017-2019~~2021-23, 2022-24 and 2023-25 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~~Peer Group (Edison Electric Institute Index (EEI Index) for the 2021-23 and 2022-24 performance periods, and compared to the Company's compensation peer group consisting of companies in the EEI Index and approved by the Company's Compensation and Human Capital Management Committee for the 2023-25 performance period), in each case over the relevant three-year period. The other performance condition goals relate to EPS growth, cumulative EPS, return on average common equity (ROACE) ~~and~~, renewable portfolio standards, carbon emissions reduction, Hawaiian Electric’s net income growth, ASB’s efficiency ~~ratio. The 2015-2017~~ratio and ~~2016-2018 LTIPs provide for performance awards payable in cash,~~strategic initiatives and ~~thus are not included in the tables below.~~Pacific Current’s EBITDA growth and return on average invested capital.

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


	Three months ended September 30								Nine months ended September 30
	2023				2022				2023				2022
	Shares		(1)		Shares		(1)		Shares		(1)		Shares		(1)
Outstanding, beginning of period	79,284		$	50.28	76,730		$	47.74	71,574		$	47.67	90,974		$	42.86
Granted	—		—		—		—		27,123		55.98		26,469		54.92
Vested (issued or unissued and cancelled)	—		—		—		—		(18,691)		48.62		(29,042)		41.07
Forfeited	—		—		(4,829)		48.52		(722)		48.92		(16,500)		44.33
Outstanding, end of period	79,284		$	50.28	71,901		$	47.69	79,284		$	50.28	71,901		$	47.69
Total weighted-average grant-date fair value of shares granted (in millions)	$	—			$	—			$	1.5			$	1.5

Three months ended September 30 Nine months ended September 30
2017 2016 2017 2016
Shares (1) Shares (1) Shares (1) Shares (1)
Outstanding, beginning of period 33,770
$ 39.51
83,947
$ 22.95
83,106
$ 22.95
162,500
$ 27.66
Granted (target level) —
—
—
—
37,204
39.51
—

—
Vested (issued or unissued and cancelled) —
—
—
—
(83,106 ) 22.95
(78,553 ) 32.69
Forfeited —
—
(175 ) 22.95
(3,434 ) 39.51
(175 ) 22.95
Outstanding, end of period 33,770
$ 39.51
83,772
$ 22.95
33,770
$ 39.51
83,772
$ 22.95
Total weighted-average grant-date fair value of shares granted ($ millions) $ —
$ —
$ 1.5
$ —

(1) Weighted-average grant-date fair value per share determined using a Monte Carlo simulation model.


~~(1)~~	~~Weighted-average grant-date fair value per share determined using a Monte Carlo simulation model.~~

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~~the Peer Group 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~~the Peer Group over the remaining three-year performance period. The expected stock volatility assumptions for HEI and ~~its peer group~~the Peer Group were based on the three-year historic stock ~~volatility,~~volatility. A dividend assumption is not required for the Monte Carlo simulation because the grant payout includes dividend equivalents and projected returns include the ~~annual dividend yield assumptions were based on dividend yields calculated on the basis~~value of ~~daily stock prices over the same three-year historical period.~~reinvested dividends.

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:


	2023		2022
Risk-free interest rate	4.19	%	1.71	%
Expected life in years	3		3
Expected volatility	33.1	%	31.0	%
Range of expected volatility for Peer Group	28.7% to 38.8%		25.4% to 76.7%
Grant date fair value (per share)	$55.98		$54.92



	~~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~~

There were no share-based LTIP awards linked to TSR with a vesting date in 2023. For the nine months ended September 30, ~~2017,~~2022, total vested LTIP awards linked to TSR and related dividends had a fair value of ~~$1.9~~$0.8 million and the related tax benefits were ~~$0.7~~$0.1 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 30, ~~2017,~~2023, there was ~~$1.0~~$1.6 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 years~~.

1.2 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:


	Three months ended September 30								Nine months ended September 30
	2023				2022				2023				2022
	Shares		(1)		Shares		(1)		Shares		(1)		Shares		(1)
Outstanding, beginning of period	357,477		$	38.78	293,711		$	39.91	309,589		$	39.50	306,342		$	38.42
Granted	—		—		—		—		108,499		42.41		105,860		41.31
Vested	—		—		—		—		(62,778)		48.07		(71,807)		37.68
Increase above target	4,277		38.02		—		—		10,278		37.77		—		—
Forfeited	—		—		(19,316)		38.60		(3,834)		43.53		(66,000)		37.31
Outstanding, end of period	361,754		$	39.17	274,395		$	40.00	361,754		$	39.17	274,395		$	40.00
Total weighted-average grant-date fair value of shares granted (at target performance levels) (in millions)	$	—			$	—			$	4.6			$	4.4

Three months ended September 30 Nine months ended September 30
2017 2016 2017 2016
Shares (1) Shares (1) Shares (1) Shares (1)
Outstanding, beginning of period 135,078
$ 33.47
113,550
$ 25.18
109,816
$ 25.18
222,647
$ 26.02
Granted (target level) —
—
—

—
148,818
33.47
—

—
Vested (issued) —
—
—
—
(109,816 ) 25.18
(109,097 ) 26.89
Forfeited —
—
(699 ) 25.19
(13,740 ) 33.48
(699 ) 25.19
Outstanding, end of period 135,078
$ 33.47
112,851
$ 25.18
135,078
$ 33.47
112,851
$ 25.18
Total weighted-average grant-date fair value of shares granted (at target performance levels) ($ millions) $ —
$ —
$ 5.0
$ —

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


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

For the nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022, total vested LTIP awards linked to other performance conditions and related dividends had a fair value of ~~$4.2~~$2.9 million and ~~$3.6~~$3.2 million, respectively, and the related tax benefits were ~~$1.6~~$0.6 million and ~~$1.4~~$0.4 million, respectively.

As of September 30, ~~2017,~~2023, there was ~~$3.4~~$5.4 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~~.1.2 years.

9 Note 11 · Income taxes

The Company’s ~~ETRs~~and the Utilities’ effective tax rates (combined federal and state income tax rates) 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 months ended September 30, ~~2017 compared to~~2023 were 20% and 22%, respectively. 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~~nontaxable bank-owned life insurance, partially offset by the ~~Domestic Production Activities Deduction (DPAD) in 2016~~Utilities’ lower 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.~~2017 Tax Cuts and Jobs Act that lowered the federal income tax rate from 35% to 21%.

~~Hawaiian Electric’s ETRs for~~In August 2020, the ~~third quarters of~~Internal Revenue Service notified the Company that its 2017 and ~~2016 were 36% and 37%, respectively, and for~~2018 income tax returns would be examined. The Company was previously audited every year through 2011, at which time the ~~first nine months~~IRS changed their internal policies regarding audit frequency. The audit is still in progress. The Company has not been notified of ~~2017 and 2016 were 36% and 37%, respectively.~~ any material audit adjustments to date.

The ~~lower ETR~~Inflation Reduction Act of 2022 (IRA) was ~~due in part to the tax benefits recognized for the DPAD as a result of moving out of a federal net operating loss position in 2017.~~

~~Recent tax developments.~~ ~~The extension of bonus depreciation~~signed by President Biden on August 16, 2022. Key provisions under the ~~“Protecting Americans from Tax Hikes (PATH) Act~~IRA include a 15% corporate alternative minimum tax (CAMT) imposed on certain large corporations and a 1% excise tax on stock repurchases after December 31, 2022. Based on current interpretation of ~~2015”~~the law and current guidance available we do not believe HEI will be impacted by the CAMT or stock repurchase excise tax provisions.

The IRA also creates new tax credits and enhances others to stimulate investment in renewable energy sources. Certain provisions of the IRA became effective beginning tax year 2023. The Company continues to ~~be the most significant recent~~monitor guidance and assess related 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.

planning opportunities.

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

10Note 12 ·Cash flows


Nine months ended September 30	2023		2022
(in millions)
Supplemental disclosures of cash flow information
HEI consolidated
Interest paid to non-affiliates, net of amounts capitalized	$	104	$	59
Income taxes paid (including refundable credits)	28		26
Income taxes refunded (including refundable credits)	1		2
Hawaiian Electric consolidated
Interest paid to non-affiliates	45		40
Income taxes paid (including refundable credits)	38		46
Income taxes refunded (including refundable credits)	2		—
Supplemental disclosures of noncash activities
HEI consolidated
Property, plant and equipment
Estimated fair value of noncash contributions in aid of construction (investing)	9		6
Unpaid invoices and accruals for capital expenditures, balance, end of period (investing)	45		34
Increase related to an acquisition (investing)	—		15
Right-of-use assets obtained in exchange for finance lease obligations (financing)	76		48

Right-of-use assets obtained in exchange for operating lease obligations (investing)	1		48
Property, plant, equipment and other assets received in exchange for the assumption of debt associated with a business acquisition (investing)	—		68
Debt, lease liabilities and other liabilities assumed in business acquisition (financing)	—		68
Common stock issued (gross) for director and executive/management compensation (financing)1	8		10

Obligations to fund low income housing investments (investing)	7		9
Loans transferred from held for investment to held for sale (investing)	95		—

Transfer of retail repurchase agreements to deposit liabilities (financing)	98		—


Hawaiian Electric consolidated
Electric utility property, plant and equipment
Estimated fair value of noncash contributions in aid of construction (investing)	9		6
Unpaid invoices and accruals for capital expenditures, balance, end of period (investing)	43		31
Increase related to an acquisition (investing)	—		15
Right-of-use assets obtained in exchange for finance lease obligations (financing)	76		48

Right-of-use assets obtained in exchange for operating lease obligations (investing)	—		44

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

¹~~The amounts shown represent common stock dividends reinvested in HEI common stock under the HEI Dividend Reinvestment and Stock Purchase Plan (DRIP) in noncash transactions.~~

²The amounts shown represent the market value of common stock issued for director and executive/management compensation and withheld to satisfy statutory tax liabilities.

Note 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)~~

~~Level 1:~~Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and is used to measure fair value whenever available.

~~Level 2:~~Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means.

~~Level 3:~~Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

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.

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~~Collateral dependent loans. ~~At the time~~Collateral dependent loans have been adjusted to fair value. When a loan is ~~considered impaired, it is valued at~~identified as collateral dependent, the ~~lower of cost or fair value. Fair value is determined primarily by~~Company measures the impairment using ~~an income, cost or market approach and is normally provided through appraisals. Impaired loans carried at~~the current fair value ~~generally receive specific allocations within~~of the ~~allowance for~~collateral, less selling costs. Depending on the characteristics of a loan, ~~losses. For collateral-dependent loans,~~the fair value of collateral is ~~commonly based on recent real estate appraisals. These~~generally estimated by obtaining external appraisals, ~~may utilize a single valuation approach or a combination of approaches including comparable sales and~~but in some cases, 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 classificationvalue of the ~~inputs for determining fair~~collateral may be estimated as having little or no 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~~If it is determined that the value of the collateral dependent loan is less than its recorded investment, the Company recognizes this impairment and ~~adjusted accordingly.~~adjusts the carrying value of the loan to fair value through the allowance for credit losses.

Real estate acquired in settlement of loans. Foreclosed assets are ~~carried~~initially measured at fair value (less estimated costs to sell) and subsequently measured at the lower of the carrying value or fair value less selling costs. Fair values 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)~~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~~“Revenues - ~~bank"~~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~~its own experience and expertise to arrive at a value. ASB uses the third-party value only to assess the reasonableness of its own estimate. ASB includes MSRs within Level 3 of the valuation hierarchy.

Time deposits. 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 fixed-rate long-term ~~debt of HEI and the Utilities~~debt—other than bank 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 discounting the future cash flows using the current rates offered for debt of the same or similar risks, terms, and remaining maturities. The carrying amount of floating rate long-term debt—other than bank approximated fair value because of the short-term interest reset periods. 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~~marketplace that are observable and are classified as Level 2 measurements.

~~Window forward contracts~~Interest rate swaps. The ~~estimated~~Company measures its interest rate swaps at fair ~~value~~value. The fair values of the ~~Utilities’ window forward contracts was obtained from a third-party financial services provider~~Company's interest rate swaps are based on the ~~effective exchange~~estimated amounts that the Company would receive or pay to terminate the contracts at the reporting date and are determined using interest rate ~~offered for~~pricing models and interest rate related observable inputs. The fair values of the ~~foreign currency denominated transaction. Window forward contracts~~Company's interest rate swaps are classified as a 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~~


			Estimated fair value
(in thousands)	Carrying or notional amount		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
September 30, 2023
Financial assets
HEI consolidated

Available-for-sale investment securities	$	1,266,412	$	—	$	1,251,918	$	14,494	$	1,266,412
Held-to-maturity investment securities	1,212,005		—		1,052,221		—		1,052,221

Loans, net	6,116,811		—		2,174		5,541,812		5,543,986
Mortgage servicing rights	8,376		—		—		18,867		18,867

Derivative assets	19,044		15		1,350		—		1,365


Financial liabilities
HEI consolidated
Deposit liabilities	1,050,692		—		1,035,501		—		1,035,501

Other bank borrowings	750,000		—		743,366		—		743,366
Long-term debt, net—other than bank	2,944,589		—		2,120,573		—		2,120,573
Derivative liabilities	22,949		—		1,344		—		1,344
Hawaiian Electric consolidated

Long-term debt, net	2,034,040		—		1,400,901		—		1,400,901


December 31, 2022
Financial assets
HEI consolidated

Available-for-sale investment securities	$	1,429,667	$	—	$	1,414,765	$	14,902	$	1,429,667
Held-to-maturity investment securities	1,251,747		—		1,150,971		—		1,150,971

Loans, net	5,907,514		—		821		5,453,381		5,454,202
Mortgage servicing rights	9,047		—		—		17,646		17,646

Derivative assets	16,220		18		1,330		—		1,348


Financial liabilities
HEI consolidated
Deposit liabilities	611,718		—		597,617		—		597,617
Short-term borrowings—other than bank	172,568		—		172,568		—		172,568
Other bank borrowings	695,120		—		695,095		—		695,095
Long-term debt, net—other than bank	2,384,980		—		2,122,605		—		2,122,605
Derivative liabilities	22,949		—		472		—		472
Hawaiian Electric consolidated
Short-term borrowings	87,967		—		87,967		—		87,967
Long-term debt, net	1,684,816		—		1,487,496		—		1,487,496

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

~~these liabilities have no stated maturity.~~

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
September 30, 2017

Financial assets

HEI consolidated
Available-for-sale investment securities $ 1,320,110
$ —
$ 1,304,683
$ 15,427
$ 1,320,110
Stock in Federal Home Loan Bank 9,706
—
9,706
—
9,706
Loans receivable, net 4,638,962
13,260
2,468
4,791,209
4,806,937
Mortgage servicing rights 9,070
—
—
12,091
12,091
Bank-owned life insurance 147,391
—
147,391
—
147,391
Derivative assets 8,399
—
591
—
591
Hawaiian Electric consolidated
Derivative assets-window forward contracts 8,014
—
584
—
584
Financial liabilities

HEI consolidated
Deposit liabilities 5,752,326
—
5,748,858
—
5,748,858
Short-term borrowings—other than bank 24,498
—
24,498
—
24,498
Other bank borrowings 153,552
—
153,717
—
153,717
Long-term debt, net—other than bank 1,618,446
—
1,747,972
—
1,747,972
Derivative liabilities 500
2
—
—
2
Hawaiian Electric consolidated
Short-term borrowings 6,000
—
6,000
—
6,000
Long-term debt, net 1,318,623
—
1,441,855
—
1,441,855
December 31, 2016

Financial assets

HEI consolidated
Money market funds $ 13,085
$ —
$ 13,085
$ —
$ 13,085
Available-for-sale investment securities 1,105,182
—
1,089,755
15,427
1,105,182
Stock in Federal Home Loan Bank 11,218
—
11,218
—
11,218
Loans receivable, net 4,701,977
—
13,333
4,839,493
4,852,826
Mortgage servicing rights 9,373
—
—
13,216
13,216
Bank-owned life insurance 143,197
—
143,197
—
143,197
Derivative assets 23,578
—
453
—
453
Financial liabilities

HEI consolidated
Deposit liabilities 5,548,929
—
5,546,644
—
5,546,644
Other bank borrowings 192,618
—
193,991
—
193,991
Long-term debt, net—other than bank 1,619,019
—
1,704,717
—
1,704,717
Derivative liabilities 53,852
129
823
—
952
Hawaiian Electric consolidated
Long-term debt, net 1,319,260
—
1,399,490
—
1,399,490
Derivative liabilities-window forward contracts 20,734
—
743
—
743

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

Fair value measurements on a recurring basis. Assets and liabilities measured at fair value on a recurring basis were as follows:


	September 30, 2023						December 31, 2022
	Fair value measurements using						Fair value measurements using
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

Available-for-sale investment securities (bank segment)
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	$	—	$	1,145,167	$	—	$	—	$	1,292,968	$	—
U.S. Treasury and federal agency obligations	—		75,000		—		—		81,063		—
Corporate bonds	—		31,751		—		—		40,734		—
Mortgage revenue bonds	—		—		14,494		—		—		14,902
	$	—	$	1,251,918	$	14,494	$	—	$	1,414,765	$	14,902
Derivative assets
Interest rate lock commitments (bank segment)1	$	—	$	54	$	—	$	—	$	9	$	—
Forward commitments (bank segment)1	15		—		—		18		—		—
Interest rate swap (Other segment)2	—		1,296		—		—		1,321		—
	$	15	$	1,350	$	—	$	18	$	1,330	$	—
Derivative liabilities



Interest rate swap (Other segment)2	$	—	$	1,344	$	—	$	—	$	472	$	—

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
$ —

¹ Derivatives are carried at fair value ~~with changes in value reflected in the balance sheet~~ in other assets or other liabilities ~~and~~in the balance sheets with changes in value included in mortgage banking income.

² Derivatives are included in ~~noncurrent regulatory~~other assets ~~and/or~~and other liabilities in the balance sheets.

There were no transfers of financial assets and liabilities between Level 1 and Level 2 of the fair value hierarchy during the nine months ended September 30, ~~2017.~~2023 and 2022.

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:


	Three months ended September 30				Nine months ended September 30
Mortgage revenue bonds	2023		2022		2023		2022
(in thousands)
Beginning balance	$	14,630	$	15,165	$	14,902	$	15,427
Principal payments received	(136)		(132)		(408)		(394)
Purchases	—		—		—		—
Unrealized gain (loss) included in other comprehensive income	—		—		—		—
Ending balance	$	14,494	$	15,033	$	14,494	$	15,033

Three months ended September 30 Nine months ended September 30
Mortgage revenue bond 2017 2016 2017 2016
(in thousands)
Beginning balance $ 15,427
$ —
$ 15,427
$ —
Principal payments received —
—
—
—
Purchases —
—
—
—
Unrealized gain (loss) included in other comprehensive income —
—
—
—
Ending balance $ 15,427
$ —
$ 15,427
$ —

~~ASB holds one mortgage~~Mortgage revenue ~~bond~~bonds are issued by the Department of Budget and Finance of the State of Hawaii. The Company estimates the fair value by using a discounted cash flow model to calculate the present value of estimated future principal and interest payments. The unobservable input used in the fair value measurement is the weighted average discount rate. As of September 30, ~~2017,~~2023, the weighted average discount rate was ~~2.826%~~5.65%, which was derived by incorporating a credit spread over the one month ~~LIBOR rate.~~London Inter-Bank Offered Rate (LIBOR). Significant increases (decreases) in the weighted average discount rate could result in a significantly lower (higher) fair value measurement.

~~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~~As of ~~assets~~September 30, 2023 and December 31, 2022, there were no financial instruments measured at fair value on a nonrecurring ~~basis were as follows:~~basis.

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 the nine months ended September 30,~~2017~~ 2023 and ~~2016,~~2022, 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%

~~(1) Represent percent of outstanding principal balance.~~

~~(2) N/A - Not applicable. There is one loan or property 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~~2022 Form 10-K and should be read in conjunction with such discussion and the ~~2016~~2022 annual consolidated financial statements of HEI and Hawaiian Electric and notes thereto included in HEI’s and Hawaiian Electric’s ~~2016~~2022 Form 10-K, as well as the quarterly ~~(as of and for the three and nine months ended September 30, 2017)~~ condensed consolidated financial statements and notes thereto included in Item 1 of this Form 10-Q.

HEI consolidated

Recent developments. On August 8, 2023, a number of brush fires in the West Maui (Lahaina) and Upcountry Maui areas, caused widespread property damage, including damage to property of the Utilities, and at least 99 fatalities in Lahaina (the Maui windstorm and wildfires). The Maui windstorm and wildfires were fueled by extreme winds and drought-like conditions in those parts of Maui. According to the County of Maui, in addition to the loss of life, over 3,450 acres burned and over 2,500 structures were destroyed. In Lahaina, a fire was reported at about 6:30 a.m. (the “Morning Fire”) and appears to have been caused by power lines that fell in high winds and spread into a field near the Intermediate School. The Maui County Fire Department responded promptly to the Morning Fire, and according to the Fire Department’s public statement that morning, by 9 a.m. the Morning Fire was “100% contained.” The Maui County fire chief subsequently reported that the Fire Department had determined that the Morning Fire was “extinguished.” Shortly before 3 p.m. that day, while the power remained off, Utility crew members saw a small fire in the same field about 75 yards away from Lahainaluna Road. They immediately called 911 and reported the fire (the “Afternoon Fire”). At the time of the Afternoon Fire, the Company’s power lines in the area where that fire ignited were not energized and had not been energized for more than six hours. By the time the Maui County Fire Department arrived back on the scene, it was not able to contain the Afternoon Fire and it spread out of control toward Lahaina. No determination as to the cause of the Afternoon Fire has been made. The Company believes that most of the property damage and all of the fatalities are from the Afternoon Fire.

The circumstances surrounding the Maui windstorm and wildfires are currently the subject of several investigations.

Multiple civil and class action lawsuits related to the Maui windstorm and wildfires have been filed in the Maui and Oahu Circuit Courts against HEI, the Utilities, and other defendants, including the County of Maui, the State of Hawaii and related state entities, private landowners and developers, and telecommunications companies (collectively “tort-related legal claims”). Most of these lawsuits allege that the defendants were responsible for, and/or negligent in failing to prevent or respond to the wildfires that led to the property destruction and loss of life. Other claims include, among other things, personal injury, wrongful death, emotional distress and inverse condemnation. One lawsuit asserting similar theories and claims was filed by the County of Maui against HEI and the Utilities. Additional lawsuits may be filed against the Company and other defendants in the future. The plaintiffs seek to recover damages and other costs, including punitive damages. In addition, a putative securities class action lawsuit against HEI and a putative shareholder derivation action lawsuit against certain current and former officers and directors of HEI and Hawaiian Electric were filed.

On November 8, 2023, Hawaii Governor Josh Green announced the One ‘Ohana Initiative (the Initiative) as a collective path forward to recovery from the Maui windstorm and wildfires. The Initiative is a new humanitarian aid fund expected to exceed $150 million, with the objective to compensate, in an expedited manner, those who have lost loved ones and those who have suffered severe injuries in the Maui windstorm and wildfires. The Initiative provides an alternative to a lengthy and expensive legal process. Beneficiaries are anticipated to receive payments of more than $1 million each as early as the second quarter of 2024 after an administrator is selected and processes are established. In exchange for receiving such a payment, beneficiaries will be required to waive their ability to pursue legal claims for wrongful death and severe injuries. Hawaiian Electric fully supports this humanitarian initiative and has pledged to contribute up to $75 million. The Governor announced that other parties, including the State of Hawaii, the County of Maui, and Kamehameha Schools have all agreed to contribute to the fund, and additional contributions from other parties are possible. Hawaiian Electric’s contribution to the Initiative will be less than half of the total, and Hawaiian Electric's insurance carriers have agreed to fund its share of the contributions to the fund. Hawaiian Electric’s contribution is reflective of its commitment to join with community partners to provide solutions to promote Maui’s recovery. Hawaiian Electric’s commitment to contribute to the Initiative is not an admission of guilt or reflection of fault or liability related to the wildfires. See Note 2 of the Condensed Consolidated Financial Statements for more information.

In the third quarter of 2023, economic conditions in Hawaii remained stable with seasonally adjusted unemployment rate at 2.8% for September 2023 and total passenger counts higher by 0.7% and 7.1% for the quarter and nine months ended September 30, 2023, as compared to the prior quarter and nine months ended September 30, 2022, respectively. While economic conditions remained stable during the quarter, the Utility’s kWh sales in the third quarter of 2023 were down by 2.5%, compared to the third quarter of 2022 due to a decrease in Maui sales from the Maui windstorm and wildfires and the continued adoption of energy efficiency measures and distributed energy resources. While the level of kWh sales does not

affect Utility revenues due to decoupling, it may increase or decrease the price per kWh paid by customers. See “Decoupling” in Note 4 of the Condensed Consolidated Financial Statements for a discussion of the decoupling mechanism.

At the Bank, due to an increase in wholesale borrowings and term certificates, which was driven primarily by strong loan growth in 2022 coupled with an outflow of core deposits which started in the latter half of 2022 and continued in 2023, the Bank’s net interest margin for the third quarter of 2023 decreased to 2.70%, compared to net interest margin of 2.75% and 2.96% for the prior quarters ended June 30, 2023 and September 30, 2022, respectively.

In March 2023, the banking industry experienced significant turmoil with the failures of Silicon Valley Bank and Signature Bank. The failures of these banks were in part due to a significant concentration of deposits in certain industries that contributed to a significant amount of deposit withdrawals that occurred in a short period of time. Both banks had a significant amount of uninsured deposits that exceeded the FDIC insured limits, totaling 88% and 90% for Silicon Valley Bank and Signature Bank, respectively, as of December 31, 2022, which contributed to the “run” on these institutions as depositors became concerned about their bank’s solvency.

As of September 30, 2023, approximately 87% of ASB’s deposits are FDIC insured or fully collateralized. Additionally, ASB’s total deposit base is primarily composed of retail deposits, which represented 84% of the total deposit base as of September 30, 2023. Retail deposits are generally less rate sensitive and less volatile compared to commercial deposits. ASB also remains “well capitalized” and has approximately $3 billion in liquidity, which is nearly three times the amount of uninsured or not collateralized deposits as of September 30, 2023.

ASB’s funding cost, which impacts its net interest margin, is driven by the mix of its funding sources, with the lowest cost source of funding provided by its core deposits. At September 30, 2023, ASB’s year-to-date average core deposits were down approximately 3.2% from year end 2022 balances, which resulted in an increase in ASB’s wholesale borrowings and term certificates to fund loan growth and an in increase in its overall cost of funds. Looking forward, ASB expects that its deposit base will remain relatively flat to down, given the higher interest rate environment, as well as inflationary pressures on customers that may drive increased spending. ASB also expects that the higher interest rate environment will continue to pressure funding costs and its deposit mix, which in turn will affect net interest income and net interest margin.

Since its peak in June of last year, monthly inflation rates have decreased as reflected in the U.S. Consumer Price Index (CPI). Although the inflation rate, as measured by CPI, appears to be cooling off from last year’s peak, the rate is still at a moderately-high level of 3.7% as of September 2023 and inflationary pressures are expected to continue over the near- to medium-term and have led to higher costs for O&M and capital projects and higher interest expense at the Utilities and HEI, as well as higher compensation and benefits cost at the Bank.

Short-term interest rates have also increased significantly as a result of the Federal Reserve’s ongoing rate increases to the federal funds target rate. The higher interest rate environment has impacted the fair value of the Bank’s investment portfolio, which declined and was recorded as an other comprehensive loss. Unrealized losses on held-to-maturity (HTM) securities are not recorded to other comprehensive loss because ASB has the positive intent and ability to hold the securities till maturity and recover its full investment. At September 30, 2023, the unrealized losses on HTM securities not recorded to other comprehensive losses was approximately $117 million after tax.

For further discussion of the impacts of inflation and other macro-economic factors impacting the Utilities and the Bank, see “Recent Developments” in the Electric Utility and Bank sections below.

RESULTS OF OPERATIONS


	Three months ended September 30				%
(in thousands)	2023		2022		change	Primary reason(s)*
Revenues	$	901,873	$	1,042,197	(13)	Decrease for the electric utility segment, partly offset by increases for bank and “other” segments.
Operating income	75,111		102,115		(26)	Decreases for bank and electric utility segments and higher losses for the “other” segment. See below for HEI Consolidated Maui windstorm and wildfires costs.
Net income for common stock	41,118		62,082		(34)	Lower net income at the bank and electric utility segments and higher net loss for the “other” segment. See below for HEI Consolidated Maui windstorm and wildfires costs and effective tax rate explanation.

(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


	Nine months ended September 30				%
(in thousands)	2023		2022		change	Primary reason(s)*
Revenues	$	2,725,795	$	2,722,872	—	Increases for bank and “other” segments, offset by decrease for the electric utility segment.
Operating income	261,608		288,059		(9)	Decreases for bank and electric utility segments and higher losses for the “other” segment. See below for HEI Consolidated Maui windstorm and wildfires costs.
Net income for common stock	150,449		183,790		(18)	Lower net income at the bank and electric utility segments and higher net loss for the “other” segment. See below for HEI Consolidated Maui windstorm and wildfires costs and effective tax rate explanation.

* Also, see segment discussions which follow.

(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


*	~~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~~third quarters of 2023 and ~~12.3% for the twelve months ended September 30, 2016.~~2022 were 15% 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 months of ~~2017~~2023 and ~~full year 2016~~2022 were ~~76%~~20% and ~~54%~~21%, respectively. The effective tax rates were lower for the third quarter and first nine months of 2023 primarily due to lower pretax income and higher nontaxable bank-owned life insurance, partially offset by the lower amortization in 2023 of the Utilities’ regulatory liability related to certain excess deferred income taxes resulting from the Tax Act’s decrease in the federal income tax rate.

For the three and nine months ended September 30, 2023 the Company’s incremental expenses related to the Maui windstorm and wildfires, which excludes the $75 million contribution and insurance receivable as discussed in Subsequent event - One ‘Ohana Initiative in Note 2 of the Condensed Consolidated Financial Statements, were as follows:


	Three and nine months ended September 30, 2023
(in thousands)	Electric utility		Bank		Other segment		HEI Consolidated
Maui windstorm and wildfires related expenses:

Legal expenses	$	6,251	$	550	$	3,950	$	10,751
Outside services expense	4,706		750		678		6,134
Provision for credit losses	—		5,900		—		5,900
Other expense	2,482		1,357		3		3,842
Interest expense	503		—		452		955
Total Maui windstorm and wildfires related expenses	$	13,942	$	8,557	$	5,083	$	27,582

Note: Other segment Maui windstorm and wildfires related expenses - legal, outside services and other are included in “Expenses-Other” and interest expense is included “Interest expense, net—other than on deposit liabilities and other bank borrowings” on the HEI ~~currently~~and subsidiaries Condensed Consolidated Statements of Income. See Electric utility and Bank sections below for more detail.

The Company expects to ~~maintain its dividend at its present level;~~continue to incur significant expenditures in connection with the Maui windstorm and wildfires; however, the ~~HEI Board of Directors evaluates~~Company is looking to mitigate the ~~dividend quarterly and considers many factors in~~financial impact through seeking insurance recoveries as well as the ~~evaluation, including but not limited to the Company’s results of operations, the long-term prospects~~Utilities requesting for ~~the Company and current and expected future economic conditions.~~

deferral treatment for incremental non-labor expense.

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), University of Hawaii Economic Research Organization (UHERO), U.S. Bureau of Labor Statistics, Department of Labor and Industrial Relations (DLIR), Hawaii Tourism Authority (HTA), Honolulu Board of REALTORS® and national and local ~~newspapers)~~news media).

~~After three quarters of 2017, Hawaii’s tourism industry, a significant driver of Hawaii’s economy, ended with strong growth~~In the third quarter, the average daily passenger count was 0.7% higher than the comparable period in ~~both visitor spending and arrivals. Visitor expenditures increased 7.1% and arrivals increased 4.9%~~the prior year, but down 6.5% compared to the ~~same time period~~2019 pre-COVID-19 count. The recovery in ~~2016. Looking ahead,~~total passenger counts from the ~~Hawaii Tourism Authority expects scheduled nonstop seats~~low levels in 2020, which occurred under COVID-19 restrictions, thus far has been driven by domestic travelers, with international travelers, primarily Japan, remaining at lower levels, but activity is increasing compared to ~~Hawaii~~2022. In the third quarter, international visitor arrivals (excluding Japan) have continued to increase at a modest pace, but is still 18.7% below 2019 levels, whereas Japanese visitors are 47.1% below 2019 levels.

Hawaii’s preliminary seasonally adjusted unemployment rate in September 2023 was 2.8%, which was lower compared to the September 2022 rate of 3.7%. The national unemployment rate in September 2023 was 3.8% compared to 3.5% in

September 2022. According to the most recent forecast by UHERO, issued on September 22, 2023, job growth in the state will dip below 2% for 2023 and dip down to 1% in 2024. The Maui windstorm and wildfires destroyed the majority of the businesses in Lahaina, and tourism in West Maui is not expected to recover for some time.Accordingly, unemployment on Maui is predicted to increase above 11% in the fourth quarter ~~of 2017~~and then gradually decline, though it is not expected to ~~increase by 4.7% over the fourth quarter of 2016 driven primarily by an increase in seats from Asia, Canada and the West Coast.~~

Hawaii’s unemployment rate continued to decline to 2.5% in September 2017 which was lower than the 3.0% rate a year ago in September 2016 and 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.dip below 4% until late-2026.

Hawaii real estate activity through September 2023, as indicated by ~~the~~Oahu’s home resale market, ~~experienced growth~~resulted in a 6.0% increase in the median sales ~~prices in 2017. Median sales prices~~price ($532,000) for ~~single family residential~~condominiums, and a decrease of 4.5% for single-family homes ~~and condominiums on Oahu through September 2017 were higher by 3.4% and 5.4%, respectively, over~~compared to the same ~~time~~ period in ~~2016.~~2022, with the September median single-family home price of $1,050,000. The number of closed sales decreased 31.2% for ~~both single family~~condominiums and 30.5% for single-family residential homes ~~and condominiums~~ through ~~September~~the third quarter of ~~2017 were also up~~2023 compared to ~~same time period of 2016 by 5.0% and 5.8%, respectively.~~2022.

Hawaii’s petroleum product prices ~~reflect supply and demand in~~relate to the ~~Asia-Pacific region and the price of~~ crude oil in international markets. ~~Following steady price increases through 2016, the~~The price of crude oil has ~~remained relatively stable~~decreased through ~~the first three quarters of 2017.~~July 2023 and since then, gradually increased through September, although remaining below 2022’s peak.

At its September ~~2017~~20, 2023 meeting, the Federal Open Market Committee (FOMC) decided to maintain the federal funds rate target range of ~~“1.0%~~5.25% - 5.50% and anticipates ongoing increases as appropriate. The FOMC is still assessing plans to ~~1.25%” in view~~adjust their stance on monetary policy depending on the economic outlook to achieve maximum employment and inflation at the rate of ~~its expected labor market conditions and inflation.~~2 percent over the long run. The ~~FOMC~~Federal Reserve stated that it will continue to ~~assess~~reduce its holdings of Treasury securities and agency mortgage-backed securities.

~~Overall, Hawaii’s economy in~~rest of the ~~near term~~State. UHERO is ~~expected~~expecting that many would-be Maui visitors will vacation to ~~be buoyed by a strong tourism industry. Tourism~~other islands most likely Kauai or the Big Island. The Japanese market continues to ~~fare well however, future gains may be hindered by capacity constraints in visitor accommodations. The growth in~~fall short of expectations due to the weak yen. Other counties’ construction projects will need to compete with Maui’s recovery efforts, and once rebuilding starts the number of jobs in the sector will be slightly higher than previous forecast. The U.S. is ~~anticipated~~likely to ~~decline~~avoid a recession, but further rate increases could change that outcome. The uncertainties on Maui’s recovery will lead to changes in future forecasts and as ~~construction activity eases and unemployment remains low. Risks~~more information becomes available UHERO will refine said forecasts. If economic conditions worsen from current levels or remain ~~stemming from geopolitical uncertainty and its~~depressed for an extended period of time, it could have a material unfavorable impact on ~~tourism~~the Company’s financial position or results of operations.

See also “Recent Developments” in the “Electric utility” and ~~from~~“Bank” sections below for further discussion of the economic impact of ~~the financial markets on real estate development and sales.~~recent events.

“Other” segment.


	Three months ended September 30				Nine months ended September 30
(in thousands)	2023		2022		2023		2022		Primary reason(s)
Revenues	$	5,912	$	4,815	$	14,540	$	7,386	The revenues for the third quarter of 2023 were higher than the comparable period in 2022 due primarily to interest income at corporate in the third quarter of 2023. The nine months of 2023 was higher than the comparable period in 2022 due to increase in other sales at Pacific Current subsidiaries and higher interest income at corporate.
Operating loss	(8,806)		(4,034)		(20,197)		(14,792)		The third quarters of 2023 and 2022 include ($1.3 million) and $0.9 million, respectively, of operating income (loss) from Pacific Current1, attributable to lower asset performance. Corporate expenses for the third quarter of 2023 were $3.4 million higher than the same period in 2022, primarily due to $4.6 million of Maui windstorm and wildfires related costs in third quarter of 2023, partly offset by lower general and administrative expenses. The first nine months of 2023 and 2022 include ($1.8 million) and $2.3 million of operating income (loss), respectively, from Pacific Current1. The higher operating loss is primarily due to lower Pacific Current asset performance. Corporate expenses for the first nine months of 2023 were $2.1 million higher than the same period in 2022, primarily due to $4.6 million of Maui windstorm and wildfires related cost in the first nine months 2023, partly offset by lower general and administrative expenses.
Gain on sale of equity-method investment	—		—		—		8,123		Gain on sale of an equity-method investment at Pacific Current in first quarter of 2022.
Net loss	(13,708)		(8,438)		(35,451)		(18,610)		The net loss for the third quarter of 2023 was higher than the net loss for the third quarter of 2022 due to the same factors cited for the change in operating loss and higher interest expense, net of $1.7 million primarily due to higher average borrowings and higher average rates. The net loss for the first nine months of 2023 was higher than the net loss for the first nine months of 2022 due to the first quarter of 2022 gain on sale of an equity-method investment by Pacific Current, higher interest expense, net of $5.6 million primarily due to higher average borrowings and higher average rates and the same factors cited for the change in operating loss.

Three months ended September 30 Nine months ended September 30
(in thousands) 2017 2016 2017 2016 Primary reason(s)
Revenues $ 127
$ 94
$ 299
$ 262

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

The “other” business segment ~~(loss)/income~~loss includes results of the stand-alone corporate operations of HEI (including eliminations of intercompany transactions) and ASB Hawaii, Inc. ~~(ASBH)~~(ASB Hawaii), ~~both holding companies;~~as well as the results of Pacific Current, a direct subsidiary of HEI ~~Properties, Inc.~~focused on investing in clean energy and sustainable infrastructure projects; Pacific Current’s indirect subsidiary, Hamakua Energy, which owns a 60 MW combined cycle power plant that provides electricity to Hawaii Electric Light; Pacific Current’s subsidiaries, Mauo, LLC (Mauo), which owns solar-plus-storage projects totaling 8.6 MW on five University of Hawaii campuses, Mahipapa, which owns a ~~company~~7.5 MW nameplate biomass facility on Kauai, Alenuihaha Developments, LLC, which ~~held passive, venture capital investments (all~~owns a collection of renewable energy assets on Oahu and Kauai, Ka‘ie‘ie Waho Company, LLC, which ~~have been sold or abandoned prior~~owns a 6 MW solar photovoltaic system that provides renewable energy to ~~its dissolution in December 2015~~Kauai Island Utility Cooperative, and ~~final winding up in June 2017);~~Ka‘aipua‘a, LLC, which is constructing a wastewater treatment and ~~The Old Oahu Tug Service, Inc., a maritime freight transportation company that ceased operations in 1999, but has remaining employee benefit payments;~~energy recovery facility on Hawaii island; as well as eliminations of intercompany transactions. ~~For the third quarter and first nine months of 2016, merger and spin-off related expenses (net of $6 million of reimbursements from NEE and insurers) recorded at HEI~~

~~contributed $2 million and $5 million to operating losses, respectively. See Note 12, “Termination of proposed merger and other matters,” of the Condensed Consolidated Financial Statements.~~

~~FINANCIAL CONDITION~~RESULTS OF OPERATIONS

~~Liquidity~~


	Three months ended September 30				%
(in thousands)	2023		2022		change	Primary reason(s)*
Revenues	$	901,873	$	1,042,197	(13)	Decrease for the electric utility segment, partly offset by increases for bank and “other” segments.
Operating income	75,111		102,115		(26)	Decreases for bank and electric utility segments and higher losses for the “other” segment. See below for HEI Consolidated Maui windstorm and wildfires costs.
Net income for common stock	41,118		62,082		(34)	Lower net income at the bank and electric utility segments and higher net loss for the “other” segment. See below for HEI Consolidated Maui windstorm and wildfires costs and effective tax rate explanation.


	Nine months ended September 30				%
(in thousands)	2023		2022		change	Primary reason(s)*
Revenues	$	2,725,795	$	2,722,872	—	Increases for bank and “other” segments, offset by decrease for the electric utility segment.
Operating income	261,608		288,059		(9)	Decreases for bank and electric utility segments and higher losses for the “other” segment. See below for HEI Consolidated Maui windstorm and wildfires costs.
Net income for common stock	150,449		183,790		(18)	Lower net income at the bank and electric utility segments and higher net loss for the “other” segment. See below for HEI Consolidated Maui windstorm and wildfires costs and effective tax rate explanation.

* Also, see segment discussions which follow.

The Company’s effective tax rates for the third quarters of 2023 and ~~capital resources.~~2022 were 15% and 22%, respectively. The ~~Company believes that its ability~~Company’s effective tax rates for the first nine months of 2023 and 2022 were 20% and 21%, respectively. The effective tax rates were lower for the third quarter and first nine months of 2023 primarily due to ~~generate cash, both internally~~lower pretax income and higher nontaxable bank-owned life insurance, partially offset by the lower amortization in 2023 of the Utilities’ regulatory liability related to certain excess deferred income taxes resulting from ~~electric utility~~the Tax Act’s decrease in the federal income tax rate.

For the three and ~~banking operations~~nine months ended September 30, 2023 the Company’s incremental expenses related to the Maui windstorm and ~~externally from issuances~~wildfires, which excludes the $75 million contribution and insurance receivable as discussed in Subsequent event - One ‘Ohana Initiative in Note 2 of ~~equity~~the Condensed Consolidated Financial Statements, were as follows:


	Three and nine months ended September 30, 2023
(in thousands)	Electric utility		Bank		Other segment		HEI Consolidated
Maui windstorm and wildfires related expenses:

Legal expenses	$	6,251	$	550	$	3,950	$	10,751
Outside services expense	4,706		750		678		6,134
Provision for credit losses	—		5,900		—		5,900
Other expense	2,482		1,357		3		3,842
Interest expense	503		—		452		955
Total Maui windstorm and wildfires related expenses	$	13,942	$	8,557	$	5,083	$	27,582

Note: Other segment Maui windstorm and debt securities, commercial paper and bank borrowings, is adequate to maintain sufficient liquidity to fund its contractual obligations and commercial commitments, its forecasted capital expenditures and investments, its expected retirement benefit plan contributionswildfires related expenses - legal, outside services and other ~~cash requirements for the foreseeable future.~~

~~The consolidated capital structure of HEI (excluding~~are included in “Expenses-Other” and interest expense is included “Interest expense, net—other than on deposit liabilities and other bank ~~borrowings)~~borrowings” on the HEI and subsidiaries Condensed Consolidated Statements of Income. See Electric utility and Bank sections below for more detail.

The Company expects to continue to incur significant expenditures in connection with the Maui windstorm and wildfires; however, the Company is looking to mitigate the financial impact through seeking insurance recoveries as well as the Utilities requesting for deferral treatment for incremental non-labor expense.

Economic conditions.

In the third quarter, the average daily passenger count was ~~as follows:~~0.7% higher than the comparable period in the prior year, but down 6.5% compared to the 2019 pre-COVID-19 count. The recovery in total passenger counts from the low levels in 2020, which occurred under COVID-19 restrictions, thus far has been driven by domestic travelers, with international travelers, primarily Japan, remaining at lower levels, but activity is increasing compared to 2022. In the third quarter, international visitor arrivals (excluding Japan) have continued to increase at a modest pace, but is still 18.7% below 2019 levels, whereas Japanese visitors are 47.1% below 2019 levels.

(dollars in millions) September 30, 2017 December 31, 2016
Short-term borrowings—other than bank $ 25
— % $ —
— %
Long-term debt, net—other than bank 1,618
43
1,619
43
Preferred stock of subsidiaries 34
1
34
1
Common stock equity 2,103
56
2,067
56
$ 3,780
100 % $ 3,720
100 %

~~HEI’s short-term borrowings~~September 2022. According to the most recent forecast by UHERO, issued on September 22, 2023, job growth in the state will dip below 2% for 2023 and ~~HEI’s line of credit facility were as follows:~~

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

¹ ~~This table does not include Hawaiian Electric’s separate commercial paper issuances~~dip down to 1% in 2024. The Maui windstorm and line of credit facilities and draws, which are disclosed below under “Electric utility—Financial Condition—Liquidity and capital resources.” The maximum amount of HEI’s external short-term borrowings duringwildfires destroyed the ~~first nine months of 2017 was $18.5 million. As of October 27, 2017, HEI had $17.5 million of outstanding commercial paper, and its line of credit facility was undrawn.~~

~~HEI has a $150 million line of credit facility and refinanced a $125 million loan on October 6, 2017. See Note 5~~majority of the ~~Condensed Consolidated Financial Statements.~~businesses in Lahaina, and tourism in West Maui is not expected to recover for some time.Accordingly, unemployment on Maui is predicted to increase above 11% in the fourth quarter and then gradually decline, though it is not expected to dip below 4% until late-2026.

~~From December 7, 2016~~Hawaii real estate activity through September 2023, as indicated by Oahu’s home resale market, resulted in a 6.0% increase in the median sales price ($532,000) for condominiums, and a decrease of 4.5% for single-family homes compared to date, HEI satisfied the share purchase requirements of the HEI Dividend Reinvestment and Stock Purchase Plan (DRIP), HEIRSP and ASB 401(k) Plan through open market purchases of its common stock rather than through new issuances.

~~In December 2014, HEI filed an omnibus registration statement to register an indeterminate amount of debt and equity securities.~~

~~For the first nine months of 2017, net cash provided by operating activities of HEI consolidated was $291 million. Net cash used by investing activities for~~ the same period ~~was $440 million, primarily due~~in 2022, with the September median single-family home price of $1,050,000. The number of closed sales decreased 31.2% for condominiums and 30.5% for single-family residential homes through the third quarter of 2023 compared to ~~Hawaiian Electric’s consolidated capital expenditures~~2022.

Hawaii’s petroleum product prices relate to the crude oil in international markets. The price of crude oil has decreased through July 2023 and ~~ASB’s purchases~~since then, gradually increased through September, although remaining below 2022’s peak.

At its September 20, 2023 meeting, the Federal Open Market Committee (FOMC) decided to maintain the federal funds rate target range of ~~investment~~5.25% - 5.50% and anticipates ongoing increases as appropriate. The FOMC is still assessing plans to adjust their stance on monetary policy depending on the economic outlook to achieve maximum employment and inflation at the rate of 2 percent over the long run. The Federal Reserve stated that it will continue to reduce its holdings of Treasury securities ~~partly offset by ASB’s receipt~~and agency mortgage-backed securities.

UHERO forecasts full year 2023 real GDP growth of ~~repayments from investment securities, proceeds from the sale~~3.4%, an increase in total visitor arrivals of ~~commercial loans~~1.9%, an increase in real personal income of 2.9%, and ~~net decrease in loans held for investment and Hawaiian Electric’s contributions in aid~~an unemployment rate of ~~construction. Net cash provided by financing activities during this period was $73 million~~3.7%. This forecast anticipates that, as a result of ~~several factors, including~~the Maui windstorm and wildfires, sharp and persistent economic losses will be felt on Maui with limited spillover to the rest of the State. UHERO is expecting that many would-be Maui visitors will vacation to other islands most likely Kauai or the Big Island. The Japanese market continues to fall short of expectations due to the weak yen. Other counties’ construction projects will need to compete with Maui’s recovery efforts, and once rebuilding starts the number of jobs in the sector will be slightly higher than previous forecast. The U.S. is likely to avoid a recession, but further rate increases could change that outcome. The uncertainties on Maui’s recovery will lead to changes in ~~short-term borrowings~~future forecasts and ~~ASB’s deposit liabilities, proceeds~~as more information becomes available UHERO will refine said forecasts. If economic conditions worsen from ~~other bank borrowings and net increases in ASB’s retail purchase agreements, partly offset by the payment~~current levels or remain depressed for an extended period of common stock dividends and repayments of other bank borrowings. Also included in cash provided by financing activities were proceeds from the issuance of special purpose revenue bonds (SPRBs), which were offset by the transfer of funds totime, it could have a trustee for the redemption of previously issued SPRBs. Other than capital contributions from their parent company, intercompany services (and related intercompany payables and receivables), Hawaiian Electric’s periodic short-term borrowings from HEI (and related interest) and the payment of dividends to HEI, the electric utility and bank segments are largely autonomous in their operating, investing and financing activities. (See the electric utility and bank segments’ discussions of their cash flows in their respective “Financial condition—Liquidity and capital resources” sections below.) During the first nine months of 2017, Hawaiian Electric and ASB (through ASB Hawaii) paid cash dividends to HEI of $66 million and $28 million, respectively.

~~CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION~~

The Company’s results of operations and financial condition can be affected by numerous factors, many of which are beyond the Company’s control and could cause future results of operations to differ materially from historical results. For information about certain of these factors, see pages 47, 62 to 64, and 73 to 75 of HEI’s MD&A included in Part II, Item 7 of HEI’s 2016 Form 10-K.

~~Additional factors that may affect future results and financial condition are described~~material unfavorable impact on ~~pages iv and v under “Cautionary Note Regarding Forward-Looking Statements.”~~

~~MATERIAL ESTIMATES AND CRITICAL ACCOUNTING POLICIES~~

In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ significantly from those estimates.

See also “Recent Developments” in the ~~most important to the portrayal~~“Electric utility” and “Bank” sections below for further discussion of the ~~Company’s~~economic impact of recent events.

“Other” segment.


	Three months ended September 30				Nine months ended September 30
(in thousands)	2023		2022		2023		2022		Primary reason(s)
Revenues	$	5,912	$	4,815	$	14,540	$	7,386	The revenues for the third quarter of 2023 were higher than the comparable period in 2022 due primarily to interest income at corporate in the third quarter of 2023. The nine months of 2023 was higher than the comparable period in 2022 due to increase in other sales at Pacific Current subsidiaries and higher interest income at corporate.
Operating loss	(8,806)		(4,034)		(20,197)		(14,792)		The third quarters of 2023 and 2022 include ($1.3 million) and $0.9 million, respectively, of operating income (loss) from Pacific Current1, attributable to lower asset performance. Corporate expenses for the third quarter of 2023 were $3.4 million higher than the same period in 2022, primarily due to $4.6 million of Maui windstorm and wildfires related costs in third quarter of 2023, partly offset by lower general and administrative expenses. The first nine months of 2023 and 2022 include ($1.8 million) and $2.3 million of operating income (loss), respectively, from Pacific Current1. The higher operating loss is primarily due to lower Pacific Current asset performance. Corporate expenses for the first nine months of 2023 were $2.1 million higher than the same period in 2022, primarily due to $4.6 million of Maui windstorm and wildfires related cost in the first nine months 2023, partly offset by lower general and administrative expenses.
Gain on sale of equity-method investment	—		—		—		8,123		Gain on sale of an equity-method investment at Pacific Current in first quarter of 2022.
Net loss	(13,708)		(8,438)		(35,451)		(18,610)		The net loss for the third quarter of 2023 was higher than the net loss for the third quarter of 2022 due to the same factors cited for the change in operating loss and higher interest expense, net of $1.7 million primarily due to higher average borrowings and higher average rates. The net loss for the first nine months of 2023 was higher than the net loss for the first nine months of 2022 due to the first quarter of 2022 gain on sale of an equity-method investment by Pacific Current, higher interest expense, net of $5.6 million primarily due to higher average borrowings and higher average rates and the same factors cited for the change in operating loss.

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

The “other” business segment loss includes results of the stand-alone corporate operations of HEI (including eliminations of intercompany transactions) and ~~financial condition, and currently require management’s most difficult, subjective or complex judgments.~~

~~For information about these material estimates and critical accounting policies, see pages 48 to 49, 64 to 65, and 75 to 78 of HEI’s MD&A included in Part II, Item 7 of HEI’s 2016 Form 10-K.~~

~~Following are discussions of~~ASB Hawaii, Inc. (ASB Hawaii), as well as the results of ~~operations, liquidity~~Pacific Current, a direct subsidiary of HEI focused on investing in clean energy and ~~capital resources~~sustainable infrastructure projects; Pacific Current’s indirect subsidiary, Hamakua Energy, which owns a 60 MW combined cycle power plant that provides electricity to Hawaii Electric Light; Pacific Current’s subsidiaries, Mauo, LLC (Mauo), which owns solar-plus-storage projects totaling 8.6 MW on five University of ~~the electric utility~~Hawaii campuses, Mahipapa, which owns a 7.5 MW nameplate biomass facility on Kauai, Alenuihaha Developments, LLC, which owns a collection of renewable energy assets on Oahu and ~~bank segments.~~Kauai, Ka‘ie‘ie Waho Company, LLC, which owns a 6 MW solar photovoltaic system that provides renewable energy to Kauai Island Utility Cooperative, and Ka‘aipua‘a, LLC, which is constructing a wastewater treatment and energy recovery facility on Hawaii island; as well as eliminations of intercompany transactions.

~~Electric utility~~

RESULTS OF OPERATIONS

~~Results.~~


	Three months ended September 30				%
(in thousands)	2023		2022		change	Primary reason(s)*
Revenues	$	901,873	$	1,042,197	(13)	Decrease for the electric utility segment, partly offset by increases for bank and “other” segments.
Operating income	75,111		102,115		(26)	Decreases for bank and electric utility segments and higher losses for the “other” segment. See below for HEI Consolidated Maui windstorm and wildfires costs.
Net income for common stock	41,118		62,082		(34)	Lower net income at the bank and electric utility segments and higher net loss for the “other” segment. See below for HEI Consolidated Maui windstorm and wildfires costs and effective tax rate explanation.

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


	Nine months ended September 30				%
(in thousands)	2023		2022		change	Primary reason(s)*
Revenues	$	2,725,795	$	2,722,872	—	Increases for bank and “other” segments, offset by decrease for the electric utility segment.
Operating income	261,608		288,059		(9)	Decreases for bank and electric utility segments and higher losses for the “other” segment. See below for HEI Consolidated Maui windstorm and wildfires costs.
Net income for common stock	150,449		183,790		(18)	Lower net income at the bank and electric utility segments and higher net loss for the “other” segment. See below for HEI Consolidated Maui windstorm and wildfires costs and effective tax rate explanation.

* Also, see segment discussions which follow.

Nine months ended September 30 Increase
2017 2016 (decrease) (dollars in millions, except per barrel amounts)
$ 1,674
$ 1,550
$ 124

Revenues. Net increase largely due to:
$ 114

higher fuel oil prices¹
35

higher purchased power energy costs²
(20 ) lower RAM revenues due to expiration of 2013 settlement agreement that allowed the accrual of RAM revenues on January 1 (vs. June 1) for years 2014 to 2016 at Hawaiian Electric
(7 ) lower KWH generated
432
334
98

Fuel oil expense. Increase due to higher fuel oil prices, partially offset by lower KWH generated
441
413
28

Purchased power expense. Increase due to higher fuel oil prices
307
298
9

Operation and maintenance expenses. Net increase due to:
6
higher overhaul costs due to more overhauls being performed in 2017
4
ERP project costs commencing in 2017
2

higher transmission and distribution operating and maintenance costs

1

Grid modernization consultant costs

1

write off of portion of deferred Geothermal RFP costs

1

additional reserves for environmental costs in 2017³
(4 ) PSIP consulting costs incurred in 2016
(3 ) LNG consulting costs incurred in 2016 to negotiate an LNG contract that was subsequently terminated following HEI/NextEra merger termination
304
289
15

Other expenses. Increase due to higher revenue taxes from higher revenue, coupled with higher depreciation expense for plant investments in 2016
191
216
(25 )
Operating income. Decrease due to lower RAM revenues and higher O&M and other expenses
95
108
(13 )
Net income for common stock. Decrease due to lower operating income, partially offset by resulting lower income taxes

6,528
6,613
(85 )
Kilowatthour sales (millions)⁴
$ 67.42
$ 52.06
$ 15.36

Average fuel oil cost per barrel¹
461,408
459,590
1,818
Customer accounts (end of period)


1	The rate schedules of the electric utilities currently contain energy cost adjustment clauses (ECACs) through which changes in fuel oil prices and certain components of purchased energy costs are passed on to customers.


2	The rate schedules of the electric utilities currently contain purchase power adjustment clauses (PPACs) through which changes in purchase power expenses (except purchased energy costs) are passed on to customers.


3	~~Increase reserve for additional costs for investigation of PCB contamination onshore and offshore of Waiau Power Plant~~


4	KWH sales were lower when compared to the same quarter in the prior year due largely to continued energy efficiency and conservation efforts by customers and increasing levels of private customer-sited renewable generation.

~~Hawaiian Electric’s consolidated ROACE was 7.2%~~The Company’s effective tax rates for the ~~twelve~~third quarters of 2023 and 2022 were 15% and 22%, respectively. The Company’s effective tax rates for the first nine months of 2023 and 2022 were 20% and 21%, respectively. The effective tax rates were lower for the third quarter and first nine months of 2023 primarily due to lower pretax income and higher nontaxable bank-owned life insurance, partially offset by the lower amortization in 2023 of the Utilities’ regulatory liability related to certain excess deferred income taxes resulting from the Tax Act’s decrease in the federal income tax rate.

For the three and nine months ended September 30, ~~2017, and 8.1% for~~2023 the ~~twelve months ended September 30, 2016.~~

The Utilities’ consolidated KWH sales have declined each year since 2007. Based on expectations of additional customer renewable self-generation and energy-efficiency installations, the Utilities’ full year 2017 KWH sales are expected to be below the 2016 level.

~~The net book value (cost less accumulated depreciation) of utility property, plant and equipment (PPE) as of September 30, 2017 amounted to $4 billion, of which approximately 25%~~Company’s incremental expenses related to ~~production PPE, 67% related to transmission~~the Maui windstorm and ~~distribution PPE,~~wildfires, which excludes the $75 million contribution and 8% related to other PPE. Approximately 11% of the total net book value relates to generation PPE that has been deactivated or that the Utilities plan to deactivate or decommission. See “Adequacy of supply” below.

~~See “Economic conditions”~~insurance receivable as discussed in ~~the “HEI Consolidated” section above.~~

~~Executive overview and strategy.~~ The Utilities provide electricity on all the principal islands in the state other than Kauai and operate five separate grids. The Utilities’ mission is to provide innovative energy leadership for Hawaii, to meet the needs and expectations of customers and communities, and to empower them with affordable, reliable and clean energy. The goal is to create a modern, flexible and dynamic electric grid that enables an optimal mix of distributed energy resources (such as private rooftop solar), demand response and grid-scale resources to achieve the statutory goal of 100% renewable energy by 2045.

~~Transition to renewable energy.~~ The Utilities are committed to assisting the State of Hawaii in achieving its Renewable Portfolio Standard goal of 100% renewable energy by 2045. Hawaii’s Renewable Portfolio Standards (RPS) law was revised in the 2015 Legislature and requires electric utilities to meet an RPS of 15%, 30%, 40%, 70% and 100% by December 31, 2015, 2020, 2030, 2040 and 2045, respectively. The Utilities have been successful in adding significant amounts of renewable energy resources to their electric systems and exceeded the 2015 RPS goal. The Utilities' RPS for 2016 was about 26% and on its way to achieving the 2020 RPS goal of 30%. (See "Developments in renewable energy efforts” below).

In April 2014, the PUC issued orders that collectively address certain key policy, resource planning and operational issues for the Utilities. The April 2014 regulatory orders were to address: (1) Integrated Resource Planning and Power Supply Improvement Plans (PSIPs), (2) Reliability Standards Working Group, and (3) Policy Statement and Order Regarding Demand Response Programs, which are described below. The PUC also provided its inclinations on the future of Hawaii’s electric utilities in one of the orders. The PUC provided its perspectives on the vision, business strategies and regulatory policy changes required to align the Utilities' business model with customers’ interests and the state’s public policy goals.

~~Integrated Resource Planning and Power Supply Improvement Plans~~. The PUC did not accept the Utilities’ Integrated Resource Plan and Action Plans submission, and, in lieu of an approved plan, commenced other initiatives to enable resource planning. As required by the PUC orders, the Utilities filed proposed PSIPs with the PUC in August 2014. Updated PSIPs were filed in April 2016 and December 2016 in response to PUC orders. The PSIPs provided plans to achieve 100% renewable energy using a diverse mix of energy resources by 2045. Under these plans, the Utilities support sustainable growth of private rooftop solar, expand use of energy storage systems, empower customers by developing smart grids and offer new products and services to customers (e.g., community solar, microgrids and voluntary “demand response” programs).

In the December 2016 PSIP Update Report, the updated plans describe greater and faster expansion of the Utilities’ renewable energy portfolio than in the plans filed in April 2016. The plans include the continued growth of private rooftop solar and describe the grid and generation modernization work needed to reliably integrate an estimated total of 165,000 private systems by 2030, and additional grid-scale renewable energy resources. The Utilities already have the highest percentage of customers using private rooftop solar of any utility in the U.S. and customer-sited resources are seen as a key contributor to the growth of the renewable portfolio on every island. In addition, the plans forecast the addition of 360 MW of grid-scale solar and 157 MW of grid-scale wind, with 32 MW derived from community-based renewable energy (CBRE). The plans also include 115 MW from Demand Response (DR) programs, which can shift customer use of electricity to times when more renewable energy is available, potentially making room to add even more renewable resources. Unlike the April 2016 updated PSIPs, the December 2016 update does not include the use of LNG to generate power in the near-term or the Kahe 3x1 Combined Cycle Plant. While LNG remains a potential lower-cost bridge fuel to be evaluated, the Utilities’ priority is to continue replacing fossil fuel generation with renewables over the next five years as federal tax incentives for renewables begin to phase out. An interisland cable is not in the near-term plan, which states that its costs and benefits should continue to be evaluated. The December 2016 Update Report emphasizes work that is in progress or planned over the next five years on each of the five islands the Utilities serve.

On July 14, 2017, the PUC accepted the Utilities’ PSIP December 2016 Update Report and closed the proceeding. In its order, the PUC provided guidance regarding the implementation of the Utilities’ near-term action plan and future planning activities, requiring the Utilities to file a report that details an updated resource planning approach and schedule by March 1, 2018. The PUC order stated that it intends to use the PSIPs in conjunction with its evaluation of specific filings for approval of capital and other projects.

~~Reliability standards working group~~. In April 2014, the PUC ordered the Utilities to take timely actions intended to lower energy costs, improve system reliability and address emerging challenges to integrate additional renewable energy. In addition to the PSIPs mentioned above, the PUC ordered certain filing requirements, including a Distributed Generation Interconnection Plan, which the Utilities filed in August 2014.

The PUC also stated it would be opening new dockets to address (1) reliability standards, (2) the technical, economic and policy issues associated with distributed energy resources (DER) and (3) the Hawaii electricity reliability administrator, which is a third-party position that the legislature has authorized the PUC to create by contract to provide support for the PUC in developing and periodically updating local grid reliability standards and procedures and interconnection requirements and overseeing grid access and operation. The PUC has not yet opened new dockets to address the first and third topics above. To

~~address DER, the second topic, the PUC opened an investigative proceeding on August 21, 2014 (see “DER investigative proceeding” below).~~

~~Policy statement and order regarding demand response programs~~. The PUC provided guidance concerning the objectives and goals for DR programs, and ordered the Utilities to develop an integrated DR Portfolio Plan that will enhance system operations and reduce costs to customers. The Utilities’ Plan was filed in July 2014. Subsequently, the Utilities submitted status updates and an update and supplemental report to the Plan. In July 2015, the PUC issued an order appointing a special adviser to guide, monitor and review the Utility’s Plan design and implementation. In December 2015, the Utilities filed an application with the PUC for approval of their proposed DR Portfolio Tariff Structure, Reporting Schedule and Cost Recovery of Program Costs. The Utilities filed an updated DR Portfolio Plan in February 2017. In May 2017, the Utilities filed their reply to the statements of position submitted by the other parties and are awaiting a PUC decision.

In October 2017, the PUC approved the Utilities request made in December 2015 to defer and recover certain computer software and software development costs for a DR Management System in an amount not to exceed $3.9 million, exclusive of AFUDC, through the Renewable Energy Infrastructure Program (REIP) Surcharge. The Utilities expect the DR Management System to be in service by the end of 2018.

~~DER investigative proceedin~~g~~. In March 2015, the PUC issued an order to address DER issues.~~

In June 2015, the Utilities submitted their final Statement of Position in the DER proceeding, which included new pricing provisions for future private rooftop photovoltaic (PV) systems, technical standards for advanced inverters, new options for customers including battery-equipped private rooftop PV systems, a pilot time-of-use rate, an improved method of calculating the amount of private rooftop PV that can be safely installed, and a streamlined and standardized PV application process.

In October 2015, the PUC issued a D&O establishing DER reforms that: (1) promote rapid adoption of the next generation of solar PV and other distributed energy technologies; (2) encourage more competitive pricing of distributed energy resource systems; (3) lower overall energy supply costs for all customers; and (4) help to manage DER in terms of each island’s limited grid capacity. The D&O capped the Utilities Net Energy Metering (NEM) programs at “existing” levels (i.e., for existing NEM customers and customers who already applied and were waiting for approval), closed the NEM programs to new participants, and approved new interim options for customers to interconnect DER to the utility electric grids, including Self Supply and Grid Supply tariff options and modified interconnection standards. The PUC placed caps on the availability of the Grid Supply program. The Self Supply Program is designed for customers who do not export to the grid.

On October 20, 2017, the PUC issued a D&O which further revises interconnection requirements, creates a Smart Export program, modifies the customer-grid supply program (Controllable Customer Grid Supply), clarifies that non-export customer systems can be added to the existing NEM program, and provides guidance and reporting requirements regarding hosting capacity analyses. The Smart Export program is designed for PV systems with battery storage and features zero compensation during mid-day, but enhanced compensation at other times of the day to reflect the value of the energy to the grid at different times of the day. The Controllable Customer Grid Supply program allows PV systems without battery storage to deliver energy to the grid on an as-available basis except when system-wide technical conditions require reduction of output. The D&O specified island-specific pricing and program caps for the Smart Export and Controllable Customer Grid Supply programs. Customers currently under the customer-grid supply program are grandfathered under existing rates for the next five years. The D&O also authorizes activation of new advanced inverter functions in PV and storage systems, which will provide support to the electric grid during different types of grid disturbances. The utilities must file tariffs consistent with the programs described in the D&O.

~~Grid modernization~~. After launching a smart grid customer engagement plan during the second quarter of 2014, Hawaiian Electric replaced approximately 5,200 residential and commercial meters with smart meters, 160 direct load control switches, fault circuit indicators and remote controlled switches in selected areas across Oahu as part of the Smart Grid Initial Phase implementation. Also under the Initial Phase a grid efficiency measure called Volt/Var Optimization (or Conservation Voltage Reduction) was enabled, customer energy portals were launched and are available for customer use and a PrePay Application was launched. The Initial Phase implementation was completed in 2015. The smart grid provides benefits such as customer tools to manage their electric bills, potentially shortening outages and enabling the Utilities to integrate more low-cost renewable energy, like wind and solar, which will reduce Hawaii’s dependence on imported oil.

In March 2016, the Utilities sought PUC approval to commit funds for an expansion of the smart grid project. The proposed smart grid project was estimated to cost $340 million and to be implemented over 5 years. On January 4, 2017, the PUC issued an order dismissing the application without prejudice and directing the Utilities to submit a Grid Modernization Strategy.

The PUC indicated that the overall goal of the Grid Modernization Strategy is to deploy modern grid investments at an appropriate priority, sequence and pace to cost-effectively maximize flexibility, minimize the risk of redundancy and

obsolescence, deliver customer benefits and enable greater DER and renewable energy integration. On June 30, 2017, the Utilities filed an initial draft of the Grid Modernization Strategy describing how new technology will help triple private rooftop solar and make use of rapidly evolving products including storage and advanced inverters. The cost of the first segment of the modernization is estimated at about $205 million over six years. The Utilities filed their final Grid Modernization Strategy on August 29, 2017. The PUC will set forth any next steps after reviewing the final Strategy and public comments.

~~Community-Based Renewable Energy~~. On October 1, 2015, the Utilities filed a proposed CBRE program and tariff with the PUC that would allow customers who cannot, or chose not to, take advantage of private rooftop solar to receive the benefits of renewable energy to help offset their monthly electric bills and support clean energy for Hawaii. In November 2015, the PUC suspended the tariff submittal and opened an investigatory docket. In February 2017, the PUC issued a proposed CBRE Program Framework and a Proposed Model Tariff Language, which significantly increased the scope of the program. Under the proposed CBRE Program Framework, the CBRE program will utilize a phased approach. The Program Framework proposes a Phase 1 with an 80 MW capacity statewide with 73 MW allocated to the Utilities' service territories. During Tranche A of the CBRE Phase 1 Program, the Utilities' primary role is to serve as the program administrator. In Tranche B, the Utilities are allowed to develop 9 MW in the service territories, 75% of the capacity is reserved for low-to-moderate income subscribers. In March 2017, the Utilities submitted comments to the Program Framework, which identified certain concerns should the proposed CBRE Program Framework be adopted and requested a technical conference before a decision is issued. In June 2017, a technical conference with the PUC was completed with the Utilities, the Consumer Advocate and industry stakeholders. The Utilities are awaiting the PUC’s decision on the CBRE program.

~~Decoupling.~~ ~~See "Decoupling"~~Subsequent event - One ‘Ohana Initiative in Note 32 of the Condensed Consolidated Financial Statements, ~~for a discussion of decoupling.~~were as follows:

As part of decoupling, the Utilities also track their rate-making ROACEs as calculated under the earnings sharing mechanism, which includes only items considered in establishing rates. At year-end, each utility's rate-making ROACE is compared against its ROACE allowed by the PUC to determine whether earnings sharing has been triggered. Annual earnings of a utility over


	Three and nine months ended September 30, 2023
(in thousands)	Electric utility		Bank		Other segment		HEI Consolidated
Maui windstorm and wildfires related expenses:

Legal expenses	$	6,251	$	550	$	3,950	$	10,751
Outside services expense	4,706		750		678		6,134
Provision for credit losses	—		5,900		—		5,900
Other expense	2,482		1,357		3		3,842
Interest expense	503		—		452		955
Total Maui windstorm and wildfires related expenses	$	13,942	$	8,557	$	5,083	$	27,582

Note: Other segment Maui windstorm and ~~above the ROACE allowed by the PUC are shared between the utility~~wildfires related expenses - legal, outside services and its ratepayers on a tiered basis. Results for 2016 and 2015 did not trigger the earnings sharing mechanism for the Utilities. For 2014, the earnings sharing mechanism was triggered for Maui Electric, and Maui Electric credited $0.5 million to its customers for their portion of the earnings sharing during the period between June 2015 to May 2016. Earnings sharing creditsother are included in “Expenses-Other” and interest expense is included “Interest expense, net—other than on deposit liabilities and other bank borrowings” on the ~~annual decoupling filing~~HEI and subsidiaries Condensed Consolidated Statements of Income. See Electric utility and Bank sections below for ~~the following year.~~

~~Regulated returns.Actual and PUC-allowed (as of September 30, 2017) returns were as follows:~~

% Rate-making Return on rate base (RORB)* ROACE** Rate-making ROACE***
Twelve months ended September 30, 2017 Hawaiian Electric Hawaii Electric Light Maui Electric Hawaiian Electric Hawaii Electric Light Maui Electric Hawaiian Electric Hawaii Electric Light Maui Electric
Utility returns 6.77
6.71
6.83
7.35
6.54
6.99
7.99
7.54
7.96
PUC-allowed returns 8.11
7.80
7.34
10.00
9.50
9.00
10.00
9.50
9.00
Difference (1.34 ) (1.09 ) (0.51 ) (2.65 ) (2.96 ) (2.01 ) (2.01 ) (1.96 ) (1.04 )

* Based on recorded operating income and average rate base, both adjusted for items not included in determining electric rates.

** Recorded net income divided by average common equity.

*** ROACE adjusted to remove items not included by the PUC in establishing rates, such as incentive compensation.more detail.

The ~~gap between PUC-allowed ROACEs~~Company expects to continue to incur significant expenditures in connection with the Maui windstorm and wildfires; however, the ~~ROACEs actually achieved~~Company is ~~primarily due to:~~looking to mitigate the ~~consistent exclusion of certain expenses from rates (for example, incentive compensation and charitable contributions),~~financial impact through seeking insurance recoveries as well as the recognition of annual RAM revenues on June 1 annually rather than on January 1, the low RBA interest rate (currently a short-term debt rate rather than the actual cost of capital), O&M increases and return on capital additions since the last rate case in excess of indexed escalations, and the portion of the pension regulatory asset not earning a return due to pension contributions and pension costs in excess of the pension amount in rates.Utilities requesting for deferral treatment for incremental non-labor expense.

~~Most recent rate proceedings.~~ Unless otherwise agreed or ordered, each electric utility is currently required by PUC order to initiate a rate proceeding every third year (on a staggered basis) to allow the PUC and the Consumer Advocate to regularly evaluate decoupling and to allow the utility to request electric rate increases to cover rising operating costs and the cost of plant and equipment, including the cost of new capital projects to maintain and improve service reliability and integrate more renewable energy. The PUC may grant an interim increase within 10 to 11 months following the filing of an application, but there is no guarantee of such an interim increase and interim amounts collected are refundable, with interest, to the extent they exceed the amount approved in the PUC’s final D&O. The timing and amount of any final increase is determined at the discretion of the PUC. The adoption of revenue, expense, rate base and cost of capital amounts (including the ROACE and

~~RORB) for purposes of an interim rate increase does not commit the PUC to accept any such amounts in its final D&O.~~

Test year
(dollars in millions)

Date
(filed/
implemented)
Amount
% over
rates in
effect

ROACE
(%)

RORB
(%)

Rate
base

Common
equity
%

Stipulated
agreement
reached with
Consumer
Advocate
Hawaiian Electric

2014
Request 6/27/14
2017

Request 12/16/16 $ 106.4
6.9
10.60
8.28
$ 2,002
57.36

Hawaii Electric Light

2016
Request 9/19/16 $ 19.3
6.5
10.60
8.44
$ 479
57.12
Yes
Interim increase 8/31/17 9.9
3.4
9.50
7.80
482
56.69

Maui Electric

2015

Request 12/30/14
2018

Request 10/12/17 $ 30.1
9.3
10.60
8.05
$ 473
56.94

Economic conditions.

Note: The ~~“Request” date reflects~~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), University of Hawaii Economic Research Organization (UHERO), U.S. Bureau of Labor Statistics, Department of Labor and Industrial Relations (DLIR), Hawaii Tourism Authority (HTA), Honolulu Board of REALTORS® and national and local news media).

In the ~~application filing date~~third quarter, the average daily passenger count was 0.7% higher than the comparable period in the prior year, but down 6.5% compared to the 2019 pre-COVID-19 count. The recovery in total passenger counts from the low levels in 2020, which occurred under COVID-19 restrictions, thus far has been driven by domestic travelers, with international travelers, primarily Japan, remaining at lower levels, but activity is increasing compared to 2022. In the third quarter, international visitor arrivals (excluding Japan) have continued to increase at a modest pace, but is still 18.7% below 2019 levels, whereas Japanese visitors are 47.1% below 2019 levels.

September 2022. According to the most recent forecast by UHERO, issued on September 22, 2023, job growth in the state will dip below 2% for 2023 and dip down to 1% in 2024. The Maui windstorm and wildfires destroyed the majority of the businesses in Lahaina, and tourism in West Maui is not expected to recover for some time.Accordingly, unemployment on Maui is predicted to increase above 11% in the fourth quarter and then gradually decline, though it is not expected to dip below 4% until late-2026.

Hawaii real estate activity through September 2023, as indicated by Oahu’s home resale market, resulted in a 6.0% increase in the median sales price ($532,000) for condominiums, and a decrease of 4.5% for single-family homes compared to the same period in 2022, with the September median single-family home price of $1,050,000. The number of closed sales decreased 31.2% for condominiums and 30.5% for single-family residential homes through the third quarter of 2023 compared to 2022.

Hawaii’s petroleum product prices relate to the crude oil in international markets. The price of crude oil has decreased through July 2023 and since then, gradually increased through September, although remaining below 2022’s peak.

At its September 20, 2023 meeting, the Federal Open Market Committee (FOMC) decided to maintain the federal funds rate target range of 5.25% - 5.50% and anticipates ongoing increases as appropriate. The FOMC is still assessing plans to adjust their stance on monetary policy depending on the economic outlook to achieve maximum employment and inflation at the rate ~~proceeding.~~of 2 percent over the long run. The ~~“Interim increase” date reflects the effective date~~Federal Reserve stated that it will continue to reduce its holdings of ~~the revised schedules~~Treasury securities and ~~tariffs~~agency mortgage-backed securities.

UHERO forecasts full year 2023 real GDP growth of 3.4%, an increase in total visitor arrivals of 1.9%, an increase in real personal income of 2.9%, and an unemployment rate of 3.7%. This forecast anticipates that, as a result of the ~~PUC-approved increase.~~Maui windstorm and wildfires, sharp and persistent economic losses will be felt on Maui with limited spillover to the rest of the State. UHERO is expecting that many would-be Maui visitors will vacation to other islands most likely Kauai or the Big Island. The Japanese market continues to fall short of expectations due to the weak yen. Other counties’ construction projects will need to compete with Maui’s recovery efforts, and once rebuilding starts the number of jobs in the sector will be slightly higher than previous forecast. The U.S. is likely to avoid a recession, but further rate increases could change that outcome. The uncertainties on Maui’s recovery will lead to changes in future forecasts and as more information becomes available UHERO will refine said forecasts. If economic conditions worsen from current levels or remain depressed for an extended period of time, it could have a material unfavorable impact on the Company’s financial position or results of operations.

See ~~“Most recent rate proceedings”~~also “Recent Developments” in ~~Note 3~~the “Electric utility” and “Bank” sections below for further discussion of the ~~Condensed Consolidated Financial Statements.~~economic impact of recent events.

~~Performance-based regulation~~. ~~In the~~

“Other” segment.


	Three months ended September 30				Nine months ended September 30
(in thousands)	2023		2022		2023		2022		Primary reason(s)
Revenues	$	5,912	$	4,815	$	14,540	$	7,386	The revenues for the third quarter of 2023 were higher than the comparable period in 2022 due primarily to interest income at corporate in the third quarter of 2023. The nine months of 2023 was higher than the comparable period in 2022 due to increase in other sales at Pacific Current subsidiaries and higher interest income at corporate.
Operating loss	(8,806)		(4,034)		(20,197)		(14,792)		The third quarters of 2023 and 2022 include ($1.3 million) and $0.9 million, respectively, of operating income (loss) from Pacific Current1, attributable to lower asset performance. Corporate expenses for the third quarter of 2023 were $3.4 million higher than the same period in 2022, primarily due to $4.6 million of Maui windstorm and wildfires related costs in third quarter of 2023, partly offset by lower general and administrative expenses. The first nine months of 2023 and 2022 include ($1.8 million) and $2.3 million of operating income (loss), respectively, from Pacific Current1. The higher operating loss is primarily due to lower Pacific Current asset performance. Corporate expenses for the first nine months of 2023 were $2.1 million higher than the same period in 2022, primarily due to $4.6 million of Maui windstorm and wildfires related cost in the first nine months 2023, partly offset by lower general and administrative expenses.
Gain on sale of equity-method investment	—		—		—		8,123		Gain on sale of an equity-method investment at Pacific Current in first quarter of 2022.
Net loss	(13,708)		(8,438)		(35,451)		(18,610)		The net loss for the third quarter of 2023 was higher than the net loss for the third quarter of 2022 due to the same factors cited for the change in operating loss and higher interest expense, net of $1.7 million primarily due to higher average borrowings and higher average rates. The net loss for the first nine months of 2023 was higher than the net loss for the first nine months of 2022 due to the first quarter of 2022 gain on sale of an equity-method investment by Pacific Current, higher interest expense, net of $5.6 million primarily due to higher average borrowings and higher average rates and the same factors cited for the change in operating loss.

1 Hamakua Energy’s sales to Hawaii Electric Light 2016 test year rate case and the Hawaiian Electric 2017 test year rate case, the Utilities recommended that a separate investigatory docket be opened to evaluate PBR on a broader scale that can be implemented across the Utilities, and to fully develop a comprehensive PBR Framework. PBR refers to different ways(a regulated affiliate) are eliminated in which regulators have modified their regulatory approach in an attempt to strengthen financial incentives for Utilities to achieve desired outcomes. In the its April 27, 2017 order in the Decoupling Investigative proceeding, the PUC stated that it would initiate a separate investigative docket to examine a full range of Performance Incentive Mechanism and PBR options.consolidation.

~~Depreciation docket~~. In December 2016, the Utilities filed an application with the PUC for approval of changes in the depreciation and amortization rates and amortization period for contributions in aid of construction (CIAC).

The proposed depreciation rates are higher than the existing depreciation rates, based on a depreciation study which reviewed the average service lives, net salvage, retirement dispersion and retirement dates“other” business segment loss includes results of the ~~Utilities’ assets. The application requests~~stand-alone corporate operations of HEI (including eliminations of intercompany transactions) and ASB Hawaii, Inc. (ASB Hawaii), as well as the results of Pacific Current, a direct subsidiary of HEI focused on investing in clean energy and sustainable infrastructure projects; Pacific Current’s indirect subsidiary, Hamakua Energy, which owns a 60 MW combined cycle power plant that the effective date of implementation of the change in depreciation and amortization rates and revised CIAC amortization period, as recommended by the 2015 Book Depreciation Study, coincide with the effective date of interim base rates (that include the increased expenses resulting from the new depreciation and amortization rates and change in CIAC amortization period)provides electricity to ~~be established in each of the Utilities’ next general rate cases or the effective date of the decoupling RBA Rate Adjustment that incorporates the new depreciation and amortization rates~~ fo~~r each utility, whichever is sooner.~~

Developments in renewable energy efforts.  Developments in the Utilities’ efforts to further their renewable energy strategy include renewable energy projects discussed in Note 3 of the Condensed Consolidated Financial Statements and the following:

~~New renewable PPAs~~.

In July 2015, the PUC approved the PPA for the 27.6 MW Waianae Solar project that was developed by Eurus Energy America. The project achieved commercial operations in January 2017 and is now the largest solar project in Hawaii.

In July 2015, Maui Electric signed two PPAs, with Kuia Solar and South Maui Renewable Resources (which subsequently assigned its PPA to SSA Solar of HI 2, LLC and SSA Solar of HI 3, LLC, respectively), each for a 2.87-MW solar facility. In February 2016, the PUC approved both PPAs, subject to certain conditions and modifications. The guaranteed commercial operations date for the facilities was December 31, 2016, however both projects are experiencing delays and are now expected to be completed by the end of the fourth quarter in 2017.

In December 2014, the PUC approved a PPA for Renewable As-Available Energy dated October 3, 2013 between Hawaiian Electric and Na Pua Makani Power Partners, LLC (NPM) for a proposed 24-MW wind farm on Oahu. In September 2016, Hawaiian Electric filed an Amended and Restated PPA, dated August 12, 2016, which reflects the completion of an interconnection requirements study. In October 2017, the PUC approved the construction of an

~~overhead 46 kV sub-transmission line to accommodate the interconnection of the NPM wind farm, which is expected to be placed into service by August 31, 2019.~~

Hawaiian Electric had PPAs to purchase solar energy with three affiliates of SunEdison. In February 2016, as a result of the project entities missing contract milestones, Hawaiian Electric terminated the original PPAs for the three projects. SunEdison filed Chapter 11 bankruptcy proceedings and during those proceedings, the three SunEdison affiliates were acquired by an affiliate of NRG Energy, Inc. (NRG). Hawaiian Electric then negotiated with NRG and its newly acquired affiliates and has entered into amended and restated PPAs for solar energy on Oahu with Waipio PV, LLC for 45.9 MW, Lanikuhana Solar, LLC for 14.7 MW and Kawailoa Solar, LLC for 49.0 MW. On July 27, 2017, the PUC approved the three NRG PPAs, subject to modifications and conditions. The three projects are expected to be in service by the end of 2019.

~~Tariffed renewable resources~~.

~~As of September 30, 2017, there were approximately 330 MW, 77 MW and 88 MW of installed distributed renewable energy technologies (mainly PV) at Hawaiian Electric,~~ Hawaii Electric Light and Maui Electric, respectively, for tariff-based private customer generation programs, namely NEM, Customer Grid Supply and Customer Self Supply. As of September 30, 2017, an estimated 27% of single family homesLight; Pacific Current’s subsidiaries, Mauo, LLC (Mauo), which owns solar-plus-storage projects totaling 8.6 MW on the islands of Oahu, Hawaii, and Maui have installed private rooftop solar systems, and an estimated 29% of single family homes have installed, or have been approved to install, private rooftop solar systems. As of September 30, 2017, approximately 16% of the Utilities' total customers have solar systems.

The Utilities began accepting energy from feed-in tariff projects in 2011. As of September 30, 2017, there were 30 MW, 3 MW and 5 MW of installed feed-in tariff capacity from renewable energy technologies at Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively.

~~Biofuel sources~~.

In September 2015, the PUC approved Hawaiian Electric’s 2-year biodiesel supply contract with Pacific Biodiesel Technologies, LLC (PBT) to supply 2 million to 3 million gallons of biodiesel at Campbell Industrial Park combustion turbine No. 1 (CIP CT-1) and the Honolulu International Airport Emergency Power Facility beginning in November 2015. The PBT contract is set to expire on November 2, 2018. PBT also has a spot buy contract with Hawaiian Electric to purchase additional quantities of biodiesel at or below the price of diesel. Some purchases of “at parity” biodiesel have been made under the spot purchase contract, which was recently extended through June 2018. REG Marketing & Logistics Group, LLC has a contingency supply contract with Hawaiian Electric to also supply biodiesel to CIP CT-1 in the event PBT is not able to supply necessary quantities. This contingency contract has been extended to November 2018, and will continue with no volume purchase requirements.

On April 28, 2017 Hawaiian Electric issued a Biofuel Supply Request for Proposal for 3.1 million gallons of biofuel per year for three years, to commence as early as November 2018 to be used as fuel for power generation at Hawaiian Electric’s Schofield Generating Station, the Honolulu International Airport Emergency Power Facility and any other generating unit on Oahu, as necessary. Hawaiian Electric is in negotiations with a bidder.

~~Requests for renewable proposals, expressions of interest, and information~~.

In response to requests filed by the utilities, on October 6, 2017, the PUC opened a docket to receive filings, review approval requests, and resolve disputes, if necessary, related to the Utilities' plan to proceed with a competitive bidding process of dispatchable firm renewable generation on the island of Maui and variable renewable generation on the islands of Oahu, Hawaii, Maui, Molokai, and Lanai. The PUC also indicated that it will appoint an independent observer to monitor the competitive bidding process. On October 23, 2017, the Utilities filed draft requests for proposals for 220 megawatts (MW) of renewable generation on Oahu, 50 MW of renewable generation on Hawaii Island, and 100 MW of renewable generation on Maui, including 40 MW of firm renewable generation (all resources to be in service by the end of 2022). With this filing, the Utilities also filed proposed model power purchase agreements and timelines for each proposed procurement. Maui Electric proposed to suspend its request to issue variable renewable dispatchable generation RFPs for Molokai and Lanai as Maui Electric is already in discussions on such islands regarding renewable generation.

On January 5, 2017, Hawaiian Electric issued an Onshore Wind Expression of Interest requesting expressions of interest from independent power producers that are capable of developing utility scale onshore wind projects that are eligible to capture the federal Investment Tax Credit for Large Wind on the island of Oahu. Responses have been accepted and Hawaiian Electric is in non-binding confidential discussions regarding such responses.

On December 12, 2016, the Utilities issued a request for information asking interested landowners to provide information about properties available for utility-scale renewable energy projects or for growing biofuel feedstock on

~~the islands of Oahu, Hawaii, Maui, Molokai and Lanai. Responses have been made available to developers interested in developing renewable energy projects in these~~ five ~~islands.~~

~~Adequacy of supply.~~

~~Hawaiian Electric~~. In January 2017, Hawaiian Electric filed its 2017 Adequacy of Supply (AOS) letter, which indicated that based on its October 2016 sales and peak forecast for the 2017 - 2021 time period, Hawaiian Electric's generation capacity will be sufficient to meet reasonably expected demands for service and provide reasonable reserves for emergencies through 2018, but may have shortfalls in meeting the Utilities’ generating system reliability guideline. The calculated reliability guideline shortfalls are relatively small and Hawaiian Electric can implement mitigation measures.

In accordance to its planning criteria, Hawaiian Electric deactivated two fossil fuel generating units from active service at its Honolulu Power Plant in January 2014 and anticipates deactivating two additional fossil fuel units at its Waiau Power Plant in the 2022 timeframe. Hawaiian Electric acquired new firm capacity with the commissioning of the State of Hawaii Department of Transportation’s emergency power facility in June 2017. Hawaiian Electric is proceeding with a future firm capacity addition with the U.S. Department of the Army for a utility owned and operated renewable, dispatchable, including black start capabilities, generation security project on federal lands, which is expected to be in service in the second quarter of 2018. Hawaiian Electric is continuing negotiations with firm capacity IPPs on Oahu. On August 31, 2017, Hawaiian Electric and Kalaeloa entered into an agreement that neither party will give written notice of termination of the Kalaeloa PPA prior to October 31, 2018. The PPA with AES Hawaii is scheduled to expire in 2022.

~~Hawaii Electric Light~~. In January 2017, Hawaii Electric Light filed its 2017 AOS letter, which indicated that Hawaii Electric Light’s generation capacity through 2019 is sufficient to meet reasonably expected demands for service and provide for reasonable reserves for emergencies. Additional generation from other renewable resources could be added in the 2018-2025 timeframe.

~~Maui Electric~~. In January 2017, Maui Electric filed its 2017 AOS letter, which indicated that Maui Electric’s generation capacity for the islands of Lanai and Molokai for the next three years is sufficiently large to meet all reasonably expected demands for service and provide reasonable reserves for emergencies. The 2017 AOS letter also indicated that without the peak reduction benefits of demand response but with the equivalent firm capacity value of wind generation, Maui Electric expects to have a small reserve capacity shortfall from 2017 to 2022 on the island of Maui. Maui Electric is evaluating several measures to mitigate the anticipated reserve capacity shortfall. Maui Electric anticipates needing a significant amount of additional firm capacity on Maui in the 2022 timeframe after the planned retirement of the Kahului Power Plant.

In February 2014, Maui Electric deactivated two fossil fuel generating units, with a combined rating of 11.4 MW-net, at its Kahului Power Plant. Due to various system conditions including lack of wind generation, approaching storms and scheduled and unscheduled outages of generating units, transmission lines and independent power producers, the two deactivated units at Kahului Power Plant were reactivated for several days in 2015 and 2016. Due to the frequency of reactivations of Kahului Units 1 and 2 to meet system requirements, these units were removed from deactivated status and designated as reactivated in September 2016. Considering the time needed to acquire replacement firm generating capacity, Maui Electric now anticipates the retirement of all generating units at the Kahului Power Plant, which have a combined rating of 32.3 MW, in the 2022 timeframe. A capacity planning analysis is in progress to better define generating needs and timing. Maui Electric plans to issue one or more RFPs for energy storage, demand response and firm generating capacity, and to make system improvements needed to ensure reliability and voltage support in this timeframe. In May 2016, Maui Electric requested that the PUC open a new docket for Maui Electric’s competitive bidding process for additional firm capacity resources. In September 2016, Maui Electric submitted an application to purchase and install three temporary mobile distributed generation diesel engines to address increasing reserve capacity shortfalls on the island of Maui; Maui Electric has since requested the PUC to suspend the proceeding until the end of 2017 to evaluate contingency measures and permanent solutions to minimize or eliminate the risk of near-term capacity shortfalls on the island of Maui.

~~Legislation and regulation.~~ Congress and the Hawaii legislature periodically consider legislation that could have positive or negative effects on the Utilities and their customers. See “Recent tax developments” in Note 9 of the Condensed Consolidated Financial Statements. Also, in recent years, legislative, regulatory and governmental activities related to the environment, including proposals and rulemaking under the Clean Air Act and Clean Water Act (CWA), have increased significantly.

~~Clean Water Act Section 316(b)~~. On August 14, 2014, the EPA published in the Federal Register the final regulations required by section 316(b) of the CWA designed to protect aquatic organisms from adverse impacts associated with existing power plant cooling water intake structures. The regulations were effective October 14, 2014 and apply to the cooling water systems for the steam generating units at three of Hawaiian Electric’s power plants on the island of Oahu. The regulations prescribe a process, including a number of required site-specific studies, for states to develop facility-specific entrainment and impingement controls to be incorporated in each facility’s National Pollutant Discharge Elimination System permit. Hawaiian

Electric submitted the final site specific studies to the DOH in December 2016 for the Honolulu and Waiau power plants and in September 2017 for the Kahe power plant. Hawaiian Electric will work with the DOH to identify the appropriate compliance methods for the 316(b) rule.

~~Mercury Air Toxics Standards~~. On February 16, 2012, the EPA published the final rule establishing the National Emission Standards for Hazardous Air Pollutants for fossil-fuel fired steam electrical generating units (EGUs) in the Federal Register. The final rule, known as the Mercury and Air Toxics Standards (MATS), applies to the 14 EGUs at Hawaiian Electric’s power plants. MATS established the Maximum Achievable Control Technology standards for the control of hazardous air pollutants emissions from new and existing EGUs. Hawaiian Electric initially selected a MATS compliance strategy based on switching to lower emission fuels, but has since continued developing and refining its emission control strategy. Hawaiian Electric’s liquid oil-fired steam generating units that are subject to the MATS limits are able to comply with the new standards without a significant fuel switch in combination with a suite of operational changes.

~~Hawaiian Electric has proceeded with the implementation of its MATS Compliance Plan and has met all compliance requirements to date.~~

~~PUC Commissioner.~~ The Governor’s appointment of James Griffin as PUC Commissioner was confirmed by the State Senate on August 31, 2017. Mr. Griffin was a researcher and a faculty member at the Hawaii Natural Energy Institute at the University of Hawaii ~~at Manoa. He also previously served~~campuses, Mahipapa, which owns a 7.5 MW nameplate biomass facility on Kauai, Alenuihaha Developments, LLC, which owns a collection of renewable energy assets on Oahu and Kauai, Ka‘ie‘ie Waho Company, LLC, which owns a 6 MW solar photovoltaic system that provides renewable energy to Kauai Island Utility Cooperative, and Ka‘aipua‘a, LLC, which is constructing a wastewater treatment and energy recovery facility on Hawaii island; as ~~Chief~~well as eliminations of ~~Policy and Research at the PUC. His term on the PUC ends June 30, 2022.~~intercompany transactions.

~~FINANCIAL CONDITION~~

~~Liquidity and capital resources.~~ Management believes that Hawaiian Electric’s ability, and that of its subsidiaries, to generate cash, both internally from operations and externally from issuances of equity and debt securities and commercial paper and draws on lines of credit, is adequate to maintain sufficient liquidity to fund their respective capital expenditures and investments and to cover debt, retirement benefits and other cash requirements in the foreseeable future.

~~Hawaiian Electric’s consolidated capital structure was as follows:~~

(dollars in millions) September 30, 2017 December 31, 2016
Short-term borrowings $ 6
— % $ —
— %
Long-term debt, net 1,319
41
1,319
42
Preferred stock 34
1
34
1
Common stock equity 1,829
58
1,800
57
$ 3,188
100 % $ 3,153
100 %

~~Information about Hawaiian Electric’s short-term borrowings (other than from Hawaii Electric Light and Maui Electric) and Hawaiian Electric’s line of credit facility were as follows:~~

Average balance Balance
(in millions) Nine months ended September 30, 2017 September 30, 2017 December 31, 2016
Short-term borrowings ¹

Commercial paper $ 6
$ 6
$ —
Line of credit draws —
—
—
Borrowings from HEI 2
—
—
Undrawn capacity under line of credit facility 200
200

¹ The maximum amount of external short-term borrowings by Hawaiian Electric during the first nine months of 2017 was $48 million. As of September 30, 2017, Hawaiian Electric had short-term borrowings from Hawaii Electric Light and Maui Electric of $6.6 million and $4.0 million, respectively. As of October 27, 2017, Hawaiian Electric had $2 million of outstanding commercial paper, no draws under its line of credit facility and no borrowings from HEI. Also, as of October 27, 2017, Hawaiian Electric had short-term borrowings from Hawaii Electric Light and Maui Electric of $13.1 million and $7.0 million, respectively, which intercompany borrowings are eliminated in consolidation.

~~Hawaiian Electric has a $200 million line of credit facility. See Note 5 of the Condensed Consolidated Financial Statements.~~

In May 2015, up to $80 million of SPRBs ($70 million for Hawaiian Electric, $2.5 million for Hawaii Electric Light and $7.5 million for Maui Electric) were authorized by the Hawaii legislature for issuance, with PUC approval, prior to June 30, 2020 to finance the Utilities’ capital improvement programs.

On January 26, 2017, Hawaiian Electric, Hawaii Electric Light and Maui Electric obtained PUC approval to issue, on or before December 31, 2017, unsecured obligations bearing taxable interest (Hawaiian Electric up to $100 million, Hawaii Electric Light up to $10 million and Maui Electric up to $30 million), with the proceeds expected to be used, as applicable, to finance capital expenditures, repay long-term and/or short term debt used to finance or refinance capital expenditures and/or to reimburse funds used for payment of capital expenditures.

In March 2017 and amended in April 2017, the Utilities requested PUC approval to issue and sell each utility’s common stock through December 31, 2021 (Hawaiian Electric’s sale/s to HEI of up to $150 million and Hawaii Electric Light’s and Maui Electric’s sale/s to Hawaiian Electric of up to $10 million each) and the purchase of Hawaii Electric Light and Maui Electric common stock by Hawaiian Electric through December 31, 2021. On October 31, 2017, the PUC issued a D&O approving the issue and sale of each utility’s common stock as requested in the application.

In September 2017, the Utilities requested PUC approval to issue, over a four-year period from 2018 to December 31, 2021, unsecured obligations bearing taxable interest (Hawaiian Electric up to $280 million, Hawaii Electric Light up to $30 million and Maui Electric up to $10 million), with the proceeds expected to be used, as applicable, to finance capital expenditures, repay long-term and/or short term debt used to finance or refinance capital expenditures and/or to reimburse funds used for payment of capital expenditures.

~~Cash flows. The following table reflects the changes in cash flows for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016:~~

Nine months ended September 30,
(in thousands) 2017 2016 Change
Net cash provided by operating activities $ 229,902
$ 275,271
$ (45,369 )
Net cash used in investing activities (229,287 ) (226,036 ) (3,251 )
Net cash used in financing activities (64,914 ) (50,707 ) (14,207 )

~~Net cash provided by operating activities.~~ Cash flows from operating activities generally relate to the amount and timing of cash received from customers and payments made to third parties. Using the indirect method of determining cash flows from operating activities, noncash expense items such as depreciation and amortization, as well as changes in certain assets and liabilities, are added to (or deducted from) net income.

~~The decrease in net cash provided by operating activities was impacted by the following:~~

~~Lower cash from an increase in accounts receivable due to timing and an increase in fuel prices.~~

~~Lower cash from a decrease in accounts payable due to timing on payments of invoices related to fuel and capital projects.~~

~~Lower cash from an increase in unbilled revenues due to higher fuel prices.~~

~~Lower cash due to refund of federal income taxes in 2016 based on bonus depreciation enacted in the fourth quarter of 2015 (similar treatment was not granted in the fourth quarter of 2016).~~

~~Net cash used in investing activities.~~ The increase in net cash used in investing activities was driven primarily by an increase in capital expenditures related to construction activities, offset by higher contributions in aid of construction and capital good tax credits.

~~Net cash used in financing activities.~~ Financing activities provide supplemental cash for both day-to-day operations and capital requirements as needed. The increase in net cash used in financing activities primarily reflects lower short-term borrowings.

~~2017 forecast capital expenditures~~. For 2017, the Utilities forecast $400 million of net capital expenditures, which could change over time based upon external factors such as the timing and scope of environmental regulations, unforeseen delays in permitting and timing of PUC decisions. Proceeds from the issuance of equity and long-term debt, cash flows from operating activities, temporary increases in short-term borrowings and existing cash and cash equivalents are expected to provide the funds needed for the net capital expenditures in 2017, to pay down commercial paper or other short-term borrowings, as well as to fund any unanticipated expenditures not included in the 2017 forecast (such as increases in the costs or acceleration of capital projects or unanticipated capital expenditures that may be required by new environmental laws and regulations).

~~Bank~~

Three months ended September 30 Increase
(in millions) 2017 2016 (decrease) Primary reason(s)
Interest income $ 59
$ 55
$ 4
The increase in interest income was the result of a higher average investment securities portfolio balance and an increase in yields on earning assets. ASB’s average loan portfolio balance for the three months ended September 30, 2017 decreased by $68 million compared to the same period in 2016 as increases in average consumer and home equity lines of credit balances of $54 million and $31 million, respectively, were more than offset by a decrease in commercial loan balances of $132 million. The decrease in the average commercial loan balance was primarily due to a decrease in the syndicated national credit loan portfolio and paydowns in the commercial loan portfolio. The yield on earning assets increased by 8 basis points due to the repricing of the adjustable rate loans with the increase in the interest rate environment and a shift in the mix of the loan portfolio with the growth in the consumer loan portfolio, which resulted in an increase in the loan portfolio yield of 20 basis points. The average investment securities portfolio balance increased by $378 million due to the use of excess liquidity to purchase investments. The yield on the investment securities portfolio increased by 8 basis points as new investment purchase yields were higher due to the increase in short-term interest rates.
Noninterest income 15
19
(4 ) Noninterest income decreased for the three months ended September 30, 2017 compared to noninterest income for the three months ended September 30, 2016 due to lower mortgage banking income. Prior year’s noninterest income included a gain on sale of real estate with no similar sale in 2017.
Revenues 74
74
—

Interest expense 3
3
—
Interest expense was flat for the three months ended September 30, 2017 compared to the same period in 2016 as higher interest expense from the growth in term certificates was offset by lower interest expense on other borrowings as a result of lower repurchase agreements and FHLB advances. Average deposit balances for the three months ended September 30, 2017 increased by $392 million compared to the same period in 2016 due to an increase in core deposits and term certificates of $303 million and $89 million, respectively. Other borrowings decreased by $105 million primarily due to a decrease in repurchase agreements and FHLB advances of $72 million and $33 million, respectively. The interest-bearing liability rate for the three months ended September 30, 2017 decreased by 5 basis points compared to the same period in 2016.
Provision for loan losses 1
6
(5 ) The provision for loan losses decreased by $5.3 million for the three months ended September 30, 2017 compared to the provision for loan losses for the three months ended September 30, 2016. The provision for loan losses for 2017 was primarily due to increased loan loss reserves for the consumer loan portfolio partly offset by the release of reserves for the commercial real estate and syndicated national credit loan portfolios due to loan paydowns and sales as the Bank strategically worked to improve commercial asset quality. The provision for loan losses for 2016 was primarily due to increased reserves for growth in the loan portfolio, additional loan loss reserves for the consumer loan portfolio and loan loss reserves for commercial loans due to downgrades of specific commercial credits. Delinquency rates have increased from 0.51% at September 30, 2016 to 0.60% at September 30, 2017. The annualized net charge-off ratio for the three months ended September 30, 2017 was 0.32% compared to an annualized net charge-off ratio of 0.20% for the same period in 2016. The increase in net charge-offs were due to an increase in consumer loan portfolio charge-offs as a result of ASB’s strategic expansion of its unsecured consumer loan product offering with risk-based pricing.
Noninterest expense 44
42
2
The increase in noninterest expense for the three months ended September 30, 2017 compared to the same period in 2016 was primarily due to higher compensation and employee benefits expenses as a result of higher performance-based compensation costs and higher employee benefit costs.
Expenses 48
51
(3 )
Operating income 26
23
3
Higher net interest income and lower provision for loan losses was partly offset by higher noninterest expenses and lower noninterest income.
Net income 18
15
3

Nine months ended September 30 Increase
(in millions) 2017 2016 (decrease) Primary reason(s)
Interest income $ 176
$ 163
$ 13
The increase in interest income was the result of higher average earning asset balances and an increase in yields on earning assets. ASB’s average loan portfolio balance for the nine months ended September 30, 2017 increased by $17 million compared to the same period in 2016 as average consumer, commercial real estate and home equity lines of credit balances increased by $58 million, $48 million and $23 million, respectively. The growth in these loan portfolios was reflective of ASB’s portfolio mix target and loan growth strategy. The average commercial loan balance decreased by $103 million primarily due to a decrease in the syndicated national credit loan portfolio. The yield on earning assets increased by 7 basis points due to a shift in the mix of the loan portfolio with the growth in the commercial real estate and consumer loan portfolios and repricing of the adjustable rate loans with the increase in the interest rate environment, which resulted in an increase in loan portfolio yields of 17 basis points. The average investment securities portfolio balance increased by $358 million due to the use of excess liquidity to purchase investments. The yield on the investment securities portfolio increased by 9 basis points as new investment purchase yields were higher due to the increase in short-term interest rates.
Noninterest income 47
50
(3 ) Noninterest income decreased slightly for the nine months ended September 30, 2017 compared to noninterest income for the nine months ended September 30, 2016 due to lower mortgage banking income. Prior year’s noninterest income included gains on sales of securities and a gain on sale of real estate with no similar sales in 2017.
Revenues 223
213
10

Interest expense 9
10
(1 ) Interest expense was lower for the nine months ended September 30, 2017 compared to the same period in 2016 as higher interest expense from the growth in term certificates was more than offset by lower interest expense on other borrowings as a result of lower repurchase agreements and FHLB advances. Average deposit balances for the nine months ended September 30, 2017 increased by $471 million compared to the same period in 2016 due to an increase in core deposits and term certificates of $334 million and $137 million, respectively. Other borrowings decreased by $102 million primarily due to a decrease in repurchase agreements. The interest-bearing liability rate for the nine months ended September 30, 2017 decreased by 3 basis points compared to the same period in 2016.
Provision for loan losses 7
15
(8 ) The provision for loan losses decreased by $8.0 million for the nine months ended September 30, 2017 compared to the provision for loan losses for the nine months ended September 30, 2016. The provision for loan losses for the first nine months of 2017 was primarily due to increased loan loss reserves for the consumer loan portfolio partly offset by the release of reserves for the commercial real estate and syndicated national credit loan portfolios due to lower outstanding balances and improved credit quality. The provision for loan losses for the first nine months of 2016 was primarily due to increased reserves for growth in the loan portfolio, additional loan loss reserves for the consumer loan portfolio and loan loss reserves for commercial loans due to downgrades of specific commercial credits. Delinquency rates have increased from 0.51% at September 30, 2016 to 0.60% at September 30, 2017. The annualized net charge-off ratio for the nine months ended September 30, 2017 was 0.27% compared to an annualized net charge-off ratio of 0.19% for the same period in 2016. The increase in net charge-offs for the first nine months of 2017 was due to an increase in consumer loan portfolio charge-offs as a result of ASB’s strategic expansion of its unsecured consumer loan product offering with risk-based pricing.
Noninterest expense 131
126
5
The increase in noninterest expense for the nine months ended September 30, 2017 compared to the same period in 2016 was primarily due to higher compensation and employee benefits expenses as a result of higher performance-based compensation costs and higher employee benefit costs. Prior year’s noninterest expense included costs related to the replacement and upgrade of the electronic banking platform.
Expenses 147
151
(4 )
Operating income 76
62
14
Higher net interest income and lower provision for loan losses was partly offset by higher noninterest expenses and lower noninterest income.
Net income 50
41
9

~~See Note 4 of the Condensed Consolidated Financial Statements and “Economic conditions” in the “HEI Consolidated” section above.~~

~~ASB continues to maintain its low-risk profile, strong balance sheet and straightforward community banking business model.~~

~~ASB’s return on average assets, return on average equity and net interest margin were as follows:~~

Three months ended September 30 Nine months ended September 30
(percent) 2017 2016 2017 2016
Return on average assets 1.07
0.97
1.02
0.89
Return on average equity 11.64
10.36
11.24
9.50
Net interest margin 3.69
3.57
3.68
3.59

~~Average balance sheet and net interest margin.~~ ~~The following tables provide a summary of average balances including major categories of interest-earning assets and interest-bearing liabilities:~~

Three months ended September 30
2017 2016
(dollars in thousands) Average
balance
Interest¹
income/
expense
Yield/
rate (%) Average
balance
Interest¹income/
expense
Yield/
rate (%)
Assets:

Interest-earning deposits $ 54,598
$ 172
1.23
$ 97,885
$ 124
0.50
FHLB stock 10,401
45
1.70
11,218
54
1.89
Available-for-sale investment securities
Taxable 1,291,604
6,521
2.02
928,698
4,581
1.97
Non-taxable 15,427
171
4.33
—
—
—
Total available-for-sale investment securities 1,307,031
6,692
2.05
928,698
4,581
1.97
Loans
Residential 1-4 family 2,066,648
21,383
4.14
2,077,135
22,044
4.24
Commercial real estate 880,304
9,542
4.26
888,886
9,113
4.08
Home equity line of credit 895,224
7,714
3.42
864,589
7,204
3.31
Residential land 16,340
296
7.26
18,764
282
6.00
Commercial 618,708
6,863
4.39
750,366
7,327
3.87
Consumer 213,619
6,412
11.91
159,226
4,474
11.18
Total loans ^2,3
4,690,843
52,210
4.42
4,758,966
50,444
4.22
Total interest-earning assets ²
6,062,873
59,119
3.88
5,796,767
55,203
3.80
Allowance for loan losses (55,881 )

(55,480 )

Non-interest-earning assets 558,736

514,120

Total assets $ 6,565,728

$ 6,255,407

Liabilities and shareholder’s equity:

Savings $ 2,292,341
$ 400
0.07
$ 2,139,863
$ 358
0.07
Interest-bearing checking 901,645
61
0.03
837,480
43
0.02
Money market 138,151
41
0.12
161,149
52
0.13
Time certificates 686,638
1,942
1.12
597,537
1,418
0.94
Total interest-bearing deposits 4,018,775
2,444
0.24
3,736,029
1,871
0.20
Advances from Federal Home Loan Bank 66,848
436
2.59
100,000
792
3.10
Securities sold under agreements to repurchase 90,011
34
0.15
161,652
672
1.63
Total interest-bearing liabilities 4,175,634
2,914
0.28
3,997,681
3,335
0.33
Non-interest bearing liabilities:

Deposits 1,681,774

1,572,821

Other 103,695

101,759

Shareholder’s equity 604,625

583,146

Total liabilities and shareholder’s equity $ 6,565,728

$ 6,255,407

Net interest income
$ 56,205

$ 51,868

Net interest margin (%) ⁴

3.69

3.57

Nine months ended September 30
2017 2016
(dollars in thousands) Average
balance
Interest¹
income/
expense
Yield/
rate (%) Average
balance
Interest¹income/
expense
Yield/
rate (%)
Assets:

Interest-earning deposits $ 64,426
$ 479
0.98
$ 80,738
$ 304
0.50
FHLB stock 11,128
150
1.80
11,094
142
1.71
Available-for-sale investment securities
Taxable 1,235,029
19,651
2.12
892,726
13,773
2.06
Non-taxable 15,427
481
4.11
—
—
—
Total available-for-sale investment securities 1,250,456
20,132
2.15
892,726
13,773
2.06
Loans
Residential 1-4 family 2,070,150
65,172
4.20
2,076,308
66,565
4.27
Commercial real estate 902,605
28,676
4.20
854,977
25,993
4.04
Home equity line of credit 880,472
22,078
3.35
857,652
21,058
3.28
Residential land 16,816
791
6.28
18,577
843
6.05
Commercial 650,554
21,108
4.32
753,783
22,294
3.93
Consumer 201,379
17,444
11.58
143,514
11,818
11.00
Total loans ^2,3
4,721,976
155,269
4.38
4,704,811
148,571
4.21
Total interest-earning assets ²
6,047,986
176,030
3.88
5,689,369
162,790
3.81
Allowance for loan losses (56,276 )

(52,902 )

Non-interest-earning assets 537,894

505,014

Total assets $ 6,529,604

$ 6,141,481

Liabilities and shareholder’s equity:

Savings $ 2,271,926
$ 1,160
0.07
$ 2,095,975
$ 1,034
0.07
Interest-bearing checking 898,794
175
0.03
831,412
127
0.02
Money market 146,864
133
0.12
164,596
157
0.13
Time certificates 676,083
5,390
1.07
539,314
3,836
0.95
Total interest-bearing deposits 3,993,667
6,858
0.23
3,631,297
5,154
0.19
Advances from Federal Home Loan Bank 89,273
1,999
2.99
101,232
2,363
3.07
Securities sold under agreements to repurchase 93,128
111
0.16
182,671
2,053
1.48
Total interest-bearing liabilities 4,176,068
8,968
0.29
3,915,200
9,570
0.32
Non-interest bearing liabilities:

Deposits 1,658,238

1,549,467

Other 100,499

100,210

Shareholder’s equity 594,799

576,604

Total liabilities and shareholder’s equity $ 6,529,604

$ 6,141,481

Net interest income
$ 167,062

$ 153,220

Net interest margin (%) ⁴

3.68

3.59


¹	Interest income includes taxable equivalent basis adjustments, based upon a federal statutory tax rate of 35%, of $0.06 million and nil for the three months ended September 30, 2017 and 2016, respectively and $0.2 million and nil for the nine months ended September 30, 2017 and 2016, respectively.

²~~Includes loans held for sale, at lower of cost or fair value.~~


³	Includes recognition of deferred loan fees of $0.3 million and $0.6 million for the three months ended September 30, 2017 and 2016 and $1.4 million and $2.1 million for the nine months ended September 30, 2017 and 2016, respectively, together with interest accrued prior to suspension of interest accrual on nonaccrual loans.


⁴	~~Defined as net interest income as a percentage of average total interest-earning assets.~~

~~Earning assets, costing liabilities and other factors.~~ Earnings of ASB depend primarily on net interest income, which is the difference between interest earned on earning assets and interest paid on costing liabilities. The interest rate environment has been impacted by disruptions in the financial markets over a period of several years. These conditions have begun to moderate with the interest rate increases in the past year which resulted in an increase in ASB’s net interest income and net interest margin.

~~Loan originations and mortgage-related securities are ASB’s primary earning assets.~~

~~Loan portfolio~~. ASB’s loan volumes and yields are affected by market interest rates, competition, demand for financing, availability of funds and management’s responses to these factors. The composition of ASB’s loans receivable was as follows:

September 30, 2017 December 31, 2016
(dollars in thousands) Balance % of total Balance % of total
Real estate:

Residential 1-4 family $ 2,066,023
44.2
$ 2,048,051
43.2
Commercial real estate 745,583
15.9
800,395
16.9
Home equity line of credit 905,249
19.4
863,163
18.2
Residential land 18,611
0.4
18,889
0.4
Commercial construction 128,407
2.7
126,768
2.7
Residential construction 13,031
0.3
16,080
0.3
Total real estate 3,876,904
82.9
3,873,346
81.7
Commercial 589,669
12.6
692,051
14.6
Consumer 211,571
4.5
178,222
3.7
4,678,144
100.0
4,743,619
100.0
Less: Deferred fees and discounts (1,863 )
(4,926 )
Allowance for loan losses (53,047 )
(55,533 )
Total loans, net $ 4,623,234

$ 4,683,160

~~Home equity— key credit statistics~~. Attention has been given by regulators and rating agencies to the potential for increased exposure to credit losses associated with home equity lines of credit (HELOC) that were originated during the period of rapid home price appreciation between 2003 and 2007 as they have reached, or are starting to reach, the end of their 10-year, interest only payment periods. Once the interest only payment period has ended, payments are reset to include principal repayments along with interest. ASB does not have a large exposure to HELOCs originated between 2003 and 2007. Nearly all of the HELOC originations prior to 2008 consisted of amortizing equity lines that have structured principal payments during the draw period. These older equity lines represent 1% of the portfolio and are included in the amortizing balances identified in the loan portfolio table below.

September 30, 2017 December 31, 2016
Outstanding balance of home equity loans (in thousands) $ 905,249
$ 863,163
Percent of portfolio in first lien position 47.2 % 45.1 %
Annualized net charge-off (recovery) ratio (0.04 )% 0.01 %
Delinquency ratio 0.38 % 0.35 %

End of draw period – interest only Current
September 30, 2017 Total Interest only 2017-2018 2019-2021 Thereafter amortizing
Outstanding balance (in thousands) $ 905,249
$ 718,843
$ 55,842
$ 97,061
$ 565,940
$ 186,406
% of total 100 % 79 % 6 % 11 % 62 % 21 %

The HELOC portfolio comprised 19% of the total loan portfolio and is generally an interest-only revolving loan for a 10-year period, after which time the HELOC outstanding balance converts to a fully amortizing variable rate term loan with a 20-year amortization period. This product type comprises 79% of the total HELOC portfolio and is the current product offering. Borrowers also have a “Fixed Rate Loan Option” to convert a part of their available line of credit into a 5, 7 or 10-year fully amortizing fixed rate loan with level principal and interest payments. As of ~~September 30, 2017, approximately 20% of the portfolio balances were amortizing loans under the Fixed Rate Loan Option.~~

~~Loan portfolio risk elements~~. ~~See Note 4 of the Condensed Consolidated Financial Statements.~~

~~Available-for-sale investment securities~~. ~~ASB’s investment portfolio was comprised as follows:~~

September 30, 2017 December 31, 2016
(dollars in thousands) Balance % of total Balance % of total
U.S. Treasury and federal agency obligations $ 182,118
14 % $ 192,281
18 %
Mortgage-related securities — FNMA, FHLMC and GNMA 1,122,565
85
897,474
81
Mortgage revenue bond 15,427
1
15,427
1
Total available-for-sale investment securities $ 1,320,110
100 % $ 1,105,182
100 %

Principal and interest on mortgage-related securities issued by Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Government National Mortgage Association (GNMA) are guaranteed by the issuer and, in the case of GNMA, backed by the full faith and credit of the U.S. government.

~~Deposits and other borrowings~~. Deposits continue to be the largest source of funds for ASB and are affected by market interest rates, competition and management’s responses to these factors. Deposit retention and growth will remain challenging in the current environment due to competition for deposits and the low level of short-term interest rates. Advances from the FHLB of Des Moines and securities sold under agreements to repurchase continue to be additional sources of funds. As of ~~September 30, 2017~~ ~~and December 31, 2016, ASB’s costing liabilities consisted of 97% deposits and 3% other borrowings. The weighted average cost of deposits for the first~~ ~~nine~~ ~~months of 2017 and 2016 was 0.16% and 0.13%, respectively.~~

~~Federal Home Loan Bank of Des Moines~~. As of September 30, 2017 and December 31, 2016, ASB had $50 million and $100 million of advances outstanding at the FHLB of Des Moines. The decrease in advances outstanding was due to the payoff of a maturing FHLB advance. As of September 30, 2017, the unused borrowing capacity with the FHLB of Des Moines was $1.9 billion. The FHLB of Des Moines continues to be an important source of liquidity for ASB.

~~Other factors~~. Interest rate risk is a significant risk of ASB’s operations and also represents a market risk factor affecting the fair value of ASB’s investment securities. Increases and decreases in prevailing interest rates generally translate into decreases and increases in the fair value of the investment securities, respectively. In addition, changes in credit spreads also impact the fair values of the investment securities.

~~As of~~ ~~September 30, 2017~~, ASB had an unrealized loss, net of taxes, on available-for-sale investment securities (including securities pledged for repurchase agreements) in AOCI of $5.5 million compared to an unrealized loss, net of taxes, of $7.9 million at December 31, 2016. See “Item 3. Quantitative and qualitative disclosures about market risk” for a discussion of ASB’s interest rate risk sensitivity.

During the first nine months of 2017, ASB recorded a provision for loan losses of $7.2 million primarily due to increased loan loss reserves for the consumer loan portfolio partly offset by the release of reserves for the commercial real estate and syndicated national credit loan portfolios due to lower outstanding balances and improved credit quality. During the first ~~nine~~ months of 2016, ASB recorded a provision for loan losses of $15.3 million primarily due to increased loss reserves for growth in the loan portfolio, additional loan loss reserves for the consumer loan portfolio and loan loss reserves for commercial loans due to downgrades of specific commercial credits. Financial stress on ASB’s customers may result in higher levels of delinquencies and losses.

Nine months ended September 30
Year ended
December 31,
(in thousands) 2017 2016 2016
Allowance for loan losses, January 1 $ 55,533
$ 50,038
$ 50,038
Provision for loan losses 7,231
15,266
16,763
Less: net charge-offs 9,717
6,567
11,268
Allowance for loan losses, end of period $ 53,047
$ 58,737
$ 55,533
Ratio of net charge-offs during the period to average loans outstanding (annualized) 0.27 % 0.19 % 0.24 %

We maintain a reserve for credit losses that consists of two components, the allowance for loan losses and a reserve for unfunded loan commitments (unfunded reserve). The level of the reserve for unfunded loan commitments is adjusted by recording an expense or recovery in other noninterest expense. As of September 30, 2017 and December 31, 2016, the reserve for unfunded loan commitments was $1.7 million.

~~Legislation and regulation.~~ ASB is subject to extensive regulation, principally by the OCC and the FDIC. Depending on ASB’s level of regulatory capital and other considerations, these regulations could restrict the ability of ASB to compete with other institutions and to pay dividends to its shareholder. See the discussion below under “Liquidity and capital resources.”

~~Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)~~. Regulation of the financial services industry, including regulation of HEI, ASB Hawaii and ASB, has changed and will continue to change as a result of the enactment of the Dodd-Frank Act, which became law in July 2010. Importantly for HEI, ASB Hawaii and ASB, under the Dodd-Frank Act all of the functions of the Office of Thrift Supervision transferred on July 21, 2011 to the OCC, the FDIC, the FRB and the Consumer Financial Protection Bureau (Bureau). Supervision and regulation of HEI and ASB Hawaii, as thrift holding companies, moved to the FRB, and supervision and regulation of ASB, as a federally chartered savings bank, moved to the OCC. While the laws and regulations applicable to HEI and ASB did not generally change, the applicable laws and regulations are being interpreted, and new and amended regulations may be adopted, by the FRB, the OCC and the Bureau. In addition, HEI will continue to be required to serve as a source of strength to ASB in the event of its financial distress. The Dodd-Frank Act also imposed new restrictions on the ability of a savings bank to pay dividends should it fail to remain a qualified thrift lender.

More stringent affiliate transaction rules now apply to ASB in the securities lending, repurchase agreement and derivatives areas. Standards were raised with respect to the ability of ASB to merge with or acquire another institution. In reviewing a potential merger or acquisition, the approving federal agency will need to consider the extent to which the proposed transaction will result in “greater or more concentrated risks to the stability of the U.S. banking or financial system.”

The Dodd-Frank Act established the Bureau. It has authority to prohibit practices it finds to be unfair, deceptive or abusive, and it may also issue rules requiring specified disclosures and the use of new model forms. On January 10, 2013, the Bureau issued the Ability-to-Repay rule which closed for comment on February 25, 2013. For mortgages, among other things, (i) potential borrowers have to supply financial information, and lenders must verify it, (ii) to qualify for a particular loan, a consumer has to have sufficient assets or income to pay back the loan and (iii) lenders have to determine the consumer’s ability to repay both the principal and the interest over the long term - not just during an introductory period when the rate may be lower.

ASB may also be subject to new state regulation because of a provision in the Dodd-Frank Act that acknowledges that a federal savings bank may be subject to state regulation and allows federal law to preempt a state consumer financial law on a “case by case” basis only when (1) the state law would have a discriminatory effect on the bank compared to that on a bank chartered in that state, (2) the state law prevents or significantly interferes with a bank’s exercise of its power or (3) the state law is preempted by another federal law.

The Dodd-Frank Act also adopts a number of provisions that impact the mortgage industry, including the imposition of new specific duties on the part of mortgage originators (such as ASB) to act in the best interests of consumers and to take steps to ensure that consumers will have the capability to repay loans they may obtain, as well as provisions imposing new disclosure requirements and requiring appraisal reforms.

Also, the Dodd-Frank Act directs the Bureau to publish rules and forms that combine certain disclosures that consumers receive in connection with applying for and closing on a mortgage loan under the Truth in Lending Act and the Real Estate Settlement Procedures Act. Consistent with this requirement, the Bureau amended Regulation X (Real Estate Settlement Procedures Act) and Regulation Z (Truth in Lending) to establish new disclosure requirements and forms in Regulation Z for most closed-end consumer credit transactions secured by real property. In addition to combining the existing disclosure requirements and implementing new requirements, the final rule provides extensive guidance regarding compliance with those requirements. This rule was effective October 3, 2015.

The “Durbin Amendment” to the Dodd-Frank Act required the FRB to issue rules to ensure that debit card interchange fees are “reasonable and proportional” to the processing costs incurred. In June 2011, the FRB issued a final rule establishing standards for debit card interchange fees and prohibiting network exclusivity arrangements and routing restrictions. Under the final rule, effective October 1, 2011, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction is 21-24 cents, depending on certain components. Financial institutions and their affiliates that have less than $10 billion in assets are exempt from this Amendment; however, on July 1, 2013, ASB became non-exempt as the consolidated assets of HEI exceeded $10 billion. The debit card interchange fees received by ASB have been lower as a result of the application of this Amendment.

~~Final Capital Rules~~. On July 2, 2013, the FRB finalized its rule implementing the Basel III regulatory capital framework. The final rule would apply to banking organizations of all sizes and types regulated by the FRB and the OCC, except bank holding companies subject to the FRB’s Small Bank Holding Company Policy Statement and Savings & Loan Holding Companies (SLHCs) substantially engaged in insurance underwriting or commercial activities. HEI currently meets the requirements of the exemption as a top-tier grandfathered unitary SLHC that derived, as of June 30 of the previous calendar year, either 50% or more of its total consolidated assets or 50% or more of its total revenues on an enterprise-wide basis (calculated under GAAP) from activities that are not financial in nature pursuant to Section 4(k) of the Bank Holding Company Act. The FRB is temporarily excluding these SLHCs from the final rule while it considers a proposal relating to capital and other requirements for SLHC intermediate holding companies (such as ASB Hawaii). The FRB indicated that it would release a proposal on intermediate holding companies that would specify the criteria for establishing and transferring activities to intermediate holding

companies and propose to apply the FRB’s capital requirements to such intermediate holding companies. The FRB has not yet issued such a proposal, or a proposal on how to apply the Basel III capital rules to SLHCs that are substantially engaged in commercial or insurance underwriting activities, such as grandfathered unitary SLHCs like HEI.

Pursuant to the final rule and consistent with the proposals, all banking organizations, including covered holding companies, would initially be subject to the following minimum regulatory capital requirements: a common equity Tier 1 capital ratio of 4.5%, a Tier 1 capital ratio of 6%, a total capital ratio of 8% of risk-weighted assets and a tier 1 leverage ratio of 4%, and these requirements would increase in subsequent years. In order to avoid restrictions on capital distributions and discretionary bonus payments to executive officers, the final rule requires a banking organization to hold a buffer of common equity tier 1 capital above its minimum capital requirements in an amount greater than 2.5% of total risk-weighted assets (capital conservation buffer). In addition, a countercyclical capital buffer would expand the capital conservation buffer by up to 2.5% of a banking organization’s total risk-weighted assets for advanced approaches banking organizations. The final rule would establish qualification criteria for common equity, additional tier 1 and tier 2 capital instruments that help to ensure their ability to absorb losses. All banking organizations would be required to calculate risk-weighted assets under the standardized approach, which harmonizes the banking agencies’ calculation of risk-weighted assets and address shortcomings in capital requirements identified by the agencies. The phased-in effective dates of the capital requirements under the final rule are:

~~Minimum Capital Requirements~~

Effective dates 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019
Capital conservation buffer
0.625 % 1.25 % 1.875 % 2.50 %
Common equity Tier-1 ratio + conservation buffer 4.50 % 5.125 % 5.75 % 6.375 % 7.00 %
Tier-1 capital ratio + conservation buffer 6.00 % 6.625 % 7.25 % 7.875 % 8.50 %
Total capital ratio + conservation buffer 8.00 % 8.625 % 9.25 % 9.875 % 10.50 %
Tier-1 leverage ratio 4.00 % 4.00 % 4.00 % 4.00 % 4.00 %
Countercyclical capital buffer — not applicable to ASB
0.625 % 1.25 % 1.875 % 2.50 %

~~The final rule was effective January 1, 2015 for ASB. As of~~ ~~September 30, 2017, ASB met the new capital requirements with a Common equity Tier-1 ratio of 12.7%, a Tier-1 capital ratio of 12.7%, a Total capital ratio of 13.9% and a Tier-1 leverage ratio of 8.7%.~~

Subject to the timing and final outcome of the FRB’s SLHC intermediate holding company proposal, HEI anticipates that the capital requirements in the final rule will eventually be effective for HEI or ASB Hawaii as well. If the fully phased-in capital requirements were currently applicable to HEI, management believes HEI would satisfy the capital requirements, including the fully phased-in capital conservation buffer. Management cannot predict what final rule the FRB may adopt concerning intermediate holding companies or their impact on ASB Hawaii, if any.

~~Military Lending Act~~. The Department of Defense (DOD) amended its regulation that implements the Military Lending Act (MLA), which became effective on October 3, 2016. The DOD amended its regulation primarily for the purpose of extending the protections of the MLA to a broader range of closed-end and open-end credit products. It initially applied to three narrowly-defined “consumer credit” products: closed-end payday loans; closed-end auto title loans; and closed-end tax refund anticipation loans. The DOD revised the scope of the definition of ‘‘consumer credit’’ to be generally consistent with the credit products that have been subject to the requirements of the Regulation Z, namely: credit offered or extended to a covered borrower primarily for personal, family or household purposes and that is (i) subject to a finance charge or (ii) payable by a written agreement in more than four installments.

Additionally, the DOD elected to exercise its discretion by generally requiring any fees for credit insurance products or for credit-related ancillary products to be included in the Military Annual Percentage Rate. The DOD also modified the disclosures that a creditor must provide to a covered borrower and implemented the enforcement provisions of the MLA. ASB has modified certain products, practices and associated training to conform to these changes.

~~Overtime Rules~~. The Secretary of Labor updated the overtime regulations of the Fair Labor Standards Act to simplify and modernize them. The Department of Labor issued final rules that will raise the salary threshold indicating eligibility from $455/week to $913/week ($47,476 per year), and update automatically the salary threshold every three years, based on wage growth over time, increasing predictability. The final rule was to become effective on December 1, 2016. In late-November 2016 however, the U.S. District Court in the Eastern District of Texas granted a nationwide preliminary injunction that blocked the final rule, saying the Department of Labor's rule exceeds the authority the agency was delegated by Congress. Despite this block, ASB modified its salaries in the fourth quarter of 2016 such that it is in voluntary compliance with the final rule. On July 26, 2017, the Department of Labor published a Request for Information Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees. On August 31, 2017, U.S. District Court in the Eastern District of Texas

granted summary judgment against the Department of Labor in consolidated cases challenging the final rule published on May 23, 2016. The court held that the final rule’s salary level exceeded the Department of Labor’s authority and concluded that the final rule was invalid.

~~Arbitration Agreements~~. Pursuant to section 1028(b) of the Dodd-Frank Act, on July 19, 2017, the Bureau issued a final rule to regulate arbitration agreements in contracts for specified consumer financial product and services. First, the final rule prohibits covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action concerning the covered consumer financial product or service. Second, the final rule requires covered providers that are involved in arbitration pursuant to a pre-dispute arbitration agreement to submit specified arbitral records to the Bureau and also to submit specified court records. The compliance date for this regulation is March 19, 2018. Under the Congressional Review Act, the U.S. House of Representatives voted to overturn the final rule on July 25, 2017, and the U.S. Senate did the same on October 24, 2017. On November 1, 2017, the President signed the repeal of the final rule. ~~ASB is currently evaluating the impact of these events on its affected agreements.~~

FINANCIAL CONDITION

Liquidity and capital resources.

(dollars in millions) September 30, 2017 December 31, 2016 % change
Total assets $ 6,619
$ 6,421
3
Available-for-sale investment securities 1,320
1,105
19
Loans receivable held for investment, net 4,623
4,683
(1 )
Deposit liabilities 5,752
5,549
4
Other bank borrowings 154
193
(20 )

In August 2023, the credit ratings of HEI and Hawaiian Electric were subject to multiple downgrades, including to ratings below investment grade, by Fitch, Moody’s and S&P. These rating actions were primarily due to the uncertainty facing the Company due to the damages caused by the Maui windstorm and wildfires. As of September 30, 2023, the Fitch, Moody’s and S&P ratings of HEI were as follows:

Fitch

Moody’s

S&P

From

Long-term issuer default, long-term and issuer credit, respectively

BBB+

WR*

B-

BBB-

Short-term issuer default, commercial paper and commercial paper, respectively

P-2

A-3

Outlook

Watch Negative

Stable

Review for downgrade

Stable

Watch Negative

Stable

* Not rated. Moody’s long-term debt rating was withdrawn because HEI does not currently have any outstanding, publicly traded debt. Moody’s continues to rate Hawaiian Electric’s long-term debt. See “Electric utility-Liquidity and capital resources” below.

Note: The above ratings reflect only the view, at the time the ratings are issued or affirmed, of the applicable rating agency, from whom an explanation of the significance of such ratings may be obtained. Such ratings are not recommendations to buy, sell or hold any securities; such ratings may be subject to revision or withdrawal at any time by the rating agencies; and each rating should be evaluated independently of any other rating.

See “Credit and Capital Market Risk” in Item 1A. Risk Factors in HEI’s and Hawaiian Electric’s 2022 Form 10-K and in Item 1A. Risk Factors below. The downgrades of HEI’s and Hawaiian Electric’s credit ratings impacted the Company’s ability to access capital markets and other sources of debt and equity financing in a timely manner and on acceptable terms.

The Company’s objective continues to be to operate a strong, financially healthy enterprise to empower a thriving future for Hawaii. While the fundamentals of its businesses remain strong, the Company took prudent and measured actions to reinforce its commitment to serving the community for the long term. In August 2023, HEI and Hawaiian Electric fully drew down $175 million and $200 million, respectively, on their existing revolving credit facilities. The cash proceeds were primarily invested in highly liquid short-term investments and used for general corporate purposes. The Company has taken additional prudent measures to strengthen its financial position while continuing to provide reliable service to its customers and reinforcing our commitment to serving the community for the long term. Some of these proactive measures include suspending the quarterly cash dividend on HEI’s common stock after payment of the second quarter dividend in September 2023 and reducing or eliminating discretionary costs. The Company is working with financial advisors to help ensure adequate liquidity and believes it has adequate cash to meet its financial obligations and sustain operations.

At the end of the quarter, HEI and Hawaiian Electric had no commercial paper outstanding. As of September 30, 2023, ASB’s unused FHLB borrowing capacity was approximately $1.9 billion and ASB had unpledged investment securities of $0.5 billion that were available to be used as collateral for additional borrowing capacity.

As of September 30, 2023 and December 31, 2022, the total amount of available borrowing capacity (net of commercial paper outstanding) under the Company’s committed lines of credit was nil and approximately $237 million, respectively.

On March 16, 2023, HEI executed a private placement under which HEI authorized the issue and sale of $100 million of unsecured senior notes that were fully drawn on May 30, 2023. The proceeds of the notes, HEI Series 2023A for $39 million and HEI Series 2023B for $61 million, were used to repay the $100 million term loan facility on May 31, 2023. The HEI Series 2023A and 2023B bear interest at 6.04% and 6.10%, respectively and are due June 15, 2028 and June 15, 2033, respectively. See Note 6 of the Condensed Consolidated Financial Statements for additional information.

The Company believes that its cash and cash equivalents and expected operating cash flow from operations will be sufficient to meet the Company’s cash requirements in the near term based on its current business plans. However, the Company expects that its liquidity will continue to be impacted at HEI and the Utilities due to the impacts of the Maui windstorm and wildfires, including the downgrade of its credit ratings to below investment grade, which could inhibit access to the capital markets and other sources of debt and equity financing in a timely manner and on acceptable terms while the resolution of the Maui windstorm and wildfires and the ongoing related lawsuits are pending. Additionally, higher working capital requirements resulting from lingering COVID-19 impacts to the local economy and elevated fuel prices, could also increase liquidity needs. For the Utilities, while fuel prices have moderated from their highs in 2022, they remain elevated and have increased the cost of carrying fuel inventory and higher customer accounts receivable balances as fuel is consumed and billed to customers. While the accounts receivable balance has decreased since December 2022, it remains elevated coming out of the pandemic and has led to higher bad debt expense and higher write-offs in 2022 and year-to-date September 2023, following the end of the moratorium on disconnections. The higher bad debt expense is expected to continue until the Utilities return to pre-pandemic collection practices, along with a decrease in volume, for delinquent accounts. The Maui windstorm and

wildfires have not and are not anticipated to materially impact accounts receivable and higher bad debt expense. As of September 30, 2023, approximately $32.1 million of the Utilities’ accounts receivables were over 30 days past due. Of the over 30 days past due amounts, approximately 40% were on payment plans. In addition to the cash flow impact from delayed collection of accounts receivable, lower kWh sales relative to the level of kWh sales approved in the last rate case generally result in delayed timing of cash flows, resulting in higher working capital requirements (see “Recent Developments” in the Electric utility section below). At this time, the delay in customer cash collections has not significantly affected the Company’s liquidity. The Company is prepared to address, if needed, the potential financing requirement related to the delayed timing of customer collections.

At ASB, liquidity remains at satisfactory levels. ASB’s cash and cash equivalents was $264 million as of September 30, 2023, compared to $156 million as of December 31, 2022. ASB remains well above the “well capitalized” level under the FDIC Improvement Act prompt correction action capital category, and while the Hawaii economic outlook remains stable, there are emerging risks from potential continued turmoil in the banking industry, inflation, higher interest rates and the tightening of monetary policy that increase the risk of a recession, which could create increased uncertainty regarding the impact on loan performance and the allowance for credit losses (see “Recent Developments” in the Bank section below).

If further liquidity is deemed necessary, the Utilities could also reduce the pace of capital spending related to non-essential projects, manage O&M expenses, borrow on a secured basis, and explore asset sales.

HEI Consolidated material cash requirements.Material cash requirements of HEI Consolidated include: Utility capital expenditures (including capital expenditures related to wildfires and wildfire mitigations), labor and benefit costs, O&M expenses, including One ‘Ohana Initiative contribution (see further information in Note 2 of the Condensed Consolidated Financial Statements), legal and consulting costs related to the Maui windstorm and wildfires, fuel and purchase power costs, and debt and interest payments; investments in loans and investment securities at the Bank; labor and benefits costs, shareholder dividends and debt and interest payments at HEI, legal and consulting costs related to the Maui windstorm and wildfires and HEI equity contributions to support Pacific Current’s sustainable infrastructure investments.

Although the Company’s credit rating downgrades related to the Maui windstorm and wildfires will continue to adversely impact its ability to access capital markets and other sources of debt and equity financing in a timely manner and on acceptable terms, the Company currently believes that its ability to generate cash, both internally from electric utility and banking operations and the existing cash fully drawn on its revolving credit facilities is adequate to maintain sufficient liquidity to fund its contractual obligations and commercial commitments, its forecasted capital expenditures and investments, its expected retirement benefit plan contributions and other short-term and long-term material cash requirements. However, the economic impact of higher fuel prices, inflation, higher interest rates, tightening of monetary policy, the lingering COVID-19 pandemic, geopolitical situations, any material reduction or extended delay in dividends or other distributions from one or more operating subsidiaries to HEI and the potential damages and losses related to the Maui windstorm and wildfires and related lawsuits (see further information in Note 2 of the Condensed Consolidated Financial Statements), create significant uncertainty, and the Company cannot predict the extent or duration of these conditions, the future effects that these conditions will have on the Company’s cost of capital and its ability to access additional capital, or the future impacts on the Company’s financial position, results of operations, and cash flows.

The consolidated capital structure of HEI (excluding deposit liabilities and other bank borrowings) was as follows:


(dollars in millions)	September 30, 2023				December 31, 2022
Short-term borrowings—other than bank, net of discount	$	—	—	%	$	173	3	%
Long-term debt, net—other than bank	2,945		56		2,385		50
Preferred stock of subsidiaries	34		1		34		1
Common stock equity	2,224		43		2,202		46
	$	5,203	100	%	$	4,794	100	%

HEI’s commercial paper borrowings and line of credit facility were as follows:


	Average balance		Balance
(in millions)	Nine months ended September 30, 2023		September 30, 2023		December 31, 2022
Commercial paper	$	32	$	—	$	50
Line of credit draws on revolving credit facility	25		175		—

Note:This table does not include Hawaiian Electric’s separate commercial paper issuances and line of credit facilities and draws, which are disclosed below under “Electric utility—Financial Condition—Liquidity and capital resources.” The maximum amount of HEI’s short-term commercial paper borrowings during the first nine months of 2023 was $99 million. As of September 30, 2023, available committed capacity under HEI’s line of credit facility was nil.

There were no new issuances of common stock through the HEIRSP or the ASB 401(k) Plan in the nine months ended September 30, 2023 and 2022. HEI satisfied the share purchase requirements of the Dividend Reinvestment Program (DRIP) through new issuances of approximately 0.5 million shares of common stock, amounting to $5.8 million, primarily for participants receiving the September 2023 dividend payment.

For the first nine months of 2023, net cash provided by operating activities of HEI consolidated was $475 million, primarily due to cash provided by the Utilities of $406 million - lower cash paid due to lower fuel oil prices and higher Utility customer cash receipts. Net cash used by investing activities for the same period was $370 million, primarily due to capital expenditures, ASB’s net increase in loans receivable and purchases of loans held for investment, partly offset by ASB’s receipt of investment security repayments and maturities, proceeds from the sale of commercial loans and a net decrease in FHLB stock. Net cash provided by financing activities during this period was $372 million as a result of several factors, including issuance of long-term debt and net increase in ASB’s other bank borrowings, partly offset by net decreases in short-term borrowings and ASB’s deposit liabilities, repayment of long-term debt and payment of common stock dividends. During the first nine months of 2023, Hawaiian Electric and ASB (through ASB Hawaii) paid cash dividends to HEI of $97 million and $39 million, respectively.

Dividends. The payout ratios for the first nine months of 2023 and full year 2022 were 79% and 64%, respectively. On February 10, 2023, the HEI Board of Directors approved a 1 cent increase in the quarterly dividend from $0.35 per share to $0.36 per share, starting with the dividend in the first quarter of 2023. The HEI Board of Directors evaluates the dividend quarterly and considers many factors in the evaluation including, but not limited to, the Company’s results of operations, the long-term prospects for the Company, current and expected future economic conditions, and capital investment alternatives. In August 2023, due to the potential impact from the Maui windstorm and wildfires, the HEI Board of Directors voted to suspend the quarterly cash dividend, starting after the second quarter dividend. This action is intended to allow the Company to help ensure adequate liquidity and allocate cash to rebuilding and restoring power and help ensure a strong future for the Utility and Bank. The ASB Board of Directors determined to suspend its quarterly cash dividends to HEI, starting after the second quarter dividend, to help ensure maximum possible Bank liquidity and capital. A material reduction or delay in dividends or other

distributions from one or more of the operating subsidiaries to HEI for an extended period of time could have a material adverse

effect on the Company’s financial condition and results of operation.

MATERIAL ESTIMATES AND CRITICAL ACCOUNTING POLICIES

In accordance with SEC Release No. 33-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies,” management has identified the accounting policies it believes to be the most critical to the Company’s financial statements—that is, management believes that these policies are both the most important to the portrayal of the Company’s results of operations and financial condition, and currently require management’s most difficult, subjective or complex judgments.

For information about these material estimates and critical accounting policies, in addition to the critical policy discussed below, see pages 44 to 45, 64, and 77 to 78 of the MD&A included in Part II, Item 7 of HEI’s and Hawaiian Electric’s 2022 Form 10-K.

Following are discussions of the results of operations, liquidity and capital resources of the electric utility and bank segments.

Electric utility

Recent developments. See also “Recent developments,” which includes disclosures relating to Maui windstorm and wildfires in HEI’s MD&A.

In the third quarter of 2023, operation and maintenance expenses were higher by approximately $21 million, or 18%, as compared to the same period in 2022. The increase was mainly due to costs incurred associated with the Maui windstorm and wildfires. See “Result of Operations” for details of the Utilities’ Maui windstorm and wildfires related expenses for the three and nine months ended September 30, 2023. See also Note 2 of the Condensed Consolidated Financial Statements and “Regulatory assets and liabilities” in Note 4 of the Condensed Consolidated Financial Statements for more information related to the Maui windstorm and wildfires and the Utilities’ request to defer certain costs associated with the event.

In the third quarter of 2023, kWh sales volume decreased 2.5% compared to the same period in 2022. Although electricity prices have decreased since the end of 2022, elevated prices over the past year have continued to impact electricity consumption. Another impact leading to a decrease of electricity sales is due to the Maui windstorm and wildfires. Maui had a decrease of 8.1% kWh sales volume in the third quarter of 2023 compared to the same period in 2022. Additionally, the continued adoption of energy efficiency measures and distributed energy resources contributed to the reduction of kWh sales.

Fuel costs have risen rapidly beginning in 2022, peaked in the summer of 2022, and have decreased through July 2023 and since then, gradually increased through September, although remaining below 2022’s peak. Although the Utilities are able to pass through fuel costs to customers and have limited fuel cost exposure through a 2% fuel-cost risk sharing mechanism (approximately $3.7 million maximum exposure annually), higher customer bills could reduce customers’ ability to pay timely or increase the risk of non-payment. In addition, the higher customer bills may lead the PUC to consider other actions to limit or delay any proposed increase in rates in order to mitigate the overall bill impact of rising fuel prices.

In September 2023, the consumer price index moderated to 3.7% from a peak of 9.1% in June 2022. In Hawaii, the September 2023 Urban Hawaii (Honolulu) Consumer Price Index (CPI) also declined from its peak, with an increase of 2.2% over the last 12 months. Under the PBR framework, inflation risk for the Utilities is partially mitigated by an Annual Rate Adjustment (ARA), which is based on a formula that includes a compounded and non-compounded portion.

•The compounded portion of the ARA adjustment includes an adjustment for the annual change in inflation based on the estimated change in Gross Domestic Product Price Index (GDPPI) for the upcoming year, less a predetermined annual productivity factor (currently set at zero), less a 0.22% customer dividend, applied to a basis equal to test year target revenues plus the RAM Revenue adjustments in effect prior to the implementation of PBR, plus the prior adjustment year’s compounded portion of the ARA adjustment. The inflation factor percentage is the consensus projection of annual percentage change in GDPPI for the following calendar year published by Blue Chip Economic Indicators each October. For the 2023 calendar year, the forecasted 2023 GDPPI was 3.68% (net of the 0.22% customer dividend), measured in October 2022, and became effective in rates on January 1, 2023. For the 2024 calendar year, the forecasted 2024 GDPPI was 2.18% (net of the 0.22% customer dividend), measured in October 2023, and is scheduled to be effective in rates on January 1, 2024, pending PUC approval.

•The non-compounded portion of the ARA adjustment includes a subtractive component, representing the management audit savings commitment, or refund to customers, which was approved by the PUC for the years 2021 through 2025.

Customer accounts receivable decreased in 2023 by $47 million, or 16% with the number of accounts past due decreasing by 17% since December 31, 2022. The decrease in accounts receivables was primarily driven by payment on a large delinquent commercial customer account, lower customer bills resulting from lower fuel prices, receipt of government and other program assistance, and higher cash receipts associated with increased disconnection efforts. At this time, while accounts receivable balances continue to remain elevated compared to pre-pandemic levels, partly due to higher fuel prices, the decrease in accounts receivable balances since the beginning of the year has reduced working capital requirements and benefited the Utilities’ liquidity. See “Financial Condition—Liquidity and capital resources” for additional information.

In the second quarter of 2020, the PUC approved the deferral of certain COVID-19 related costs, such as higher bad debt expense, higher financing costs, non-collection of late payment fees, increased personal protective equipment costs, and sequestration costs for mission-critical employees. The Utilities deferred COVID-19 related costs through a PUC approved period that ended on December 31, 2021. In the second quarter of 2022, the Utilities filed an application to seek recovery of the COVID-19 deferred costs, not to exceed the amount of $27.8 million. On July 31, 2023, the Utilities submitted their most recent Supplemental Report to the PUC, reflecting the updated requested amount, as of June 30, 2023, of $9.1 million, which was a decrease from the original requested amount due to cash collections on past due accounts.As of September 30, 2023, due to ongoing collection of past due amounts, the Utilities have recorded $8.8 million in regulatory assets for deferral of COVID-19 related costs. (See discussion under “Regulatory assets and liabilities - Regulatory assets for COVID-19 related costs” in Note 4 of the Condensed Consolidated Financial Statements).

Regulatory Developments. On November 15, 2021, President Biden signed into law the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA), which includes approximately $550 billion of new federal spending to be allocated over the next five years through various programs. The funding will help the State of Hawaii achieve its sustainability goals, including renewable energy, resilience, and decarbonization, while also prioritizing economic development, equity and affordability. The Utilities are pursuing potential grant funding of projects under various programs as primary applicant as well as in partnership with other organizations. On August 29, 2023, the U.S. Department of Energy notified Hawaiian Electric that its application for $95 million in federal funds under IIJA has been recommended for award, subject to negotiation of the terms of financial assistance. In addition, the Utilities have a second full application that is pending federal government agency decision. If both applications are awarded, it would allow for reduction up to $101 million in the Utilities’ recovery under the Exceptional Project Recovery Mechanism (EPRM) and cost to customers. See “Regulatory proceedings” in Note 4 of the Condensed Consolidated Financial Statements for additional discussions.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (IRA) that provides for $258 billion in energy-related provisions over a 10-year period. The provisions of the IRA are intended to, among other things, lower gasoline and electricity prices, incentivize clean energy investment and promote reductions in carbon emissions. The Utilities are exploring clean energy tax incentives included in the IRA that may further reduce the Utilities’ recovery under the EPRM and cost to customers.

The Utilities cannot predict the ultimate timing and success of securing funding from any federal government programs.

For a discussion regarding the impact of the Maui windstorm and wildfires on the Utilities’ liquidity and capital resources, see discussion under “Financial Condition–Liquidity and capital resources.”

RESULTS OF OPERATIONS


Three months ended September 30				Increase
2023		2022		(decrease)				(dollars in millions, except per barrel amounts)
$	795	$	956	$	(161)			Revenues. Net decrease largely due to:
						$	(127)	lower fuel oil prices, partially offset by higher kWh generated1
						(52)		lower kWh purchased, lower purchase power energy prices, and lower PPAC revenues2
						1		higher MPIR revenue
						2		higher investment interest income
						4		higher fuel-cost risk sharing adjustment (reward)
						10		higher revenue from ARA adjustments
267		384		(117)				Fuel oil expense1. Net decrease largely due to lower fuel oil prices, partially offset by higher kWh generated
178		225		(47)				Purchased power expense1, 2. Net decrease largely due to lower kWh purchased, lower AES charges due to its closure on September 1, 2022, and lower purchased power energy prices; offset in part by the addition of Stage 1 solar-plus-storage projects
143		121		22				Operation and maintenance expenses. Net increase largely due to:
						13		incremental Maui windstorm and wildfires costs
						4		higher transmission and distribution operation and maintenance expense
						1		higher outside services for Customer Service Support Improvement
						1		more station maintenance work performed
						1		more generating facility overhauls performed
						1		increased employee benefits costs
						1		higher facilities expenses
136		147		(11)				Other expenses. Decrease due to lower revenue taxes, partially offset by higher depreciation expense due to increasing investments to integrate more renewable energy and improve customer reliability and system efficiency and higher payroll taxes due to higher unemployment tax rate
71		79		(8)				Operating income. Decrease largely due to higher operation and maintenance expenses, higher depreciation expenses, offset in part by higher ARA, higher fuel-cost risk sharing adjustment (reward), higher investment interest income, and higher MPIR revenue. See below for the Utilities’ incremental expenses related to the Maui windstorm and wildfires.
55		64		(9)				Income before income taxes. Decrease largely due to lower operating income and higher interest expense due to increased borrowings, partially offset by higher AFUDC related to increased capital expenditures
43		50		(7)				Net income for common stock. Decrease due to lower income before income taxes. See below for the Utilities’ incremental expenses related to the Maui windstorm and wildfires and effective tax rate explanation.
2,157		2,212		(55)				Kilowatthour sales (millions)3
$	111.51	$	166.79	$	(55.28)			Average fuel oil cost per barrel


Nine months ended September 30				Increase
2023		2022		(decrease)				(dollars in millions, except per barrel amounts)
$	2,420	$	2,484	$	(64)			Revenues. Net decrease largely due to:
						$	(118)	lower kWh purchased and lower PPAC revenues, partially offset by higher purchased power energy prices2
						1		one-time true-up pole attachment fee revenue
						4		higher MPIR revenue
						4		higher investment interest income
						7		higher fuel-cost risk sharing adjustment (reward in 2023)
						8		higher kWh generated, offset by lower fuel oil prices1
						30		higher revenue from ARA adjustments
882		875		7				Fuel oil expense2. Net increase largely due to higher kWh generated offset by lower fuel oil prices
499		607		(108)				Purchased power expense1, 2. Net decrease largely due to lower kWh purchased and lower AES charges due to its closure on September 1, 2022, partially offset by higher purchased power energy prices
407		371		36				Operation and maintenance expenses. Net increase largely due to:
						13		incremental Maui windstorm and wildfires costs
						11		higher transmission and distribution operation and maintenance expense
						8		increased labor and employee benefits costs
						3		higher outside services for Customer Service Support Improvement and Integrated Grid Planning
						2		higher station maintenance work performed
						2		higher facilities expenses
						(2)		lower scope of generating facility overhauls performed
411		407		4				Other expenses. Increase due to higher depreciation expense due to increasing investments to integrate more renewable energy and improve customer reliability and system efficiency and higher payroll taxes due to higher unemployment tax rate, offset by lower revenue taxes
221		224		(3)				Operating income. Decrease largely due to higher operation and maintenance expenses, higher depreciation expenses, offset in part by higher ARA, higher fuel-cost risk adjustment, higher investment interest income, and higher MPIR revenue. See below for the Utilities’ incremental expenses related to the Maui windstorm and wildfires.
175		180		(5)				Income before income taxes. Decrease largely due to higher interest expense due to increased borrowings and lower operating income, partially offset by higher AFUDC related to increased capital expenditures
136		140		(4)				Net income for common stock. Decrease due to lower income before income taxes. See below for the Utilities’ incremental expenses related to the Maui windstorm and wildfires and effective tax rate explanation.
6,087		6,200		(113)				Kilowatthour sales (millions)3
$	124.70	$	137.23	$	(12.53)			Average fuel oil cost per barrel
471,372		471,026		346				Customer accounts (end of period)

1The rate schedules of the electric utilities currently contain energy cost recovery clauses (ECRCs) through which changes in fuel oil prices and certain components of purchased energy costs are passed on to customers.

2The rate schedules of the electric utilities currently contain PPACs through which changes in purchased power expenses (except purchased energy costs) are passed on to customers.

3 kWh sales were lower compared to the same quarter in prior year. The decrease in sales can be attributed to elevated prices over the past year which continued to impact electricity consumption and Maui windstorm and wildfires which resulted in widespread damage to the Lahaina community. In addition, the continued adoption of energy efficiency measures and distributed energy resources contributed to the reduction in kWh sales.

The Utilities’ effective tax rate for the third quarters of 2023 and 2022 was 21%. The Utilities’ effective tax rates for the first nine months of 2023 and 2022 were 22% and 21%, respectively. The effective rate was higher for the first nine months of

2023 primarily due to lower amortization in 2023 of the Utilities’ regulatory liability related to certain excess deferred income taxes resulting from the Tax Act’s decrease in the federal income tax rate.

Hawaiian Electric’s consolidated ROACE was 7.9% and 8.1% for the twelve months ended September 30, 2023 and September 30, 2022, respectively.

For the three and nine months ended September 30, 2023, the Utilities’ incremental expenses related to the Maui windstorm and wildfires, which excludes the $75 million contribution and insurance receivable as discussed in Subsequent event - One ‘Ohana Initiative in Note 2 of the Condensed Consolidated Financial Statements, were as follows:


(in thousands)	Three and nine months ended September 30, 2023

Hawaiian Electric Maui windstorm and wildfires related expenses:

Legal expense	$	6,251
Outside services expense	4,706
Other expenses	2,482
Interest expense	503
Total Hawaiian Electric Maui windstorm and wildfires related expenses	$	13,942

Note: Utility Maui windstorm and wildfires related expenses - legal, outside services and other are included in “Other operation and maintenance” and interest expense is included in “Interest expense and other charges, net” on the Hawaiian Electric and subsidiaries Condensed Consolidated Statements of Income.

Incremental expenses represent expenses that would not have been incurred if the Maui windstorm and wildfires did not occur, such as legal fees related to the incident.

In addition to higher O&M expenses related to the Maui windstorm and wildfires, the Utilities incurred capital costs totaling approximately $8.0 million, related to the restoration effort.

Certain Maui windstorm and wildfires related expenses, such as legal fees related to the litigation, may be covered under the Company’s liability insurance. Any proceeds received from insurance recoveries will be recorded as a reduction of expense when probable and reasonably estimable.

The rebuilding of Lahaina will be a community-led effort and will occur over an extended period of time. The cost of rebuilding the electric utility infrastructure is not yet known, but could be significant because the infrastructure that may be required is expected to be different than what previously existed. For example, to mitigate wildfire risk, grid hardening strategies, such as undergrounding lines in high-risk locations, are expected to be employed.

The Utilities expect to continue to incur significant expenditures in connection with the Maui windstorm and wildfires; however, the Utilities expect to seek mitigation of the financial impact through insurance recoveries as well as requesting for deferral treatment, and eventually recovery, for incremental non-labor expense.

The net book value (cost less accumulated depreciation) of utility property, plant and equipment (PPE) as of September 30, 2023 amounted to $5.2 billion, of which approximately 24% related to generation PPE, 67% related to transmission and distribution PPE, and 9% related to other PPE. Approximately 7% of the total net book value relates to generation PPE that has been deactivated or that the Utilities plan to deactivate or decommission.

See “Economic conditions” in the “HEI Consolidated” section above.

Executive overview and strategy. The Utilities provide electricity on all the principal islands in the state, other than Kauai, to approximately 95% of the state’s population, and operate five separate grids. The Utilities’ mission is to provide innovative energy leadership for Hawaii, to meet the needs and expectations of customers and communities, and to empower them with affordable, reliable and clean energy. The goal is to create a safe, modern, resilient, flexible, and dynamic electric grid that protects Hawaii from impacts of climate change and enables an optimal mix of distributed energy resources, such as private rooftop solar, demand response, and grid-scale resources to enable the creation of smart, sustainable, resilient communities and achieve its decarbonization goals that are aligned with the statutory goal of 100% renewable energy by 2045.

Performance-based regulations. On December 23, 2020, the PUC issued a D&O (PBR D&O) approving a new performance-based regulation framework (PBR Framework). See “Regulatory proceedings” in Note 4 of the Condensed Consolidated Financial Statements.

Transition to a decarbonized and sustainable energy future. The Utilities are fully committed to leading and enabling

pathways to a decarbonized and sustainable energy future for Hawaii. A sustainable energy future is one that focuses on delivering electricity safely, reliably and affordably, strengthening resilience and shifting away from fossil-fueled resources. The Utilities believe that a holistic approach to climate change is needed, working on both climate mitigation efforts along with climate adaptation efforts. Climate mitigation requires achieving the Utilities’ decarbonization and renewable energy commitments, facilitating and promoting beneficial electrification, and deploying carbon removal and offsets among other levers to reduce statewide emissions.

In the fourth quarter of 2021, the Utilities outlined their Climate Action Plan to cut carbon emissions from power generation 70% by 2030, compared to a 2005 baseline. The emissions covered by this goal include stack emissions from generation owned by Hawaiian Electric and IPPs who sell electricity to the Utilities. Since that time, delays and cancellations in the commercial operation of new renewable third-party generation resources and higher costs as a result of supply chain disruptions and inflationary pressures, as well as federal policies related to solar panel imports have slowed the pace of progress toward reducing GHG emissions. Also, see the “Developments in renewable energy efforts—New renewable PPAs” section below. The downgrade of Hawaiian Electric’s credit ratings after the Maui windstorm and wildfires is anticipated to be an additional impediment to completion of new renewable energy and storage projects. As a result of these challenges, the Utilities expect the planned 70% reduction in carbon emissions to be achieved later than the original 2030 target date. However, the Utilities will continue to replace significant amounts of fossil fuel generation with renewable energy between now and 2030 and expect to meet or exceed the State of Hawaii’s RPS goals.

Hawaiian Electric has also committed to achieving net zero carbon emissions from power generation by 2045 or sooner. While the timing of the Utilities’ carbon reduction goals will be adjusted, key elements of the 2030 plan have already been completed or remain on track to be completed by 2030, including the closure of the state’s last coal-fired IPP plant that occurred in September 2022, increasing rooftop solar by more than 50% over 2021 levels, retiring six fossil fuel generating units, increasing grid-scale and customer-owned storage, expanding geothermal resources, and creating customer incentives for using clean, lower-cost energy at certain times of the day and using less fossil-fueled energy at night. The retirement of fossil-fueled generating units is consistent with state policy and supported by Hawaii State law. See “Forecast of capital expenditures—Liquidity and capital resources” for a discussion of potential capital expenditures related to decarbonization efforts.

On September 1, 2022, the last coal-fired IPP plant in the state, providing approximately 10% of Oahu’s generation, ceased operations, removing a significant source of GHG emissions from the Utilities’ generation mix. In advance of the retirement of the coal-fired IPP plant, the Utilities developed plans, including contingency plans, to ensure reliable service through the transition period. These plans include the anticipated addition of renewable energy/storage projects, reserve capacity from existing generation sources, the acceleration of maintenance work during periods with anticipated higher reserve levels, and multiple demand response/DER programs. For example, a 39 MW solar-plus-storage project from Stage 1 renewable PPAs reached commercial operations in mid-2022 and a 36 MW Stage 1 solar-plus-storage project reached commercial operations in early 2023. It is expected that a 185 MW standalone storage facility from Stage 2 renewable PPAs will reach commercial operations by the end of December 2023.

Hawaii’s renewable portfolio standard law requires electric utilities to meet an RPS of 30%, 40%, 70% and 100% by December 31, 2020, 2030, 2040 and 2045, respectively. Hawaii law has also established a target of sequestering more atmospheric carbon and greenhouse gases than emitted within the state by 2045. The Utilities’ strategies and plans are fully aligned in meeting these targets (see also Integrated Grid Planningbelow).

The Utilities have made significant progress on the path to clean energy and have been successful in achieving RPS goals. To date the Utilities have met all of the statutory RPS goals, including exceeding the latest milestone RPS target of 30% for 2020, where it achieved an RPS of 34.5%. In July 2022, Governor Ige signed Act 240 (H.B.2089), that amended the RPS calculation from renewable energy as a percentage of sales to renewable energy as a percentage of total generation. The amended RPS calculation results in a lower calculated percentage than the amount calculated under the previous methodology. For example, the 2022 RPS achieved under the revised RPS calculation was 31.8% versus 39.1% under the prior method. The change in the definition is effective from July 2022 forward and will require that the Utilities acquire more renewable energy than under the previous RPS calculation to comply with the RPS milestones; however, the Utilities expect to continue to meet the RPS milestones under the amended RPS law. (See “Developments in renewable energy efforts” below).

If the Utilities are not successful in meeting the RPS targets as mandated by law, the PUC could assess a penalty of $20 for every MWh that an electric utility is deficient. Based on the level of total generation in 2022, a 1% shortfall in meeting the 2030 RPS requirement of 40% would translate into a penalty of approximately $2.1 million. The PUC has the discretion to reduce the penalty due to events or circumstances that are outside an electric utility’s reasonable control, to the extent the event or circumstance could not be reasonably foreseen and ameliorated. In addition to penalties under the RPS law, failure to meet the mandated RPS targets would be expected to result in a higher proportion of fossil fuel-based generation than if the RPS target had been achieved, which in turn would be expected to subject the Utilities to limited commodity fossil fuel price exposure under a fuel cost risk-sharing mechanism. The fuel cost risk-sharing mechanism apportions 2% of the fuel cost risk to the

utilities (and 98% to ratepayers) and has a maximum exposure (or benefit) of $3.7 million. Conversely, the Utilities have incentives under PIMs that provide a financial reward for accelerating the achievement of renewable generation as a percentage of total generation, including customer supplied generation. The Utilities may earn a reward for the amount of system generation above the interpolated statutory RPS goal at $20/MWh in 2022, $15/MWh in 2023, and $10/MWh for the remainder of the multi-year rate period.

The Utilities are fully aligned with, and supportive of, state policy to achieve a decarbonized future and have made significant progress in reducing emissions through renewable energy and electrification. This alignment with state policy is reflected in management compensation programs and the Utilities’ long-range plans, which include aspirational targets in order to catalyze action and accelerate the transition away from fossil fuels throughout its operations at a pace more rapid than dictated by current law. The long-range plans, including aspirational targets, serve as guiding principles in the Utilities’ continued transformation, and are updated regularly to adapt to changing technology, costs, and other factors. While there is no financial penalty for failure to achieve the Utilities’ long-range aspirational objectives, the Utilities recognize that there are environmental and social costs from the continued use of fossil fuels.

The State of Hawaii’s policy is supported by the regulatory framework and includes a number of mechanisms designed to maintain the Utilities’ financial stability during the transition toward the State’s decarbonized future. Under the sales decoupling mechanism, the Utilities are allowed to recover from customers, target test year revenues, independent of the level of kWh sales, which have generally trended lower over time as privately-owned DER have been added to the grid and energy efficiency measures have been put into place. Other regulatory mechanisms under the PBR framework reduce some of the regulatory lag during the multi-year rate plan (MRP), such as the annual revenue adjustment to provide annual changes in utility revenues, including inflationary adjustments, and the exceptional project recovery mechanism, which allows the Utilities to recover and earn on certain approved eligible projects placed into service. See “Regulatory proceedings” in Note 4 of the Condensed Consolidated Financial Statements.

Integrated Grid Planning. Achieving high levels of renewable energy and a carbon free electric system will require modernizing the grid through coordinated energy system planning in partnership with local communities and stakeholders. To accomplish this, the Utilities are implementing an innovative systems approach to energy planning intended to yield the most cost-effective renewable energy and decarbonization pathways that incorporates customer and stakeholder input.

The Integrated Grid Planning (IGP) process utilizes an inclusive and transparent stakeholder engagement model to provide an avenue for interested parties to engage with the Utilities and contribute meaningful input throughout the IGP process. The IGP Stakeholder Council, Technical Advisory Panel and Working groups have been established and meet regularly to provide feedback and input on specific issues and process steps in the IGP. On May 12, 2023, the Utilities submitted their final Integrated Grid Plan: A pathway to a clean energy future for stakeholder and public comments. The Integrated Grid Plan proposes actionable steps to decarbonize the electric grid on the State of Hawaii’s timeline, with a flexible framework that can adapt to future technologies. The Integrated Grid Plan is the culmination of more than five years of partnership with stakeholders and community members across the islands. Together, they forecasted future energy needs and identified strategies to meet Hawaii’s growing energy demand with 100% renewable resources.

Demand response programs. Pursuant to PUC orders, the Utilities are developing an integrated Demand Response (DR) Portfolio Plan that will enhance system operations and reduce costs to customers. The reduction in cost for the customer will take the form of either rates or incentive-based programs that will compensate customers for their participation individually, or by way of engagements with turnkey service providers that contract with the Utilities to aggregate and deliver various grid services on behalf of participating customers and their distributed assets.

On June 9, 2021, the PUC issued an order providing guidance to the third Grid Service RFP filed on February 23, 2021. The proposed Grid Service RFP focused only on Oahu and is seeking 132 MW of grid services with focus on capacity reduction (60 MW) similarly in response to the potential reserve shortfall from the AES coal plant retirement that occurred on September 1, 2022. The Utilities executed a GSPA for a total grid services amount of 97.4 MW and filed with the PUC to request approval on March 16, 2022. On July 12, 2023, the PUC approved the GSPA with modifications. The Utilities will work with an aggregator to amend the GSPA and submit to the PUC for approval by the fourth quarter of 2023.

On June 8, 2021, the PUC approved the new program, Emergency Demand Response Program (EDRP), a battery storage incentive program to dispatch electricity between 6 p.m. to 8 p.m. daily from participating residential and commercial customers, to address the potential reserve shortfalls following the AES coal plant retirement. As of September 30, 2023, the Utilities have received and approved the applications totaling approximately 31.5 MW on Oahu.

On March 30, 2022, the Utilities filed with the PUC to request expanding the EDRP for up to 15 MW on the island of Maui and received PUC approval on May 20, 2022. The EDRP on Maui became effective as of June 1, 2022. Subsequently on June 23, 2022, the PUC approved the cost recovery of the additional incentives for both Oahu and Maui through the Demand Side

Management Surcharge. As of September 30, 2023, the Utilities have received and approved the applications totaling approximately 5.0 MW on Maui.

On October 31, 2022, the PUC issued an order, directing the Utilities to solicit comments from all interested parties and stakeholders on the Utilities’ Draft Grid Services RFP filed on June 30, 2022. The proposed Draft Grid Services RFP focused only on Maui and is seeking 15 MW of grid services. Hawaiian Electric issued the RFP on February 1, 2023 and bids are due on December 1, 2023.

Grid modernization. The overall goal of the Grid Modernization Strategy is to deploy modern grid investments at an appropriate priority, sequence and pace to cost-effectively maximize flexibility, minimize the risk of redundancy and obsolescence, deliver customer benefits and enable greater DER and renewable energy integration. Under the Grid Modernization Strategy, the Utilities expect that new technology will help increase adoption of private rooftop solar and make use of rapidly evolving products, including storage and advanced inverters. On March 25, 2019, the PUC approved a plan for the Utilities to implement Phase 1 of their Grid Modernization Strategy, which is the proportional deployment of advanced metering infrastructure (AMI). On February 28, 2022, the PUC expanded the scope of Phase 1 to the full service territory with a completion date set for the third quarter of 2024. The estimated cost of full deployment (including proportional deployment) is approximately $143 million in capital and deferred software cost and is expected to be incurred over five years. As of September 30, 2023, approximately $110 million of capital and deferred software cost has been incurred to date under Phase 1 and is currently being recovered under the MPIR mechanism until such costs are included in base rates. On June 24, 2022, the PUC approved with certain conditions the Utilities’ request to aggregate the per-meter and network cost caps and to recover O&M costs associated with full-service territory AMI deployment under the MPIR mechanism. As of September 30, 2023, the Utilities have deployed about 319,000 advanced meters, servicing approximately 68% of total customers.

The Utilities filed an application with the PUC on September 30, 2019 for an Advanced Distribution Management System (ADMS) as part of Phase 2 of their Grid Modernization Strategy implementation. However, on December 30, 2019, the PUC suspended the Utilities’ application for the ADMS pending the Utilities’ filing of a supplemental application for the broad deployment of field devices. This supplement and update to the Grid Modernization Strategy Phase 2 field devices application was filed on March 31, 2021. A PUC order was issued on April 27, 2021, unsuspending and resuming consideration of the Phase 2 Application. The Utilities filed the reply statement of position on October 15, 2021, completing the discovery phase of the docket. On November 16, 2021, the PUC suspended the Utilities’ ADMS and Phase 2 field device application to focus the Utilities’ attention on completing Phase 1. The Utilities filed a Motion for Reconsideration with the PUC in response to the suspension, but the motion was denied. The PUC subsequently clarified that the Utilities may resume the Phase 2 docket no earlier than six months before Phase 1 is scheduled to be completed in the third quarter of 2024. Resumption of the Phase 2 proceeding would likely commence six months prior to the scheduled completion date selected by the PUC. On April 17, 2023, the Utilities filed a motion with the PUC, requesting the suspended docket to be reopened and to allow the Utilities to file an updated and supplemented application for updated project costs. The estimated cost for the implementation of Phase 2 over six years, which includes capital, deferred software costs and O&M costs, is $113 million. On May 3, 2023, the PUC granted the motion to resume the docket, and hosted a technical conference on the updated application on May 19, 2023. The Utilities filed the reply statement of position on September 28, 2023, completing the discovery phase of the docket.

Community-based renewable energy. In December 2017, the PUC adopted a community-based renewable energy (CBRE) program framework which allows customers who cannot, or chose not to, take advantage of private rooftop solar to receive the benefits of renewable energy to help offset their monthly electric bills and support clean energy for Hawaii. The program has two phases.

The first phase, which commenced in July 2018, totaling 8 MW of solar photovoltaic (PV) only with one credit rate for each island, closed on April 9, 2020. Two phase 1 projects (28.32 kW on Maui and 270 kW on Oahu) have been operational for two years and one Phase 1 project (3,000 kW on Oahu) achieved commercial operations on October 1, 2023. Two additional phase 1 projects expect to become operational in the fourth quarter of 2023 (Hawaii Island: 750kW and Molokai: 250kW).

The second phase, which commenced on April 9, 2020 and subsequently expanded on July 27, 2021, allows over 250 MW across all Hawaiian Electric service territories in two tranches for small (under 250 kW), mid-tier and large system sizes to encourage a variety of system sizes. To provide opportunities for low-to-moderate income (LMI) customers to participate in the program, 23 MW of capacity for dedicated-LMI projects were awarded on November 15, 2022 through three island specific RFPs for Oahu, Maui and Hawaii Island. LMI projects do not have a size cap nor do they decrease the 250 MW capacity available to other projects. The dedicated-LMI projects are expected to become operational in 2025.

The Utilities issued the CBRE Tranche 1 RFPs for Oahu, Maui and Hawaii on April 14, 2022. The RFPs closed on August 17, 2022, and proposals were evaluated. Tranche 1 projects, which are greater than or equal to 250 kW, were awarded on February 22, 2023. The Tranche 1 projects are expected to become operational in 2025 or 2026.

For Lanai, the Utilities combined the previously issued Variable Renewable Dispatchable Generation Paired with Energy Storage RFP and the CBRE RFP to optimize the benefits of procuring renewable energy, spur development and increase the likelihood of success of the CBRE Program on Lanai. See “Developments in renewable energy efforts–Requests for renewable proposals, expressions of interest, and information” for additional information.

One CBRE proposal for Lanai was selected but negotiations were terminated on June 15, 2022. With the concurrence of the Independent Observer, a replacement proposal was selected on July 1, 2022. On July 25, 2022, the Utilities announced the selection of a new developer for the Lanai CBRE RFP. On September 21, 2022, the Utilities were informed by Pulama Lanai of a project being planned on Lanai to remove the two large resorts from the grid, which represent approximately 40% of the load of the island and raises great uncertainty around the future energy needs for Lanai. On September 28, 2022, the Utilities notified the PUC that ongoing negotiations for the Lanai CBRE project would continue, but the Utilities did not execute a PPA at this time given the uncertainty due to the Pulama Lanai notification. The parties are currently exploring options to move forward with the project. On Molokai, proposals were only received from a single community co-op group. After evaluation of these proposals and with concurrence of the independent observer, the Utilities filed a letter on September 9, 2022, proposing to close the Molokai CBRE RFP and to work with the lone bidder to improve certain aspects of its two proposed projects outside of the RFP process for the benefit of the residents of Molokai. After successful negotiations, two contracts for solar plus storage facilities were executed and on September 29, 2023, the Utilities filed two applications with the PUC requesting approval of the contracts by the end of 2023.

The Utilities CBRE Phase 2 Rule 29 became effective on March 10, 2022. The Utilities are currently accepting project applications for small CBRE projects less than 250 kW in size. The PUC reserved 45 MW as well as a small amount of unallocated capacity from Phase 1 for small projects in Phase 2 on Oahu, Maui and Hawaii Island. The Utilities have developed a CBRE Portal where Subscriber Organizations can apply for small project capacity and manage subscribers for all CBRE projects in the program. Customers can also use the CBRE Portal to solicit subscription quotes, compare, and subscribe to a project once the Subscriber Organization has added their project to the portal.

Microgrid services tariff proceeding. In enacting Act 200 of 2018, the Hawaii legislature found that Hawaii’s residents and businesses were vulnerable to disruptions in the islands’ energy systems caused by extreme weather events or other disasters, and stated its belief that the use of microgrids would build energy resiliency into Hawaii’s communities, thereby increasing public safety and security. The purpose of Act 200 was therefore to encourage and facilitate the development and use of microgrids through the establishment of a standard microgrid services tariff. In July 2018, pursuant to Act 200, the PUC opened a proceeding to investigate the establishment of a microgrid services tariff. In August 2019, the PUC issued an order prioritizing items for resolution in the docket and directed the Parties to establish working groups (the Working Group) to address issues identified by the PUC.

On May 27, 2021, the Utilities filed the Microgrid Service Tariff. On September 21, 2021, the PUC provided guidance for Phase 2 of the Microgrid Tariff proceeding, specifically identifying the objective for Phase 2 to promote self-sufficiency and resilience among microgrid project operators, as well as to further streamline the Microgrid Services Tariff where applicable. Furthermore, the PUC instructed Parties to recommend priority topics, along with supporting rationale to better inform the topics that will be discussed during this phase of the proceeding, which the parties submitted by October 21, 2021.

On April 1, 2022, the PUC established its Prioritized Issues for Resolution for Phase 2 of the Microgrid proceeding, which includes the following: 1) Microgrid Compensation and Grid Services; 2) Utility Compensation; 3) Customer Protection and Related Considerations; 4) Interconnection; and 5) Working Group coordination with related microgrid and resilience Initiatives at Hawaiian Electric and government agencies. Furthermore, the PUC established a procedural schedule to consist of quarterly status conference meetings with the PUC, a Phase 2 Working Group Report, draft of a revised Microgrid Service Tariff, Party comments to the proposed Microgrid Service Tariff, followed by a PUC D&O.

On June 30, 2022, the PUC provided further guidance to the Working Group to prioritize discussion of the microgrid types in the following order: 1) Hybrid Microgrid - Third Party Developer using Utility lines/infrastructure; 2) Hybrid Microgrid - Utility Project with Partners; and 3) Customer Microgrid. Additionally, the PUC instructed the Working Group to discuss microgrid compensation and continue the involvement of microgrid developers in working group meetings.

The Working Group met from April 2022 through October 2022 to discuss the PUC’s objectives and respond to the Phase 2 priority issues. On October 31, 2022, the PUC issued a guidance letter and advised that the Working Group propose a new timeline for the Report. The Utilities and the Consumer Advocate filed a joint letter with a revised timeline on November 10, 2022. On November 21, 2022, the PUC issued an order to suspend the Phase 2 procedural schedule while it reviews the joint letter.

Decoupling. See “Decoupling” in Note 4 of the Condensed Consolidated Financial Statements for a discussion of decoupling.

Regulated returns. As part of the PBR Framework’s annual review cycle, the Utilities track their rate-making ROACEs as calculated under the earnings sharing mechanism, which includes only items considered in establishing rates. At year-end, each utility’s rate-making ROACE is compared against its ROACE allowed by the PUC to determine whether earnings sharing has been triggered. The D&O in the PBR proceeding modified the earnings sharing mechanism to a symmetric arrangement. Effective with annual earnings for 2021, the earnings sharing will be triggered for achieved rate-making ROACE outside of a 300 basis points dead band above and below the current authorized rate-making ROACE of 9.5% for each of the Utilities. Earnings sharing credits or recoveries will be included in the biannual report (formally known as annual decoupling filing) to be filed with the PUC in the spring of the following year. Results for 2022, 2021 and 2020 did not trigger the earnings sharing mechanism for the Utilities.

On August 31, 2023, the PUC issued an order temporarily suspending the ESM until further notice. The intent of the order is to address the unintended consequence of customers potentially bearing the costs associated with the Maui windstorm and wildfires through the operation of the ESM without prior PUC review.

Actual and PUC-allowed returns, as of September 30, 2023, were as follows:


%	Rate-making Return on rate base (RORB)*			ROACE**			Rate-making ROACE***
Twelve months ended September 30, 2023	Hawaiian Electric	Hawaii Electric Light	Maui Electric	Hawaiian Electric	Hawaii Electric Light	Maui Electric	Hawaiian Electric	Hawaii Electric Light	Maui Electric
Utility returns	7.35	6.23	4.01	8.94	7.15	3.50	9.95	7.69	3.71
PUC-allowed returns	7.37	7.52	7.43	9.50	9.50	9.50	9.50	9.50	9.50
Difference	(0.02)	(1.29)	(3.42)	(0.56)	(2.35)	(6.00)	0.45	(1.81)	(5.79)

* Based on recorded operating income and average rate base, both adjusted for items not included in determining electric rates.

** Recorded net income divided by average common equity.

*** ROACE adjusted to remove items not included by the PUC in establishing rates, such as incentive compensation.

The gap between PUC-allowed ROACEs and the ROACEs achieved is primarily due to the exclusion of certain expenses from rates (for example, incentive compensation and charitable contributions), and depreciation, O&M expense and return on rate base that are in excess of what is currently being recovered through rates (the last rate case plus authorized RAM adjustments and ARA revenues).

Regulatory proceedings. On December 23, 2020, the PBR D&O was issued, establishing the PBR Framework. The PBR Framework implemented a five-year MRP, during which there will be no general rate case applications. In the fourth year of the MRP, the PUC will comprehensively review the PBR Framework to determine if any modifications or revisions are appropriate. See also “Regulatory proceedings” in Note 4 of the Condensed Consolidated Financial Statements.

Developments in renewable energy efforts.The Utilities’ renewable energy goals depend, in large part, on the success of renewable projects developed and operated by independent power producers. Beginning in 2017, the Utilities embarked on an ambitious procurement effort, selecting multiple solar plus storage projects to help reach the Utilities renewable portfolio standards goals as well as to assist the Utilities in retiring fossil fuel generation. Several of the recently procured projects have experienced delays as a result of supply chain disruptions caused by impacts from the COVID-19 pandemic, solar product detentions at U.S. ports of entry ordered by the U.S. Customs and Border Protection agency, and unforeseen site conditions which resulted in unanticipated project costs or in some cases the inability to effectively use previously identified project sites. These impacts have resulted in five Stage 2 projects declared null and void by the independent power producers and one Stage 2 project mutually terminating its PPA with the Utilities. Projects have also indicated potential impacts from the investigation launched by the U.S. Department of Commerce on March 28, 2022, in response to a request by Auxin Solar Inc. in regard to solar panel imports. On June 6, 2022, President Biden created a bridge to temporarily facilitate U.S. solar deployers’ ability to source certain imported solar modules and cells free of certain duties for 24 months in order to ensure the U.S. has access to a sufficient supply of solar modules to meet electricity generation needs. The Utilities have negotiated amendments with several project developers regarding requests to increase previously approved prices and extend guaranteed commercial operations dates for those projects in order to ensure their viability given the impact of these recent market conditions. All of these amendments have been approved. Significant project delays or failures of these projects increase the risk of the Utilities not meeting the renewable portfolio standards or other climate related goals, eligibility for performance incentive mechanisms associated with the speed of increasing renewable generation, and the ability to retire fossil fuel units. Developments in the Utilities’ efforts to further their renewable energy strategy include renewable energy projects discussed in Note 4 of the Condensed Consolidated Financial Statements and the following:

New renewable PPAs.

•On November 16, 2021, Hawaii Electric Light and Hawi Renewable Development, LLC (HRD) entered into an Amended and Restated Power Purchase Agreement (HRD ARPPA). Under the HRD ARPPA, HRD would make modifications to upgrade and repower the existing wind facility to enable it to continue to provide up to 10.56 MW of energy at a cost savings for customers. The HRD ARPPA is delinked from the price of fossil fuel and extends the term of the existing PPA by 20 years following the commercial operations date. On December 17, 2021, Hawaii Electric Light filed an application for approval of the HRD ARPPA, requesting a decision no later than June 15, 2022. On January 11, 2023, Hawaii Electric Light and HRD entered into a First Amendment to the HRD ARPPA (First Amendment). The First Amendment includes an extension of the Guaranteed Commercial Operations Date (GCOD) by 26 months to accommodate the delayed delivery of components, and a temporary price increase until HRD recovers its estimated increased costs specified in the First Amendment. The Amendment was conditionally approved by the PUC on July 12, 2023.

•On December 31, 2019, Hawaii Electric Light and Puna Geothermal Ventures entered into an Amended and Restated Power Purchase Agreement (PGV ARPPA). The PGV ARPPA extends the term of the existing PPA by 25 years to 2052, expands the firm capacity of the facility to 46 MW and delinks the pricing for energy delivered from the facility from fossil fuel prices to reduce cost to customers. On March 16, 2022, the PUC issued a D&O, approving the PGV ARPPA, subject to conditions, that include requiring completion of a final environmental review prior to construction. On March 28, 2022, Puna Pono Alliance filed a Motion for Reconsideration seeking reconsideration, modification and/or vacation of the D&O. On June 6, the PUC denied Puna Pono’s Motion for Reconsideration. PGV notified the Utilities that changes in market conditions that transpired since the terms of the PGV ARPPA were negotiated impacted the financial viability of the Project, and that an amendment to the PGV ARPPA was necessary to mitigate the impacts. On March 27, 2023, the Utilities and PGV executed the First Amendment to the PGV ARPPA which increases the capacity payment and extends the GCOD. An application requesting approval of the First Amendment to the PGV ARPPA was filed on April 4, 2023. On June 13, 2023, PGV notified the Utilities of concerns of its ability to timely deliver on the terms of the ARPPA. PGV has been working to re-establish its capacity generation and has continued drilling and plans to drill additional wells, however, this process has taken longer than anticipated and PGV has become increasingly concerned about timely achieving the Contract Firm Capacity of 46 MW. In light of receiving this information and to allow the Utilities and PGV to determine the best path forward, on July 6, 2023 the Utilities asked the PUC to put the procedural schedule on hold for approval of the First Amendment to the PGV ARPPA. In order to address PGV’s concerns, the parties executed a Second Amendment to the PGV ARPPA, which among other things lowered the capacity needed to reach commercial operations and preserves the full contract capacity, effectuating a partial commissioning. On October 2, 2023 the Utilities filed a letter requesting the docket be reopened and seeking approval of the First and Second Amendments to the PGV ARPPA by the end of 2023.

•Under a request for proposal process governed by the PUC and monitored by independent observers, in February 2018, the Utilities issued Stage 1 Renewable RFPs for 220 MW of renewable generation on Oahu, 50 MW of renewable generation on Hawaii Island, and 60 MW of renewable generation on Maui. To date, summarized information for a total of eight PPAs is as follows:

•


Utilities	Number of contracts	Total photovoltaic size (MW)	BESS Size (MW/MWh)	Guaranteed commercial operation dates	Contract term (years)	Total projected annual payment (in millions)
Hawaiian Electric	4	139.5	139.5/558	7/31/22, 1/11/23, 1/20/23* & 10/31/24	20 & 25	$	34.0
Hawaii Electric Light	2	60	60/240	10/11/24 & 4/21/23	25	19.2
Maui Electric	2	75	75/300	4/28/23* & 5/31/24	25	18.0
Total	8	274.5	274.5/1,098			$	71.2

* Project delays have resulted in Guaranteed Commercial Operations Date being missed.

The Utilities have received PUC approvals to recover the total projected annual payment of $71.2 million for the eight PPAs through the PPAC to the extent such costs are not included in base rates. To date, the Utilities filed seven requests with the PUC for approval of amendments related to previously-approved PPAs for changes in pricing and/or guaranteed commercial operations dates to support completion of the projects while maintaining system reliability. The PUC has approved all seven amendments. On July 31, 2022, Mililani I Solar on Oahu, the first Stage 1 solar-plus-storage project, was placed into service. Waiawa Solar project on Oahu and the AES Waikoloa Solar project on Hawaii Island also reached commercial operations on January 11, 2023 and April 21, 2023, respectively. See also “Stage 1 renewable PPAs” in Note 4 of the Condensed Consolidated Financial Statements.

•In continuation of their February 2018 request for proposal process, the Utilities issued their Stage 2 Renewable RFPs for Oahu, Maui and Hawaii Island and Grid Services RFP on August 22, 2019. To date, the Utilities had filed 11

PPAs. Additionally, two GSPAs and two applications for commitments of funds for capital expenditures for approval of the utility self-build projects were filed with the PUC. Of the 11 filed PPAs, six PPAs were declared null and void by the independent power producers and one PPA was mutually terminated. The four remaining projects have received PUC approval. To date, the Utilities filed three requests with the PUC for approval of amendments related to previously-approved PPAs for changes in pricing and/or guaranteed commercial operations dates to support completion of the projects while maintaining system reliability. The PUC has approved all three amendments. The two GSPAs were approved by the PUC in December 2020. The two utility Self-Build projects are still pending PUC approval.

A summary of the remaining four approved Stage 2 PPAs, is as follows:


Utilities	Number of contracts		Total photovoltaic size (MW)	BESS Size (MW/MWh)			Guaranteed commercial operation dates	Contract term (years)	Total projected annual payment (in millions)
Hawaiian Electric	3		79	79	/	443	5/17/24, 9/1/2024, & 4/9/2024	20 & 25	$	31.4
Hawaiian Electric	1	*	N/A	185	/	565	12/30/2022**	20	24.0
Total	4		79	264	/	1,008			$	55.4

* See further discussion under “Review of Interconnection Process and Kapolei Energy Storage Power Purchase Agreement” below.

** Project delays have resulted in Guaranteed Commercial Operations Date being missed.

The total projected annual payment of $55.4 million for these PPAs will be recovered through the PPAC to the extent such costs are not included in base rates.

A summary of the GSPAs that were approved by PUC in December 2020 is as follows:


Utilities	Fast Frequency Response - 1 (MW)	Fast Frequency Response - 2 (MW)	Capacity - Load Build (MW)	Capacity - Load Reduction (MW)
Hawaiian Electric	—	26.7	14.5	19.4
Hawaii Electric Light	6.0	—	3.2	4.0
Maui Electric	6.1	—	1.9	4.7
Total	12.1	26.7	19.6	28.1

A summary of the utility self-build projects that are pending PUC approval is as follows:

Utilities

Number of contracts

BESS Size (MW/MWh)

Guaranteed commercial operation dates

Hawaii Electric Light

12/12

12/30/22

Maui Electric

40/160

4/28/23

Total

52/172

* The Utility Self-Build project was denied by the PUC on May 25, 2022 and the Utilities have filed a motion for reconsideration with the PUC.

Tariffed renewable resources.

•As of September 30, 2023, there were approximately 600 MW, 133 MW and 144 MW of installed distributed renewable energy technologies (mainly PV) at Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively, for tariff-based private customer generation programs, namely Standard Interconnection Agreement, Net Energy Metering, Net Energy Metering Plus, Customer Grid Supply, Customer Self Supply, Customer Grid Supply Plus and Interim Smart Export. As of September 30, 2023, an estimated 39% of single family homes on the islands of Oahu, Hawaii and Maui have installed private rooftop solar systems, and approximately 21% of the Utilities’ total customers have solar systems.

•The Utilities began accepting energy from feed-in tariff projects in 2011. As of September 30, 2023, there were 44 MW, 2 MW and 6 MW of installed feed-in tariff capacity from renewable energy technologies at Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively.

Biofuel sources.

•On June 30, 2021, the Utilities issued an RFP for all fuels, including biodiesel, for supply commencing January 1, 2023. The Utilities and Pacific Biodiesel Technologies, LLC (PBT) signed an agreement on December 13, 2021 for supply of biodiesel on all islands commencing January 1, 2023, which was approved by the PUC on December 1, 2022. Hawaiian Electric also has a spot buy contract with PBT to purchase additional quantities of biodiesel at or

below the price of diesel. Some purchases of “at parity” biodiesel have been made under the spot purchase contract, which was extended through June 2025.

•Hawaiian Electric has a contingency supply contract with REG Marketing & Logistics Group, LLC to also supply biodiesel to any generating unit on Oahu in the event PBT is not able to supply necessary quantities. This contingency contract has been extended to November 2024, and will continue with no volume purchase requirements.

Requests for renewable proposals, expressions of interest, and information.

•On November 22, 2021, CBRE RFPs for Molokai and Lanai were opened. The RFP for Lanai sought a single PV paired with storage project, which included a 3 MW portion, reserved for CBRE. The Lanai RFP closed on February 14, 2022 and the Molokai RFP closed on March 1, 2022. A project was selected in the Lanai RFP, but negotiations were terminated. On July 1, 2022, a replacement project was selected and negotiations commenced. The RFP for Molokai sought 2.75 MW of new PV paired with storage projects for CBRE generation. No projects were selected in the Molokai RFP. However, with the concurrence of the independent observer, the Utilities are working with the lone bidder outside of the RFP process. See “Transition to a decarbonized and sustainable energy future—Community-based renewable energy” for additional information.

•On March 17, 2022, the CBRE LMI RFPs for Oahu, Maui and Hawaii were opened and proposals were received. In November 2022, seven projects were selected consisting of one standalone PV project on Oahu, three paired PV with storage projects on Maui, and three paired PV with storage projects on Hawaii Island. The Utilities opened the CBRE Tranche 1 RFPs for Oahu, Maui and Hawaii on April 14, 2022. In March 2023, five projects were selected consisting of one paired PV with storage project on Oahu and four standalone PV projects on Hawaii Island. See “Transition to a decarbonized and sustainable energy future—Community-based renewable energy” for additional information.

•The Hawaii Island Stage 3 RFP, seeking 325 GWh per year of energy and 65 MW of renewable firm capacity, was filed on November 7, 2022 and was issued on November 21, 2022. Proposals were received on April 20, 2023. The Stage 3 RFPs for Oahu and Maui opened for bids on January 20, 2023. For Oahu, the Utilities are seeking 500 to 700 MW of renewable firm capacity, and at least 965 GWh of renewable dispatchable energy annually. For Maui, the Utilities are procuring at least 40 MW of renewable firm capacity, and at least 425 GWh of renewable dispatchable energy annually. On March 15, 2023, the PUC denied the Utilities’ request to not advance its own proposal to meet the Maui firm capacity need as required under the Framework for Competitive Bidding, and on April 5, 2023, denied the Utilities’ motion to modify the Maui RFP to allow a self-build, ordering the Utilities to submit a proposal for the firm capacity need, or in the alternative, file a request to suspend the firm generation portion of the Maui RFP to make adjustments as ordered by the PUC, including an extension of the bidding period for firm generation proposals. The Utilities filed their request on April 12, 2023, which the PUC granted on April 14, 2023. The updated Maui RFP was filed on April 27, 2023. Proposals for the Oahu RFP and the variable generation portion of the Maui RFP were received on April 20, 2023. The Utilities submitted a proposal that is consistent with the reliability requirements under the competitive bidding framework as directed by the PUC. Priority List selections were announced on July 6, 2023 and best and final offers for the Oahu and Hawaii RFPs and the variable generation portion of the Maui RFP were due on July 14, 2023. Final award selection was originally planned for October 2023, with negotiations of the PPAs expected to be completed in the later part of 2024. On September 27, 2023, the PUC approved the Utilities’ proposal to extend the selection of the final awards to as far as December 1, 2023 for the Oahu and Hawaii RFPs, as well as for the variable generation portion of the Maui RFP. Proposals for the firm generation portion of the Maui Stage 3 RFP were received on August 17, 2023, and Priority List selections were announced on October 9, 2023.

Review of Interconnection Process and Kapolei Energy Storage Power Purchase Agreement.

•In February 2021, the PUC initiated a docket for the purposes of reviewing the status and interconnection progress of various utility-related renewable projects (i.e., Stage 1 and Stage 2 RFP PPAs and CBRE) and the Utilities’ transition plans for the expiration of the AES power purchase agreement, the retirement of the Kahului Power Plant, and other fossil fuel power plant transition plans, as needed. The Utilities filed initial status updates on the project timelines, steps needed for each of the renewable projects to achieve commercial operation and steps the Utilities are taking to address projected extensions of GCODs for renewable projects under development, which are due to a variety of factors, including those outside of the control of the Utilities. The PUC subsequently held status conferences on the Utilities’ updates. In April 2021, the PUC issued an Order directing the Utilities to establish regulatory liabilities for the difference between the on-peak avoided cost and the unit price included in the applications for approval of the renewable project PPAs, effective with the GCOD included in the applications (the earliest GCOD included in the applications is July 2021) or from the date of the Order for CBRE Phase 1 projects. The amount of regulatory liabilities to be recorded in future periods are not determinable at this time and would be affected by a number of factors, including the length of the GCOD extension period, the monthly on-peak avoided cost, as well as the factors described above. The Utilities filed a Motion for Reconsideration of the entire Order, or in the alternative to clarify that

at most the PUC is directing the Utilities to track the information and not record the information at this time. The Utilities further requested a Stay of the Order pending resolution of the Motion. The Utilities maintain that extensions of GCODs are allowed under the PUC-approved contracts and that the Order has the unintended consequence of imposing penalties against the Utilities without due process. In May 2021, the PUC issued an order clarifying its Order and directed the Utilities to track costs to consumers caused by the perceived delay of renewable projects, and that the PUC does not intend to, at this time, impose any penalties on the Utilities. The Utilities report the tracked cost on a monthly basis. The full text of the Order, Motion for Reconsideration and request for a Stay of the Order, and clarification Order as well as the tracked costs can be found on the PUC website at dms.puc.hawaii.gov/dms (Docket No. 2021-0024).

•During the 2022 Legislative Session, the Hawaii State Legislature passed Senate Bill 2474 SD 2 HD 1 CD 1, which was signed into law on June 27, 2022 as Act 201. The law requires that the PUC contract with a qualified consultant to conduct a study on the accessibility of Hawaii’s electric system and procedures for interconnection to Hawaii’s electric system, including but not limited to the timeliness and costs of interconnection. The PUC contracted with PA Consulting to conduct the study as well as act as the Independent Engineer for the Stage 3 Request for Proposal procurement. The report was submitted to the PUC on December 28, 2022 and did not find any wrongdoing on the part of the utility. The report made minor recommendations for Hawaiian Electric to review interconnection related tariff/rules and revise, if necessary, to provide technical clarity in terms of interconnection requirements, to establish a database for the purpose of centralizing all information related to all interconnection projects they manage, including their self-build and IPP-built projects, and to develop comparable interconnection cost metrics for self-build and IPP-built projects so that interconnection costs can be directly compared. The PUC stated its intent to address the recommendations that are directed to Hawaiian Electric through various proceedings related to the interconnection process. Hawaiian Electric will be working on these recommendations. The contracted consultant is working on a second phase of the study, to be completed in 2023, which will include the assessment and recommendation of remaining issues listed in Act 201 that are not covered in Phase 1.

•Also in April 2021, the PUC approved the Kapolei Energy Storage (KES) PPA (one of the PPAs as a result of the Stage 2 Renewable RFP process) (KES Decision and Order), subject to nine conditions, including the Utilities forgoing the second portion of the PIM rewards amounting up to $1.7 million for the Stage 1 RFP PPAs, removing grid constraints for the Utilities’ CBRE Phase 2 projects and for existing and new distributed energy programs, financial retirement of Hawaiian Electric generating units by specified dates and adjusting target revenues at the retirement dates for such retirements, and a requirement to charge the batteries in the project using significant levels of renewable energy generation. The financial retirement of the generating units described in the KES Decision and Order is contrary to the intent of Hawaii Revised Statutes §269-6(d), which encourages the recovery of stranded costs for the retirement of fossil fuel generation, and contrary to the regulatory compact under which in return for agreeing to commit capital necessary to allow utilities to meet their obligation to serve, utilities are assured recovery of their investment and a fair opportunity to earn a reasonable return on the capital prudently committed to the business. Hawaiian Electric filed a Motion for Reconsideration and Stay of the Decision and Order due to potentially significant financial and operational impacts. In May 2021, the PUC granted, in part, Hawaiian Electric’s Motion for Reconsideration and Stay. In this Order, the PUC addressed a number of Hawaiian Electric’s concerns, including removing the condition of the Utilities foregoing the PIM award from Stage 1 RFP projects, agreeing to address grid constraint concerns in respective DER and CBRE dockets and not in the KES docket, removing the minimum thresholds of charging energy coming from renewable energy generation and corresponding deadlines associated with these thresholds and modifying the condition on financial retirement of generating units. The PUC indicated the net book value of generating assets would be addressed at the time of retirement. The full text of the KES Decision and Order and the Motion for Reconsideration and Stay with respect thereto, and the Order granting, in part, Hawaiian Electric’s Motion for Reconsideration can be found on the PUC website at hpuc.my.site.com/cdms/s/search (Docket No. 2020-0136). On October 2, 2023, the PUC issued an order (Order No. 40293) in the proceeding regarding the retirement of Waiau Units 3 and 4, which among other things, removed one of the nine conditions from the April 2021 KES Decision and Order regarding the financial retirement of Waiau and Kahe Units by specified dates. The full text of Order No. 42093 can be found on the PUC website at hpuc.my.site.com/cdms/s/search (Docket 2023-0339).

Legislation and regulation. Congress and the Hawaii legislature periodically consider legislation that could have positive or negative effects on the Utilities and their customers. Also see “Environmental regulation” in Note 4 of the Condensed Consolidated Financial Statements.

Fuel contracts. On June 30, 2021, the Utilities issued two RFPs for all fuels for supply commencing January 1, 2023. On February 1, 2022, the Utilities and PAR Hawaii Refining, LLC (PAR Hawaii) entered into a fuel supply contract commencing January 1, 2023. On December 1, 2022, the PUC issued a decision and order (D&O) approving the PAR Hawaii fuels contract and recovery of associated costs through ECRC.

On March 3, 2022, as part of economic sanctions amid the Russia-Ukraine war, PAR Hawaii announced that it was suspending all purchases of Russian crude oil, which accounts for at least 25% of Hawaii’s supply. The Utilities are taking additional measure to ensure adequate supply of fuel by entering into a backup fuel supply contract with Vitol Inc. (Vitol) commencing on December 1, 2022 through June 30, 2024 with annual extensions if mutually agreed by both parties. The PUC issued the final D&O approving the Vitol backup fuels supply contract on December 1, 2022 and the costs incurred under the contract with Vitol are recovered in the Utilities’ respective ECRCs.

FINANCIAL CONDITION

Liquidity and capital resources.

As of September 30, 2023, Hawaiian Electric had no commercial paper outstanding, $200 million outstanding on its revolving credit facility and no remaining available borrowing capacity under the Utilities’ committed line of credit. The cash proceeds were invested in highly liquid short-term investments, and as of September 30, 2023, the Utilities’ cash and cash equivalents balance was $275 million, compared to $39 million as of December 31, 2022.

Hawaiian Electric’s objective continues to be to operate a strong, financially healthy enterprise to empower a thriving future for Hawaii. While the fundamentals of its business remain strong, the Utilities took prudent and measured actions to strengthen their financial position while continuing to provide reliable service to its customers and reinforcing its commitment to serving the community for the long term. The Utilities are working with financial advisors to help ensure adequate liquidity and believe they have adequate cash to meet their financial obligations and sustain operations, including the payment of a $100 million debt maturity in November 2023. Longer term, the Utilities are evaluating other sources of liquidity that could include securitization, re-prioritizing capital spending and reducing O&M, issuing secured debt, and conducting asset sales, among others.

Accounts receivable balances remain elevated coming out of the pandemic and has led to higher bad debt expense and higher write-offs in 2022 and year-to-date September 2023, following the end of the moratorium on disconnections. The higher bad debt expense is expected to continue until the Utilities return to pre-pandemic collection practices, along with a decrease in volume, for delinquent accounts. The Maui windstorm and wildfires have not and are not anticipated to materially impact accounts receivable and higher bad debt expense. As of September 30, 2023, approximately $32.1 million of the accounts receivables were over 30 days past due. Of the over 30 days past due amounts, approximately 40% were on payment plans. In addition to the cash flow impact from delayed collection of accounts receivable, lower kWh sales relative to the level of kWh sales approved in the last rate case generally result in delayed timing of cash flows, resulting in higher working capital requirements. As of September 30, 2023, the Utilities had cash and cash equivalents of approximately $275 million.

With the exception of Maui, the Utilities are continuing the disconnection process on a tiered basis, expanding the targeted balances, which is expected to reduce delinquent accounts receivable balances and accelerate cash collections. Service disconnections on Maui are suspended from August 8, 2023 to January 5, 2024; however, efforts are ongoing to educate and inform customers impacted by the Maui windstorm and wildfires on the availability of financial assistance to manage delinquencies accordingly. See also “Regulatory assets and liabilities” in Note 4 of the Condensed Consolidated Financial Statements.

Hawaiian Electric’s consolidated capital structure was as follows:


(dollars in millions)	September 30, 2023				December 31, 2022
Short-term borrowings, net	$	—	—	%	$	88	2	%
Long-term debt, net	2,034		46		1,685		41
Preferred stock	34		1		34		1
Common stock equity	2,383		53		2,344		56
	$	4,451	100	%	$	4,151	100	%

Information about Hawaiian Electric’s commercial paper borrowings, borrowings from HEI and line of credit facility were as follows:


	Average balance		Balance
(in millions)	Nine months ended September 30, 2023		September 30, 2023		December 31, 2022
Short-term borrowings1
Commercial paper	$	8	$	—	$	88
Borrowings from HEI	—		—		—
Line of credit draws on revolving credit facility	29		200		—

1 The maximum amount of external short-term borrowings by Hawaiian Electric during the first nine months of 2023 was approximately $200 million. At September 30, 2023, Hawaiian Electric had no short-term borrowings from Hawaii Electric Light and Maui Electric.

Prior to the Maui windstorm and wildfires, Hawaiian Electric typically utilized short-term debt, typically commercial paper, to support normal operations, to refinance short-term debt and for other temporary requirements. The Utilities also historically utilized long-term debt, borrowings of the proceeds of special purpose revenue bonds (SPRBs) issued by the State of Hawaii Department of Budget and Finance (DBF) and the issuance of privately placed unsecured senior notes bearing taxable interest, to finance the Utilities’ capital improvement projects, or to repay short-term borrowings used to finance such projects. The downgrades of Hawaiian Electric’s credit ratings impacted the Utilities’ ability to access capital markets and other sources of debt and equity financing in a timely manner and on acceptable terms. The Utilities are currently evaluating other sources of liquidity that could include re-prioritizing capital spending and reducing O&M, issuing secured debt, conducting asset sales, among others.

Credit agreement. On August 23, 2023, Hawaiian Electric fully drew down $200 million on its existing revolving credit facilities. The cash proceeds were invested in highly liquid short-term investments and will be used for general corporate purposes. The $200 million line of credit facility remained fully drawn as of September 30, 2023. See Note 6 of the Condensed Consolidated Financial Statements for additional information.

Credit ratings. In August 2023, the credit ratings of Hawaiian Electric were subject to multiple downgrades, including to ratings below investment grade, by Fitch, Moody’s and S&P. These rating actions were primarily due to the uncertainty facing the Utilities resulting from potential liability related to damages and losses caused by the Maui windstorm and wildfires and increasing number of lawsuits filed to date. As of September 30, 2023, the Fitch, Moody’s and S&P ratings of Hawaiian Electric were as follows:

Fitch

Moody’s

S&P

From

Long-term issuer default, long-term and issuer credit, respectively

A-

Ba3

Baa1

B-

BBB

Short-term issuer default, commercial paper and commercial paper, respectively

P-2

A-2

Senior unsecured debt/special purpose revenue bonds

B+

Ba3

Baa1

Cumulative preferred stock (selected series)

Baa3

Outlook

Watch Negative

Stable

Review for Downgrade

Stable

Watch Negative

Stable

* Not rated.

See “Credit and Capital Market Risk” in item 1A. Risk Factors in HEI’s and Hawaiian Electric’s 2022 Form 10-K and in item 1A. Risk Factors below. The downgrades of Hawaiian Electric’s credit ratings impacted the Utilities’ ability to access capital markets and other sources of debt financing in a timely manner and on acceptable terms. In addition, the downgrades of the Hawaiian Electric’s credit ratings triggered certain cash or payment requirements with the Utilities’ vendors.

SPRBs. Special purpose revenue bonds (SPRBs) have been issued by the Department of Budget and Finance of the State of Hawaii (DBF) to finance (and refinance) capital improvement projects of Hawaiian Electric and its subsidiaries, but the sources of their repayment are the non-collateralized obligations of Hawaiian Electric and its subsidiaries under loan agreements and notes issued to the DBF, including Hawaiian Electric’s guarantees of its subsidiaries’ obligations.

On June 10, 2019, the Hawaii legislature authorized the issuance of up to $700 million of SPRBs ($400 million for Hawaiian Electric, $150 million for Hawaii Electric Light and $150 million for Maui Electric), with PUC approval, prior to June 30, 2024, to finance the Utilities’ multi-project capital improvement programs (2019 Legislative Authorization).

On February 9, 2021, the PUC approved the use of the expedited approval procedure to request the issuance and sale of the remaining/unused amount of SPRBs authorized by the 2019 Legislative Authorization (i.e., total not to exceed up to $400 million for Hawaiian Electric, up to $150 million for Hawaii Electric Light, and up to $150 million for Maui Electric) during the period January 1, 2023 through June 30, 2024. On January 31, 2023, the PUC approved the Utilities’ requests to issue the remaining unused amounts of the SPRBs during the period January 1, 2023 through June 30, 2024, and the certification and approval of supplemental projects eligible to be financed by the SPRB proceeds.

Taxable debt. On December 20, 2022, the Utilities received PUC approval to issue, over a four-year period from January 1, 2023 to December 31, 2026, unsecured obligations bearing taxable interest (Hawaiian Electric up to $230 million, Hawaii Electric Light up to $65 million and Maui Electric up to $105 million), to finance capital expenditures, repay long-term and/or short-term debt used to finance or refinance capital expenditures, and/or to reimburse funds used for payment of capital expenditures. Pursuant to the approval, on January 10, 2023, the Utilities executed through a private placement, $150 million in unsecured senior notes (2023 Notes). The 2023 Notes had a delayed draw feature and the Utilities drew down all the proceeds on February 9, 2023. See Note 6 of the Condensed Consolidated Financial Statements for additional information and see summary table below for remaining authorized amounts.


(in millions)	Hawaiian Electric		Hawaii Electric Light		Maui Electric
Total “up to” amounts of taxable debt authorized from 2023 through 2026	$	230	$	65	$	105
Less:
Taxable debt executed on January 10, 2023, but issued on February 9, 2023	100		25		25
Remaining authorized amounts	$	130	$	40	$	80

As of September 30, 2023, Hawaiian Electric, Hawaii Electric Light, and Maui Electric have $130 million, $40 million, and $80 million, respectively of remaining taxable debt authorization.

Equity. On December 20, 2022, the Utilities received PUC approval to issue and sell each utility’s common stock over a four-year period from January 1, 2023 through December 31, 2026 (Hawaiian Electric’s sale/s to HEI of up to $75 million, Hawaii Electric Light sale/s to Hawaiian Electric of up to $25 million, and Maui Electric sale/s to Hawaiian Electric of up to $55 million) and the purchase of Hawaii Electric Light and Maui Electric common stock by Hawaiian Electric from 2023 through December 31, 2026. As of September 30, 2023, Hawaiian Electric, Hawaii Electric Light, and Maui Electric have $75 million, $25 million, and $55 million, respectively, of unused common stock authorization.

Cash flows. The following table reflects the changes in cash flows for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022:


	Nine months ended September 30
(in thousands)	2023		2022		Change
Net cash provided by operating activities	$	406,111	$	124,167	$	281,944
Net cash used in investing activities	(329,281)		(219,126)		(110,155)
Net cash provided by financing activities	160,782		61,005		99,777

Net cash provided by operating activities. The increase in net cash provided by operating activities was primarily driven by higher cash receipt of payments from large delinquent commercial customer accounts, and from customers due to increased disconnection efforts and receipt of government and other program assistance, as well as lower cash paid for fuel oil stock due to lower fuel oil prices, partially offset by higher revenue taxes paid due to timing.

Net cash used in investing activities. The increase in net cash used in investing activities was primarily driven by an increase in capital expenditures related to construction activities.

Net cash provided by financing activities. The increase in net cash provided by financing activities was driven by higher cash proceeds from long-term borrowings, partially offset by repayment of short-term borrowings.

Material cash requirements. Material cash requirements of the Utilities include O&M expenses, including One ‘Ohana Initiative contribution (see further information in Note 2 of the Condensed Consolidated Financial Statements), legal and consulting costs related to the Maui windstorm and wildfires, labor and benefit costs, fuel and purchase power costs, debt and interest payments, operating and finance lease obligations, their forecasted capital expenditures (including capital expenditures related to wildfires and wildfire mitigations) and investments, their expected retirement benefit plan contributions and other short-term and long-term material cash requirements. The cash requirements for O&M, fuel and purchase power costs, debt and interest payments, and operating and finance lease obligations are generally funded through the collection of the Utilities’ revenue requirement established in the last rate case and other mechanisms established under the regulatory framework. The cash requirements for capital expenditures are generally funded through retained earnings, the issuance of debt, and

contributions of equity from HEI and generally recovered through the Utilities’ revenue requirement or other capital recovery mechanisms over time. Although the Utilities’ credit rating downgrades related to the Maui windstorm and wildfires will continue to adversely impact its ability to access capital markets and other sources of debt financing in a timely manner and on acceptable terms, the Utilities currently believe that their ability to generate cash is adequate to maintain sufficient liquidity to fund their material cash requirements in the near term. However, the economic impact of higher fuel prices, inflation, higher interest rates, tightening of monetary policy, the lingering COVID-19 pandemic, geopolitical situations, and the potential damages and losses related to the Maui windstorm and wildfires and related lawsuits (see further information in Note 2 of the Condensed Consolidated Financial Statements), create significant uncertainty, and the Utilities cannot predict the extent or duration of these conditions, the future effects that these conditions will have on the Utilities’ cost of capital and their ability to access additional capital, or the future impacts on the Utilities’ financial position, results of operations, and cash flows.

Bank

Recent Developments. See also “Recent developments” in HEI’s MD&A.

In August 2023, ASB was impacted by wildfires on Maui which caused widespread property damage and fatalities. ASB’s outstanding credit exposure in Maui and the fire impacted zone of Lahaina as of September 30, 2023 was 11.9% and 0.8%, respectively, of the Bank’s total loan portfolio.

For the quarter ended September 30, 2023, ASB incurred additional expenses as a result of the Maui wildfires of $8.6 million, pretax, including higher provision for credit losses, additional professional services expenses and other extraordinary expenses.

The Hawaii economy remained stable in the third quarter of 2023 as visitor arrivals continued to drive a growing labor market and tax collections. Domestic visitor arrivals continued to remain strong due to pent up demand from leisure travelers. International visitor arrivals continued to lag significantly behind pre-pandemic levels but have gradually increased as certain Asian countries began loosening travel restrictions. COVID cases caused by the new variants have increased but hospitalization rates remain at relatively low levels.

As of September 30, 2023, the Federal Reserve federal funds rate target range was 5.25% - 5.50% in response to continued inflationary pressures in the economy. The increase in interest rates has impacted ASB’s net interest margin as higher yields on earning assets were more than offset by an increase in yields on deposits and other borrowings. The higher interest rates have also reduced mortgage refinance and purchase activity, negatively impacting mortgage banking income. Additionally, the tight labor market and inflationary pressures have increased compensation and benefit expenses.

ASB experienced continued loan growth in 2023 as total loans increased $216 million compared to total loans at the end of 2022. There was demand for commercial real estate, residential, home equity lines of credit and consumer loan products. The consumer loan portfolio growth also included purchases of solar and sustainable home improvement loans from a third party. The residential loan portfolio increase was due to ASB’s decision to portfolio a larger portion of its residential loan production.

Deposit growth driven by federal stimulus, which had previously funded loan growth and investment security purchases, has ceased and required ASB to increase its other borrowings to fund the loan portfolio growth, thereby increasing the Bank’s funding costs and reducing its balance sheet sensitivity. Additional federal funds rate increases may not further increase the Bank’s net interest margin if core deposits continue to flow out and funding is replaced with other borrowings.

For the quarter ended September 30, 2023, ASB recorded a provision for credit losses of $8.8 million due to $5.9 million of credit loss reserves for loans that were impacted by Maui wildfires and additional credit loss reserves for the residential, consumer and commercial real estate loan portfolios. The provision for credit losses in future quarters will be dependent on future economic conditions and changes to borrower credit quality at that time.

At September 30, 2023, the investment securities portfolio balance decreased approximately $203 million from year end 2022 as investment securities portfolio repayments were used as a funding source for the loan growth and ASB did not purchase any investment securities in 2023. The lack of deposit growth resulted in lower excess liquidity and the need for other sources to fund the loan growth. The change in interest rates during the nine months ended September 30, 2023 resulted in higher unrealized losses in the available-for-sale investment securities portfolio, which also decreased the investment portfolio balance.

In 2023, the increase in interest rates and the collapse of a few financial institutions had caused turmoil in the banking industry. Due to the failure of these financial institutions, the focus on the banking industry has been around capital levels, uninsured deposits and liquidity. At September 30, 2023, ASB’s regulatory capital ratios were above the “well-capitalized” and regulatory requirements, including the conservation buffers. Approximately 87% of the Bank’s deposits are FDIC insured or fully collateralized. ASB has access to approximately $3 billion in funding sources to meet its liquidity needs.

ASB continues to maintain its low-risk profile, strong balance sheet and straightforward community banking business model.


	Three months ended September 30				Increase
(in millions)	2023		2022		(decrease)		Primary reason(s)
Interest and dividend income	$	86	$	68	$	18
							Average loan portfolio yields were 80 basis points higher—yield benefited from the rising interest rate environment as adjustable rate yields repriced upward and new loan production yields were higher than the portfolio yields.
							Average loan portfolio balances increased $609 million - commercial real estate, home equity line of credit and commercial loan portfolio average balances increased $157 million, $85 million and $63 million, respectively, due to increased demand for these loan products. Residential loan average balances increased $221 million due to the Bank’s decision to portfolio a larger portion of the residential loan production. Consumer loan portfolio average balance increased $83 million primarily due to purchases of solar and sustainable home improvement loans.
							Average investment securities portfolio balances decreased $260 million—investment security portfolio repayments were used to fund loan growth. Average investment securities portfolio yields were 13 basis points lower due to higher investment portfolio premium amortizations.
							Average other investments increased $75 million - increase due to higher interest earning deposits being held.
Noninterest income	15		13		2
							Higher bank owned life insurance income - higher returns from insurance policies.



Revenues	101		81		20		The increase in revenues for the three months ended September 30, 2023 compared to the same period in 2022 was primarily due to higher interest and dividend income and higher noninterest income.
Interest expense	23		3		20
							Increase in interest expense on deposits and other borrowings was due to an increase in term certificate and other borrowing balances which were required to fund the loan portfolio growth, higher yields due to the increase in the interest rate environment and a shift in costing liability mix.
							Average core deposit balances decreased $539 million; average term certificate balances increased $436 million.
							Average deposit yields increased from 8 basis points to 70 basis points due to a shift in mix of deposits and higher yields from the increase in the interest rate environment.
							Average other borrowings increased $488 million and average yields increased 295 basis points.
							Average cost of funds increased from 13 basis points to 102 basis points due to a shift in funding from low cost core deposits to higher costing term certificates and other borrowings.
Provision for credit losses	9		—		9
							2023 provision for credit losses included credit loss reserves for loans impacted by the Maui wildfires, additional credit loss reserves for the residential and commercial real estate loan portfolios and credit loss reserves to cover net charge-offs, partly offset by the release of credit loss reserves for a delinquent commercial loan that paid off.
							The release of credit loss reserves in 2022 for improved credit trends in the residential, home equity line of credit and consumer loan portfolios was offset by additional credit loss reserves for growth in the consumer loan portfolio which included purchases of solar and sustainable home improvement loans.
							2022 provision for credit losses also included the release of credit loss reserves for unfunded commercial construction loan commitments.
							Delinquency rates have decreased—from 0.27% at September 30, 2022 to 0.24% at September 30, 2023 primarily due to lower residential and commercial loan delinquencies, partly offset by higher consumer and home equity line of credit loan delinquencies.
							Net charge-off to average loans increased from 0.03% at September 30, 2022 to 0.07% at September 30, 2023 primarily due to an increase in consumer loan net charge-offs.
Noninterest expense	56		52		4


	Three months ended September 30		Increase
(in millions)	2023	2022	(decrease)	Primary reason(s)
				The increase in noninterest expenses was primarily due to higher compensation and benefits as a result of higher base compensation and the fair value adjustment related to the deferred compensation plan, higher FDIC insurance assessments and additional expenses related to the Maui wildfires.

Expenses	88	55	33	The increase in expenses for the three months ended September 30, 2023 compared to the same period in 2022 was due to increases in interest expenses, provision for credit losses and higher noninterest expenses.
Operating income	13	26	(13)	The decrease in operating income for the three months ended September 30, 2023 compared to the same period in 2022 was primarily due to increases in interest expense, provision for credit losses and noninterest expenses, partly offset by higher interest and noninterest income.

Net income	11	21	(10)	Net income for the three months ended September 30, 2023 was lower than the same period in 2022 due to lower operating income partly offset by lower income tax expense.


	Nine months ended September 30				Increase
(in millions)	2023		2022		(decrease)		Primary reason(s)
Interest and dividend income	$	247	$	191	$	56
							Average loan portfolio yields were 78 basis points higher—loan yields continued to increase in 2023 due to the interest rate environment as adjustable rate loan yields repriced with rising interest rates and new loan production yields were higher than the portfolio rates.
							Average loan portfolio balances increased $753 million - commercial real estate, home equity line of credit and commercial loan portfolio average balances increased $234 million, $136 million and $63 million, respectively, due to demand for these loan types. Residential loan portfolio average balances increased $205 million due to the Bank’s decision to portfolio a larger portion of the residential loan production. Consumer loan portfolio average balances increased $117 million primarily due to the purchase of solar and sustainable home improvement loans.
							Average investment securities portfolio balances decreased $209 million—repayments in the investment securities portfolio were used to fund the loan portfolio growth.
							Average investment securities portfolio yields decreased 2 basis points.
Noninterest income	45		42		3
							Higher bank-owned life insurance income - higher returns from insurance policies.
							Lower mortgage banking income - lower residential loan sale volume due to lower production volume as the higher interest rate environment has reduced the demand for residential mortgage loans. ASB’s decision to portfolio a larger portion of the residential loan production also reduced the amount of loans sold on the secondary market.
Less: gain on sale of real estate	—		(1)		1		Gain on sale of real estate, which is included in Noninterest income above and in the Bank’s statements of income and comprehensive income in Note 4, is classified as gain on sale of real estate in the condensed consolidated statements of income, and accordingly, is reflected in operating expenses below as a separate line item and excluded from Revenues.
Revenues	292		232		60		The increase in revenues for the nine months ended September 30, 2023 compared to the same period in 2022 was primarily due to higher interest and dividend income and higher noninterest income.
Interest expense	56		5		51
							Interest expense on deposits and other borrowings increased in 2023 compared to 2022 due to an increase in term certificate and other borrowing balances which were required to fund the loan portfolio growth, higher yields due to the increase in the interest rate environment and a shift in deposit mix.
							Average core deposit balances decreased $513 million; average term certificate balances increased $398 million.
							Average deposit yields increased from 6 basis points to 51 basis points. The increase was primarily due to the increase in term certificate yields of 258 basis points and the shift in mix of deposits from low cost core deposits to term certificates.
							Average other borrowings increased $598 million and average yields increased 343 basis points. Other borrowings were used to fund the growth in the loan portfolio. The higher yields were reflective of the higher interest rate environment.
Provision for credit losses	10		(1)		11
							2023 provision for credit losses included credit loss reserves for loans impacted by the Maui wildfires, growth in the loan portfolio and credit loss reserves to cover net charge-offs.
							2022 negative provision for credit losses reflected improved credit trends, credit regrades and lower credit loss rates in the commercial real estate and commercial loan portfolios.
							2022 negative provision for credit losses also included additional credit loss reserves for growth in the commercial real estate loan portfolio and consumer loan portfolios.
							Delinquency rates have decreased—from 0.27% at September 30, 2022 to 0.24% at September 30, 2023 due to lower residential and commercial loan delinquencies, partly offset by higher consumer and home equity line of credit loan delinquencies.
							Net charge-off to average loans have increased—from 0.01% at September 30, 2022 to 0.11% at September 30, 2023 primarily due to an increase in consumer loan portfolio net charge-offs and the charge-off of a residential loan.


	Nine months ended September 30		Increase
(in millions)	2023	2022	(decrease)	Primary reason(s)
Noninterest expense	165	149	16
				The increase in noninterest expenses were due to higher compensation and benefits expenses, an increase in FDIC insurance assessments, higher deposit account expenses and additional expenses related to the Maui wildfires.
				Higher compensation and benefits expenses included higher base compensation as a result of merit increases, market adjustments and the fair value adjustment related to the deferred compensation plan.
Gain on sale of real estate	—	(1)	1
Expenses	231	152	79	The increase in expenses for the nine months ended September 30, 2023 compared to the same period in 2022 was due to higher interest expenses, higher noninterest expenses, higher provision for credit losses and lower gain on sale of real estate in 2023.
Operating income	61	80	(19)	The decrease in operating income for the nine months ended September 30, 2023 compared to the same period in 2022 was primarily due to higher interest expenses, higher noninterest expenses and higher provision for credit losses, partly offset by higher interest income and higher noninterest income.

Net income	50	62	(12)	Net income for the nine months ended September 30, 2023 was lower than the same period in 2022 due to lower operating income partly offset by lower income tax expense.

ASB’s return on average assets, return on average equity and net interest margin were as follows:


	Three months ended September 30		Nine months ended September 30
(Annualized %)	2023	2022	2023	2022
Return on average assets	0.47	0.89	0.70	0.90
Return on average equity	9.19	15.11	13.62	13.65
Net interest margin	2.70	2.96	2.77	2.87

For the three and nine months ended September 30, 2023 the Bank’s costs related to the Maui wildfires is as follows:


(in thousands)	Three and nine months ended September 30, 2023

Bank Maui wildfires related cost:
Provision for credit losses	$	5,900
Professional services expenses	1,300
Other expenses	1,357
Total Bank Maui wildfires related cost	$	8,557

Note: Bank Maui windstorm and wildfires related expenses - provision for credit losses is included in Provision for credit losses, professional services expenses are included in Noninterest expense-Services and other expenses are included in Noninterest expense-Other expense on the ASB Statements of Income and Comprehensive Income Data.


	Three months ended September 30
	2023					2022
(dollars in thousands)	Average balance		Interest income/ expense		Yield/ rate (%)	Average balance		Interest income/ expense		Yield/ rate (%)
Assets:
Interest-earning deposits	$	91,499	$	1,246	5.33	$	16,598	$	83	1.96
FHLB stock	18,769		253		5.35	15,858		175		4.39
Investment securities
Taxable	2,925,474		12,183		1.67	3,183,928		14,453		1.82
Non-taxable	67,552		525		3.07	68,938		432		2.48
Total investment securities	2,993,026		12,708		1.70	3,252,866		14,885		1.83
Loans
Residential 1-4 family	2,569,148		24,350		3.79	2,348,214		20,721		3.53
Commercial real estate	1,528,448		19,931		5.12	1,370,993		13,535		3.88
Home equity line of credit	1,037,147		10,289		3.94	952,298		7,459		3.11
Residential land	20,553		286		5.58	21,253		256		4.84
Commercial	734,545		10,794		5.79	671,175		6,945		4.08
Consumer	265,801		6,104		9.13	182,503		4,541		9.88
Total loans 1,2	6,155,642		71,754		4.62	5,546,436		53,457		3.82
Total interest-earning assets 3	9,258,936		85,961		3.68	8,831,758		68,600		3.09
Allowance for credit losses	(69,165)					(70,685)
Noninterest-earning assets	478,529					544,651
Total assets	$	9,668,300				$	9,305,724
Liabilities and shareholder’s equity:
Savings	$	2,917,408	$	687	0.09	$	3,296,229	$	219	0.03
Interest-bearing checking	1,372,670		2,157		0.62	1,339,002		150		0.04
Money market	358,512		3,121		3.45	214,706		55		0.10
Time certificates	908,392		8,481		3.70	472,425		1,280		1.08
Total interest-bearing deposits	5,556,982		14,446		1.03	5,322,362		1,704		0.13
Advances from Federal Home Loan Bank	219,228		2,535		4.53	146,462		951		2.54
Borrowings from Federal Reserve Bank	550,000		6,063		4.37	—		—		—
Securities sold under agreements to repurchase and federal funds purchased	—		—		—	134,458		104		0.31
Total interest-bearing liabilities	6,326,210		23,044		1.44	5,603,282		2,759		0.19
Noninterest bearing liabilities:
Deposits	2,628,869					2,966,148
Other	218,435					186,840
Shareholder’s equity	494,786					549,454
Total liabilities and shareholder’s equity	$	9,668,300				$	9,305,724
Net interest income			$	62,917				$	65,841
Net interest margin (%) 4					2.70					2.96


	Nine months ended September 30
	2023					2022
(dollars in thousands)	Average balance		Interest income/ expense		Yield/ rate (%)	Average balance		Interest income/ expense		Yield/ rate (%)
Assets:
Interest-earning deposits	$	46,499	$	1,855	5.26	$	69,813	$	230	0.43
FHLB stock	21,465		916		5.70	12,396		343		3.70
Investment securities
Taxable	2,984,976		38,524		1.72	3,192,967		42,220		1.76
Non-taxable	67,911		1,536		3.00	69,265		1,185		2.27
Total investment securities	3,052,887		40,060		1.75	3,262,232		43,405		1.77
Loans
Residential 1-4 family	2,524,994		70,076		3.70	2,320,414		60,904		3.50
Commercial real estate	1,490,412		55,551		4.93	1,256,402		33,485		3.53
Home equity line of credit	1,031,133		28,974		3.76	894,685		20,163		3.01
Residential land	20,362		832		5.45	21,529		1,044		6.47
Commercial	765,251		32,045		5.56	702,489		20,350		3.85
Consumer	257,237		17,340		9.01	140,735		11,798		11.21
Total loans 1,2	6,089,389		204,818		4.47	5,336,254		147,744		3.69
Total interest-earning assets 3	9,210,240		247,649		3.58	8,680,695		191,722		2.94
Allowance for credit losses	(70,812)					(69,811)
Noninterest-earning assets	472,184					608,240
Total assets	$	9,611,612				$	9,219,124
Liabilities and shareholder’s equity:
Savings	$	3,021,660	$	1,222	0.05	$	3,284,235	$	638	0.03
Interest-bearing checking	1,334,576		3,556		0.36	1,347,378		295		0.03
Money market	275,352		5,445		2.64	210,899		124		0.08
Time certificates	822,234		20,721		3.37	423,779		2,515		0.79
Total interest-bearing deposits	5,453,822		30,944		0.76	5,266,291		3,572		0.09
Advances from Federal Home Loan Bank	286,615		10,010		4.61	59,903		1,085		2.39
Borrowings from Federal Reserve Bank	396,630		12,989		4.38	—		—		—
Securities sold under agreements to repurchase	83,484		2,172		3.48	109,028		114		0.14
Total interest-bearing liabilities	6,220,551		56,115		1.20	5,435,222		4,771		0.12
Noninterest bearing liabilities:
Deposits	2,686,245					2,988,191
Other	214,070					189,318
Shareholder’s equity	490,746					606,393
Total liabilities and shareholder’s equity	$	9,611,612				$	9,219,124
Net interest income			$	191,534				$	186,951
Net interest margin (%) 4					2.77					2.87

1 Includes loans held for sale, at lower of cost or fair value.

2 Includes recognition of net deferred loan fees of $0.8 million and $0.9 million for the three months ended September 30, 2023 and 2022, respectively, and $2.3 million and $4.5 million for the nine months ended September 30, 2023 and 2022, respectively, together with interest accrued prior to suspension of interest accrual on nonaccrual loans. Includes nonaccrual loans.

3 For the three and nine months ended September 30, 2023 and 2022, the taxable-equivalent basis adjustments made to the table above were not material.

4 Defined as net interest income, on a fully taxable equivalent basis, as a percentage of average total interest-earning assets.

Earning assets, costing liabilities, contingencies and other factors. Earnings of ASB depend primarily on net interest income, which is the difference between interest earned on earning assets and interest paid on costing liabilities. The interest

rate environment has been impacted by disruptions in the financial markets over a period of several years. The Federal Open Market Committee federal funds rate target range was 5.25% - 5.50% at September 30, 2023 to combat inflation. ASB’s net interest income and net interest margin has been impacted by the higher interest rates as the Bank has used higher costing other borrowings and term certificates to fund its loan growth.

Loans and mortgage-backed securities are ASB’s primary earning assets.

Loan portfolio. ASB’s loan volumes and yields are affected by market interest rates, competition, demand for financing, availability of funds and management’s responses to these factors. See Note 5 of the Condensed Consolidated Financial Statements for a composition of ASB’s loan portfolio.

Home equity— key credit statistics. The home equity line of credit (HELOC) portfolio makes up 17% of the total loan portfolio and is generally an interest-only revolving loan for a 10-year period, after which time the HELOC outstanding balance converts to a fully amortizing variable-rate term loan with a 20-year amortization period. Borrowers also have a “Fixed Rate Loan Option” to convert a part of their available line of credit into a 5, 7 or 10-year fully amortizing fixed-rate loan with level principal and interest payments. As of September 30, 2023, approximately 37% of the portfolio balances were amortizing loans under the Fixed Rate Loan Option. A HELOC loan is typically in a subordinate lien position to a borrower’s first mortgage loan, however, approximately 54% of ASB’s HELOC loan portfolio is in a first lien position.

Loan portfolio risk elements. See Note 5 of the Condensed Consolidated Financial Statements.

Investment securities. ASB’s investment portfolio was comprised as follows:


	September 30, 2023				December 31, 2022
(dollars in thousands)	Balance		% of total		Balance		% of total
U.S. Treasury and federal agency obligations	$	134,912	5	%	$	140,957	5	%
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	2,297,260		93		2,484,821		92
Corporate bonds	31,751		1		40,734		2
Mortgage revenue bonds	14,494		1		14,902		1
Total investment securities	$	2,478,417	100	%	$	2,681,414	100	%

Currently, ASB’s investment portfolio consists of high-grade investment securities, including U.S. Treasury and federal agency obligations, mortgage-backed securities, corporate bonds and mortgage revenue bonds. ASB owns mortgage-backed securities issued or guaranteed by the U.S. government agencies or sponsored agencies, including the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC), Government National Mortgage Association (GNMA) and Small Business Administration (SBA). Principal and interest on mortgage-backed securities issued by FNMA, FHLMC, GNMA and SBA are guaranteed by the issuer and, in the case of GNMA and SBA, backed by the full faith and credit of the U.S. government. U.S. Treasury securities are also backed by the full faith and credit of the U.S. government.

Deposits and other borrowings. Deposits continue to be the largest source of funds for ASB and are affected by market interest rates, competition and management’s responses to these factors. In 2023, deposits increased by $54.7 million, as an outflow of core deposits was replaced with time certificates. Core deposit retention will remain challenging in the current rising interest rate environment. Advances from the FHLB of Des Moines, securities sold under agreements to repurchase, borrowings from the Federal Reserve Bank and federal funds purchased continue to be additional sources of funds. As of September 30, 2023 and December 31, 2022, ASB’s costing liabilities consisted of 92% deposits and 8% borrowings. The weighted average cost of deposits for the first nine months of 2023 and 2022 was 0.51% and 0.06%, respectively. As of September 30, 2023 and December 31, 2022, ASB had approximately $1.1 billion and $1.2 billion of deposits that were uninsured or not collateralized, respectively.

Federal Home Loan Bank of Des Moines and Federal Reserve Bank. As of September 30, 2023 and December 31, 2022, ASB had $200 million and $414 million of advances outstanding at the FHLB of Des Moines, respectively. As of September 30, 2023, the unused borrowing capacity with the FHLB of Des Moines was $1.9 billion. As of September 30, 2023 and December 31, 2022, ASB had $550 million and nil borrowings from the Federal Reserve Bank, respectively. The FHLB of Des Moines and Federal Reserve Bank are important sources of liquidity for ASB.

Contingencies. ASB is 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, ASB cannot rule out the possibility that such outcomes could have a material adverse effect on the results of operations or liquidity for a particular reporting period in the future.

Other factors. Interest rate risk is a significant risk of ASB’s operations and also represents a market risk factor affecting the fair value of ASB’s investment securities. Increases and decreases in prevailing interest rates generally translate into decreases and increases in the fair value of the investment securities, respectively. In addition, changes in credit spreads also impact the fair values of the investment securities.

As of September 30, 2023, ASB had an unrealized loss, net of taxes, on investment securities (including securities pledged for repurchase agreements) in AOCI of $350.2 million compared to an unrealized loss, net of taxes, of $328.9 million as of December 31, 2022. The unrealized losses were due to changes in interest rates and did not affect regulatory capital ratios. See “Item 3. Quantitative and qualitative disclosures about market risk” for a discussion of ASB’s interest rate risk sensitivity.

During the first nine months of 2023, ASB recorded a provision for credit losses of $9.4 million in the allowance for credit losses for growth in the loan portfolio, credit loss reserves related to the Maui wildfires and additional credit loss reserves to cover net charge-offs, partly offset by the release of credit loss reserves for improved credit trends and lower credit loss rates. During the first nine months of 2022, ASB recorded a negative provision for credit losses of $0.2 million in the allowance for credit losses reflecting good credit trends including lower net charge-offs and credit upgrades in the commercial real estate and commercial loan portfolios, partly offset by loan reserves for growth in the commercial real estate loan portfolio and solar and sustainable home improvement loans purchased during the year.


	Nine months ended September 30						Year ended December 31, 2022
(in thousands)	2023			2022
Allowance for credit losses, beginning of period	$	72,216		$	71,130		$	71,130

Provision for credit losses	9,353			(192)			2,537
Less: net charge-offs	5,203			532			1,451
Allowance for credit losses, end of period	$	76,366		$	70,406		$	72,216
Ratio of net charge-offs during the period to average loans outstanding (annualized)	0.11		%	0.01		%	0.03		%

ASB maintains a reserve for credit losses that consists of two components, the allowance for credit losses and an allowance for loan commitments (unfunded reserve). The level of the reserve for unfunded loan commitments is adjusted by recording an expense or recovery in provision for credit losses. For the nine months ended September 30, 2023, ASB recorded a provision for credit losses for unfunded commitments of $0.7 million and a negative provision for credit losses $0.5 million for the nine months ended September 30, 2022. As of September 30, 2023 and December 31, 2022, the reserve for unfunded loan commitments was $5.1 million and $4.4 million, respectively.

Legislation and regulation. ASB is subject to extensive regulation, principally by the OCC and the FDIC. Depending on ASB’s level of regulatory capital and other considerations, these regulations could restrict the ability of ASB to compete with other institutions and to pay dividends to its shareholder. See the discussion below under “Liquidity and capital resources.”

FINANCIAL CONDITION

Liquidity and capital resources.


(dollars in millions)	September 30, 2023		December 31, 2022		% change
Total assets	$	9,657	$	9,546	1
Investment securities	2,478		2,681		(8)
Loans held for investment, net	6,115		5,907		4
Deposit liabilities	8,224		8,170		1
Other bank borrowings	750		695		8

As of September 30, 2023, ASB was one of Hawaii’s largest financial institutions based on assets of ~~$6.6~~$9.7 billion and deposits of ~~$5.8~~$8.2 billion.

As of September 30, ~~2017~~,2023, ASB’s unused FHLB borrowing capacity was approximately $1.9 billion. As of September 30, ~~2017~~,2023, ASB had commitments to borrowers for loans and unused lines and letters of credit of ~~$1.8~~$1.9 billion. ~~As of September 30, 2017, the Company did not have commitments to lend to borrowers whose loan terms have been modified in troubled debt restructurings.~~ Management believes ASB’s current sources of funds will enable it to meet these obligations while maintaining liquidity at satisfactory levels.

For the nine months ended September 30, ~~2017,~~2023, net cash provided by ASB’s operating activities was $80 million. Net cash used during the same period by ASB’s investing activities was ~~$211~~$38 million, primarily due to a net increase in loans receivable of $283 million, purchases of loans held for investment ~~securities~~ of ~~$369~~$26 million and additions to premises and equipment of ~~$36 million, and contributions to low-income housing investments of $8~~$5 million, partly offset by the receipt of investment security repayments ~~from investment securities~~and maturities of ~~$155~~$170 million, proceeds from the sale of

commercial loans of ~~$31~~$95 million, a net decrease in ~~loans receivable~~FHLB stock of ~~$13~~$9 million and ~~a decrease in restricted cash~~proceeds from the redemption of $2bank owned life insurance of $3 million. Net cash provided by financing activities during this period was ~~$131~~$65 million, primarily due to ~~increases~~a net increase in other borrowings of $336 million, partly offset by a net decrease in repurchase agreements of $183 million, decreases in deposit liabilities of $203 million, proceeds from FHLB advances of $60 million, and a net increase in retail repurchase agreements of $24 million, partly offset by principal payments on FHLB advances of $110 million, repayments of securities sold under agreements to repurchase of $14$44 million, a net decrease in mortgage escrow deposits of $5 million and ~~$28~~$39 million in common stock dividends to HEI (through ASB Hawaii).

For the nine months ended September 30, ~~2016,~~2022, net cash provided by ASB’s operating activities was ~~$42~~$82 million. Net cash used during the same period by ASB’s investing activities was ~~$310~~$553 million, primarily due to ~~purchases of investment securities of $354 million,~~ a net increase in loans receivable of ~~$175~~$395 million, ~~and~~purchases of available-for-sale securities of $366 million, purchases of loans held for investment of $77 million, bank owned life insurance purchases of $5 million, additions to premises and equipment of $8$3 million and a net increase in FHLB stock of $5 million, partly offset by the receipt of investment security repayments and ~~calls~~maturities of ~~investment securities of $173~~$296 million, proceeds from the ~~sale~~redemption of ~~investment securities~~bank owned life insurance of ~~$16~~$2 million and proceeds from the sale of ~~commercial loans~~real estate of ~~$38~~$1 million. Net cash provided by financing activities during this period was ~~$260~~$370 million, primarily due to increases in deposit liabilities of ~~$355~~$87 million, a net increase in short-term borrowings of $125 million and a net increase in repurchase agreements of $196 million, partly offset by a net decrease in ~~retail repurchase agreements of $21 million, maturities of securities sold under agreements to repurchase of $42 million, a net decrease in~~mortgage escrow deposits of $5$6 million and ~~$27~~$32 million in common stock dividends to HEI (through ASB Hawaii).

ASB believes that maintaining a satisfactory regulatory capital position provides a basis for public confidence, affords protection to depositors, helps to ensure continued access to capital markets on favorable terms and provides a foundation for growth. FDIC regulations restrict the ability of financial institutions that are not well-capitalized to compete on the same terms as well-capitalized institutions, such as by offering interest rates on deposits that are significantly higher than the rates offered by competing institutions. As of September 30, ~~2017~~,2023, ASB was well-capitalized ~~(minimum~~(well-capitalized ratio requirements noted in parentheses)

with ~~a Common equity Tier-1 ratio of 12.7% (6.5%), a Tier-1 capital ratio of 12.7% (8.0%), a Total capital ratio of 13.9% (10.0%) and~~ a Tier-1 leverage ratio of ~~8.7%~~7.7% (5.0%), common equity Tier-1 ratio of 12.2% (6.5%), Tier-1 capital ratio of 12.2% (8.0%) and total capital ratio of 13.3% (10.0%). As of December 31, ~~2016,~~2022, ASB was well-capitalized (well-capitalized ratio requirements noted in parentheses) with a Tier-1 leverage ratio of 7.8% (5.0%), common equity Tier-1 ratio of 12.2% (6.5%), Tier-1 capital ratio of 12.2%~~, a Total~~ (8.0%) and total capital ratio of ~~13.4% and a Tier-1 leverage ratio of 8.6%~~13.1% (10.0%). All dividends are subject to review by the OCC and FRB and receipt of a letter from the FRB communicating the agencies’ non-objection to the payment of any dividend ASB proposes to declare and pay to HEI (through ASB Hawaii). The ASB Board of Directors determined to suspend its quarterly cash dividends to HEI, starting after the second quarter dividend, to help ensure maximum possible Bank liquidity and capital.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company considers interest-rate risk (a non-trading market risk) to be a ~~very~~ significant market risk for ASB as it could potentially have ~~a significant effect~~material impacts on the Company’s results of operations, financial condition and liquidity. For additional quantitative and qualitative information about the Company’s market risks, see HEI’s and Hawaiian Electric’s Quantitative and Qualitative Disclosures About Market Risk in Part II, Item 7A of HEI’s ~~2016~~2022 Form 10-K (pages 7978 to ~~81)~~80).

ASB’s interest-rate risk sensitivity measures as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 constitute “forward-looking statements” and were as follows:


Change in interest rates	Change in NII (gradual change in interest rates)				Change in EVE (instantaneous change in interest rates)
(basis points)	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
+300	0.2	%	(0.1	%)	1.8	%	5.1	%
+200	0.2		—		1.7		3.8
+100	0.1		—		1.3		2.1
-100	(0.4)		(0.3)		(2.1)		(3.4)
-200	(1.0)		(0.9)		(4.7)		(7.8)
-300	(1.7)		(1.7)		(8.5)		(13.8)

Change in interest rates
Change in NII
(gradual change in interest rates)

Change in EVE
(instantaneous change in interest rates)
(basis points) September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
+300 3.4 % 1.9 % (6.0 )% (8.0 )%
+200 2.5
0.8
(2.7 ) (4.6 )
+100 1.4
—
—
(1.6 )
-100 (2.6 ) (0.5 ) (6.1 ) (1.6 )

~~Management believes that~~ ASB’s net interest ~~rate risk position~~income (NII) sensitivity profile remained neutral as of September 30, ~~2017 represents a reasonable level~~2023 compared to December 31, 2022 as expected asset repricing was relatively matched with liability repricing within the twelve-month simulation period.

Economic value of ~~risk. The NII profile under the rising interest rate scenarios~~equity (EVE) sensitivity was ~~more asset sensitive for all rate increases~~lower as of September 30, ~~2017~~2023 compared to December 31, ~~2016. Interest income increased~~2022 due to ~~the growth of the investment portfolio~~slower than anticipated mortgage prepayments and ~~higher income from the commercial and HELOC loan portfolios due to an increase~~a shift in the ~~short-term LIBOR and prime rates. In addition, the repricing assumptions of certain commercial loans were updated, which resulted in a net increase in NII.~~

~~ASB’s base EVE increased to $1.15 billion~~bank’s liability mix as of September 30, 2017, compared to $1.09 billion as of December 31, 2016, due to the growth and mix of the balance sheet. The growth of the investment portfolio was funded with the increase in core deposits. The upward shift in short term rates resulted in the market valuation of assets exceeding the valuation of liabilities.

EVE sensitivity to rising rates declined as of September 30, 2017 compared to December 31, 2016. During the first nine months of the year, the purchase of intermediate-termed duration investment securities was funded by longer duration core deposits resulting in a net decrease in EVE sensitivity. In addition, during the third quarter, the implementation of a new balance sheet management system along with some modeling improvements further decreased sensitivity.were replaced by rate sensitive deposits and shorter term wholesale funding.

The computation of the prospective effects of hypothetical interest rate changes on the NII sensitivity and the percentage change in EVE is based on numerous assumptions, including relative levels of market interest rates, loan prepayments, balance changes and pricing strategies, and should not be relied upon as ~~indicative~~indications of actual results. To the extent market conditions

and other factors vary from the assumptions used in the simulation analysis, actual results may differ materially from the simulation results. ~~Furthermore,~~ NII sensitivity analysis measures the change in ASB’s twelve-month, pretax NII in alternate interest rate scenarios, and is intended to help management identify potential exposures in ASB’s current balance sheet and formulate appropriate strategies for managing interest rate risk. The simulation does not contemplate any actions that ASB management might undertake in response to changes in interest rates. Further, the changes in NII vary in the twelve-month simulation period and are not necessarily evenly distributed over the period. These analyses are for analytical purposes only and do not represent management’s views of future market movements, the level of future earnings or the timing of any changes in earnings within the twelve month analysis horizon. The actual impact of changes in interest rates on NII will depend on the magnitude and speed with which rates change, actual changes in ASB’s balance sheet and management’s responses to the changes in interest rates.

Item 4. Controls and Procedures

HEI:

Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act. Management, including the Company’s Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective, as of the end of the period covered by this report, at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the third quarter of ~~2017~~2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Hawaiian Electric:

Disclosure Controls and Procedures

Hawaiian Electric maintains a set of disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by Hawaiian Electric in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms, and that such information is accumulated and communicated to Hawaiian Electric’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was performed under the supervision and with the participation of Hawaiian Electric’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Hawaiian Electric’s disclosure controls and procedures, as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act. Management, including Hawaiian Electric’s Chief Executive Officer and Chief Financial Officer, concluded that Hawaiian Electric’s disclosure controls and procedures were effective, as of the end of the period covered by this report, at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the third quarter of ~~2017~~2023 that have materially affected, or are reasonably likely to materially affect, Hawaiian Electric’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The descriptions of legal proceedings (including judicial proceedings and proceedings before the PUC and environmental and other administrative agencies) in HEI’s and Hawaiian Electric’s ~~2016~~2022 Form 10-K (see “Part I. Item 3. Legal Proceedings” and proceedings referred to therein) and this Form 10-Q (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 32, 4 and 45 of the Condensed Consolidated Financial Statements) are incorporated by reference in this Item 1. With regard to any pending legal proceeding, alternative dispute resolution, such as mediation or settlement, may be pursued where appropriate, with such efforts typically maintained in confidence unless and until a resolution is achieved. Certain HEI subsidiaries (including Hawaiian Electric and its subsidiaries, ASB and ~~ASB)~~Pacific Current and its subsidiaries) may also be involved in ordinary routine PUC proceedings, environmental proceedings and litigation incidental to their respective businesses.

Item 1A. Risk Factors

For information about Risk Factors, see pages 2520 to 3533 of HEI’s and Hawaiian Electric’s ~~2016~~2022 Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative

Disclosures about Market Risk” and the Condensed Consolidated Financial Statements herein. Also, see “Cautionary Note Regarding Forward-Looking Statements” on pages iv through vi herein and ~~v herein.~~as supplemented below.

Potential losses resulting from the Maui windstorm and wildfires could have a material adverse effect on HEI’s and Hawaiian Electric’s financial condition, liquidity, cash flows and results of operations. On August 8, 2023, a number of brush fires in the West Maui (Lahaina) and Upcountry Maui areas, caused widespread property damage, including damage to property of the Utilities, and at least 99 fatalities in Lahaina (the Maui windstorm and wildfires). The Maui windstorm and wildfires were fueled by extreme winds and drought-like conditions in those parts of Maui. According to the County of Maui, in addition to the loss of life, over 3,450 acres burned and over 2,500 structures were destroyed. In Lahaina, a fire was reported at about 6:30 a.m. (the “Morning Fire”) and appears to have been caused by power lines that fell in high winds and spread into a field near the Intermediate School. The Maui County Fire Department responded promptly to the Morning Fire, and according to the Fire Department’s public statement that morning, by 9 a.m. the Morning Fire was “100% contained.” The Maui County fire chief subsequently reported that the Fire Department had determined that the Morning Fire was “extinguished.” Shortly before 3 p.m. that day, while the power remained off, Utility crew members saw a small fire in the same field about 75 yards away from Lahainaluna Road. They immediately called 911 and reported the fire (the “Afternoon Fire”). At the time of the Afternoon Fire, the Company’s power lines in the area where that fire ignited were not energized and had not been energized for more than six hours. By the time the Maui County Fire Department arrived back on the scene, it was not able to contain the Afternoon Fire and it spread out of control toward Lahaina. No determination as to the cause of the Afternoon Fire has been made. The Company believes that most of the property damage and all of the fatalities are from the Afternoon Fire.

Multiple lawsuits have been filed against the Utilities and HEI alleging, among other things, that they were negligent in failing to prevent the wildfires that led to the property destruction and loss of life. If the Utilities and HEI are held responsible for damages caused by the Maui windstorm and wildfires, it could have a material impact on HEI’s and Hawaiian Electric’s financial condition, liquidity, cash flows and results of operations. The Company has $165 million in insurance coverage for third party claims, but the aggregate losses associated with the Maui windstorm and wildfires could significantly exceed that amount. Also, the Company is incurring legal and consulting fees to manage the lawsuits and financial implications related to the Maui windstorm and wildfires, and those amounts are likely to be material.

HEI’s and Hawaiian Electric’s access to capital markets and other sources of debt and equity financings in a timely manner and on acceptable terms will continue to be negatively impacted as a result of the downgrades in their debt credit ratings to below investment grade. In August 2023, HEI and Hawaiian Electric received multiple downgrades to their debt, including to ratings below investment grade, by Fitch, Moody’s and S&P. Unless and until these debt ratings are upgraded to investment grade, the Company will continue to have restricted access to capital markets and other sources of debt and equity financings in a timely manner and on acceptable terms. Accordingly, the Company’s financial condition, liquidity, cash flows and results of operations may be adversely impacted if debt credit ratings are maintained at below investment grade for an extended period of time.

Extreme weather events and other natural disasters, particularly those exacerbated by climate change, could materially affect Hawaiian Electric’s assets, particularly if they fail or are found to have contributed to a wildfire. Extreme weather-related incidents and other natural disasters, including volcanic eruptions, mudslides, hurricanes, tsunamis and other storms, can interfere with the generation and transmission of electricity, and can seriously damage the infrastructure necessary to deliver electricity to customers.These risks are increasing, as climate change has exacerbated some of the conditions that lead to these extreme weather events and natural disasters. Such an event can result in lost revenue and increased expenses for the Utilities,

100

but it also can result in regulatory penalties and disallowances if Hawaiian Electric is unable to restore power on a timely basis. Also, an extreme event can lead to significant claims for damages, including for loss of life and property, and has been the case with the Maui windstorm and wildfires. Therefore, these events could materially affect the Company’s business, reputation, financial condition and results of operations.

A material reduction or delay of dividends or other distributions from one or more operating subsidiaries to HEI for an extended period of time could have a material adverse effect on HEI’s financial condition, liquidity, cash flows and results of operations. As a holding company with no significant operations of its own, HEI’s cash flows and consequent ability to service its obligations is dependent upon its receipt of dividends or other distributions from its operating subsidiaries and its ability to issue common stock or other equity securities and to incur additional debt. A material reduction or delay in dividends or other distributions by one or both of Hawaiian Electric and ASB for an extended period of time could have a material adverse effect on the Company’s business, financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities

(c) Purchases of HEI common shares were made on the open market during the third quarter of 2023 to satisfy the requirements of certain plans as follows:

ISSUER PURCHASES OF EQUITY SECURITIES

Period*

Total Number of Shares Purchased **

Average
Price Paid
per Share **
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
July 1 to 31, 2017 33,787
$32.51 — NA
August 1 to 31, 2017 25,972
$33.23 — NA
September 1 to 30, 2017 181,072
$34.33 — NA


Period*	Total Number of Shares Purchased **	Average Price Paid per Share **	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
July 1 to 31, 2023	14,114	$37.46	—	NA
August 1 to 31, 2023	101,641	$14.96	—	NA
September 1 to 30, 2023	103,693	$12.53	—	NA

NA - Not applicable.

* Trades (total number of shares purchased) are reflected in the month in which the order is placed.

**The purchases were made to satisfy the requirements of the DRIP, the HEIRSP and the ASB 401(k) Plan for shares purchased for cash or by the reinvestment of dividends by participants under those plans and none of the purchases were made under publicly announced repurchase plans or programs. Average prices per share are calculated exclusive of any commissions payable to the brokers making the purchases for the DRIP, the HEIRSP and the ASB 401(k) Plan. Of the “Total number of shares purchased,” ~~32,817~~8,970 of the ~~33,787~~14,114 shares, ~~all~~44,934 of the ~~25,972 shares and 163,512 of the 181,072~~101,641 shares were purchased for the DRIP; ~~none~~3,986 of the ~~33,787~~14,114 shares, ~~none~~52,931 of the ~~25,972~~101,641 shares and ~~13,700~~91,116 of the ~~181,072~~103,693 shares were purchased for the HEIRSP; and the remainder was purchased for the ASB 401(k) Plan. The repurchased shares were issued for the accounts of the participants under registration statements registering the shares issued under these plans.

101

Item 5. Other Information

A.~~Ratio~~During the three months ended September 30, 2023, none of ~~earnings to fixed charges~~.

Nine months ended September 30 Years ended December 31
2017 2016 2016 2015 2014 2013 2012
HEI and Subsidiaries

Excluding interest on ASB deposits 3.92
5.34
5.05
3.68
3.80
3.55
3.30
Including interest on ASB deposits 3.66
5.04
4.75
3.54
3.65
3.42
3.15
Hawaiian Electric and Subsidiaries 3.58
4.18
4.11
3.97
4.04
3.72
3.37

the Company’s directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” in each case as defined in Item 408(a) of Regulation S-K.

~~See HEI Exhibit 12.1 and Hawaiian Electric Exhibit 12.2.~~

Item 6. Exhibits



~~HEI Exhibit 4~~		~~Letter Amendment effective August 15, 2017 to Master Trust Agreement (dated September 4, 2012) between HEI and ASB and Fidelity Management Trust Company~~

~~HEI Exhibit 12.1~~	~~Hawaiian Electric Industries, Inc. and Subsidiaries~~ ~~Computation of ratio of earnings to fixed charges, nine months ended September 30, 2017 and 2016 and years ended December 31, 2016, 2015, 2014, 2013 and 2012~~

HEI Exhibit 31.1		Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Scott W. H. Seu (HEI Chief Executive Officer)

HEI Exhibit 31.2			Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of ~~Constance H. Lau~~Scott T. DeGhetto (HEI Chief ~~Executive~~Financial Officer)

HEI Exhibit ~~31.2~~32.1			HEI Certification Pursuant to 18 U.S.C. Section 1350

HEI Exhibit 101.INS			XBRL Instance Document - the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

HEI Exhibit 101.SCH			Inline XBRL Taxonomy Extension Schema Document

HEI Exhibit 101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document

HEI Exhibit 101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document

HEI Exhibit 101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document

HEI Exhibit 101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document

HEI Exhibit 104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



Hawaiian Electric Exhibit 31.3			Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Shelee M. T. Kimura (Hawaiian Electric Chief Executive Officer)

Hawaiian Electric Exhibit 31.4			Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of ~~Gregory C. Hazelton (HEI Chief Financial Officer)~~

~~HEI Exhibit 32.1~~	~~HEI Certification Pursuant to 18 U.S.C. Section 1350~~

~~HEI Exhibit 101.INS~~	~~XBRL Instance Document~~

~~HEI Exhibit 101.SCH~~	~~XBRL Taxonomy Extension Schema Document~~

~~HEI Exhibit 101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~HEI Exhibit 101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~HEI Exhibit 101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document~~

~~HEI Exhibit 101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document~~

~~Hawaiian Electric Exhibit 12.2~~	~~Hawaiian Electric Company, Inc. and Subsidiaries~~ ~~Computation of ratio of earnings to fixed charges, nine months ended September 30, 2017 and 2016 and years ended December 31, 2016, 2015, 2014, 2013 and 2012~~

~~Hawaiian Electric Exhibit 31.3~~	~~Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Alan M. Oshima (Hawaiian Electric Chief Executive Officer)~~

~~Hawaiian Electric Exhibit 31.4~~	~~Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Tayne S. Y. Sekimura~~Paul K. Ito (Hawaiian Electric Chief Financial Officer)

Hawaiian Electric Exhibit 32.2			Hawaiian Electric Certification Pursuant to 18 U.S.C. Section 1350

102

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized. The signature of the undersigned companies shall be deemed to relate only to matters having reference to such companies and any subsidiaries thereof.

HAWAIIAN ELECTRIC INDUSTRIES, INC.

HAWAIIAN ELECTRIC COMPANY, INC.

(Registrant)

/s/ ~~Constance~~Scott W. H. ~~Lau~~Seu

/s/ ~~Alan~~Shelee M. ~~Oshima~~T. Kimura

~~Constance~~Scott W. H. ~~Lau~~Seu

~~Alan~~Shelee M. ~~Oshima~~T. Kimura

President and Chief Executive Officer

(Principal Executive Officer of HEI)

(Principal Executive Officer of Hawaiian Electric)

/s/ ~~Gregory C. Hazelton~~Scott T. DeGhetto

/s/ ~~Tayne S. Y. Sekimura~~Paul K. Ito

~~Gregory C. Hazelton~~Scott T. DeGhetto

~~Tayne S. Y. Sekimura~~Paul K. Ito

Executive Vice President, ~~and~~

Senior Vice President,

Chief Financial Officer and Treasurer

~~and~~ Chief Financial Officer and Treasurer

(Principal Financial ~~and Accounting~~Officer of HEI)

(Principal Financial Officer of Hawaiian Electric)

~~Officer of HEI)~~

Date: November ~~2, 2017~~13, 2023

103


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



Class of Common Stock	Outstanding October ~~27, 2017~~18, 2023
Hawaiian Electric Industries, Inc. (Without Par Value)	~~108,785,978~~ 110,124,098	Shares
Hawaiian Electric Company, Inc. ($6-2/3 Par Value)	~~16,019,785~~ 17,854,278	Shares (not publicly traded)


Terms		Definitions
ABR		Alternate Base Rate
ACL		Allowance for credit losses, which is the current credit loss standard, requires recording the allowance based on the expected loss model
AES Hawaii		AES Hawaii, Inc.


~~Terms~~		~~Definitions~~
~~AES Hawaii~~AOCI		~~AES Hawaii, Inc.~~
~~AFUDC~~	~~Allowance for funds used during construction~~
~~AOCI~~	Accumulated other comprehensive income/(loss)
~~ASB~~ARA		Annual revenue adjustment
ASB		American Savings Bank, F.S.B., a ~~wholly-owned~~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.
~~ASU~~
ASU		Accounting Standards Update
~~CIP CT-1~~		~~Campbell Industrial Park 110 MW combustion turbine No. 1~~
~~Company~~CBRE		Community-based renewable energy
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~~ and ~~wound up in 2017);~~Pacific Current, LLC and its subsidiaries (listed under Pacific Current). 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~~was dissolved in March 2022.
Consumer Advocate		Division of Consumer Advocacy, Department of Commerce and Consumer Affairs of the State of Hawaii
~~CBRE~~CSSM		~~Community-based renewable energy~~Collective Shared Savings Mechanism
~~DER~~D&O		~~Distributed energy resources~~
~~D&O~~	Decision and order from the PUC
DG		~~Distributed generation~~
~~Dodd-Frank Act~~DER		~~Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010~~Distributed energy resources
~~DOH~~		~~Department of Health of the State of Hawaii~~
DRIP		HEI Dividend Reinvestment and Stock Purchase Plan
~~DSM~~		~~Demand-side management~~
~~ECAC~~
ECRC		Energy cost ~~adjustment~~recovery clause
EIP		2010 Equity and Incentive Plan, as amended and restated
EPA		Environmental Protection Agency — federal
~~EPS~~EPRM		Exceptional Project Recovery Mechanism
EPS		Earnings per share
~~ERP/EAM~~		~~Enterprise Resource Planning/Enterprise Asset Management~~
~~EVE~~
ESM		Earnings Sharing Mechanism
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~~Fitch		Fitch Ratings, Inc.
FNMA		Federal National Mortgage Association
FRB		Federal Reserve Board
GAAP		Accounting principles generally accepted in the United States of America


GHG		Greenhouse gas
~~Terms~~GNMA		~~Definitions~~
~~GNMA~~	Government National Mortgage Association
GSPA		Grid Services Purchase Agreement
Hamakua Energy		Hamakua Energy, LLC, an indirect subsidiary of Pacific Current
Hawaii Electric Light		Hawaii Electric Light Company, Inc., an electric utility subsidiary of Hawaiian Electric Company, Inc.
Hawaiian Electric		Hawaiian Electric Company, Inc., an electric utility subsidiary of Hawaiian Electric Industries, Inc. and parent company of Hawaii Electric Light Company, Inc., Maui Electric Company, Limited ~~HECO Capital Trust III (unconsolidated financing subsidiary),~~and Renewable Hawaii, Inc. ~~and Uluwehiokama Biofuels Corp.~~
~~HEP~~HEI		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.
~~HEI~~	Hawaiian Electric Industries, Inc., direct parent company of Hawaiian Electric Company, Inc., ASB Hawaii, Inc.~~, HEI Properties, Inc. (dissolved in 2015~~ and ~~wound up in 2017),~~Pacific Current, LLC. The Old Oahu Tug Service, Inc. ~~(formerly Hawaiian Tug & Barge Corp.) and Pacific Current, LLC~~was dissolved in March 2022.



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 months ended September 30, ~~2017~~2023 and ~~2016~~2022
2		Condensed Consolidated Statements of Comprehensive Income (unaudited) - three and nine months ended September 30, ~~2017~~2023 and ~~2016~~2022
3		Condensed Consolidated Balance Sheets (unaudited) - September 30, ~~2017~~2023 and December 31, ~~2016~~2022
4		Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) - three and nine months ended September 30, ~~2017~~2023 and ~~2016~~2022
5		Condensed Consolidated Statements of Cash Flows (unaudited) - nine months ended September 30, ~~2017~~2023 and ~~2016~~2022
		Hawaiian Electric Company, Inc. and Subsidiaries
67		Condensed Consolidated Statements of Income (unaudited) - three and nine months ended September 30, ~~2017~~ 2023 and ~~2016~~2022
67		Condensed Consolidated Statements of Comprehensive Income (unaudited) - three and nine months ended September 30, ~~2017~~ 2023 and ~~2016~~2022
78		Condensed Consolidated Balance Sheets (unaudited) - September 30, ~~2017~~2023 and December 31, ~~2016~~2022
810		Condensed Consolidated Statements of Changes in Common Stock Equity (unaudited) - three and nine months ended September 30, ~~2017~~2023 and ~~2016~~2022
911		Condensed Consolidated Statements of Cash Flows (unaudited) - nine months ended September 30, ~~2017~~ 2023 and ~~2016~~2022
1012		Notes to Condensed Consolidated Financial Statements (unaudited)
6063	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
6063		HEI consolidated
6471		Electric Utilities
7489		Bank
8398	Item 3.	Quantitative and Qualitative Disclosures About Market Risk
8499	Item 4.	Controls and Procedures

	PART II.	OTHER INFORMATION
84100	Item 1.	Legal Proceedings
84100	Item 1A.	Risk Factors
85101	Item 2.	Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities
85102	Item 5.	Other Information
86102	Item 6.	Exhibits
87103	Signatures


~~HEIRSP~~Terms		Definitions
HEIRSP		Hawaiian Electric Industries Retirement Savings Plan
HELOC		Home equity line of credit
HPOWER		City and County of Honolulu with respect to a power purchase agreement for a refuse-fired plant
~~IPP~~IIJA		Infrastructure Investment and Jobs Act
IPP		Independent power producer
~~Kalaeloa~~IRLCs		Interest rate lock commitments
Kalaeloa		Kalaeloa Partners, L.P.
~~KWH~~kWh		Kilowatthour/s (as applicable)
~~LNG~~LIBOR		~~Liquefied natural gas~~London Inter-Bank Offered Rate
~~LTIP~~LMI		Low-to-moderate income
LTIP		Long-term incentive plan
Mahipapa		Mahipapa, LLC, a subsidiary of Pacific Current
Maui Electric		Maui Electric Company, Limited, an electric utility subsidiary of Hawaiian Electric Company, Inc.
~~Merger~~Maui windstorm and wildfires		~~As provided~~The fires in the ~~Merger Agreement (see below), merger of NEE Acquisition Sub II, Inc. with~~West Maui (Lahaina) and ~~into HEI, with HEI surviving,~~Upcountry Maui areas that caused fatalities and ~~then merger of HEI with and into NEE Acquisition Sub I,~~widespread property damage in Lahaina on August 8, 2023
Mauo		Mauo, LLC, ~~with NEE Acquisition Sub I, LLC surviving as~~ a ~~wholly owned~~ subsidiary of ~~NextEra Energy, Inc.~~Pacific Current
~~Merger Agreement~~Moody’s		~~Agreement and Plan of Merger by and among HEI, NextEra Energy, Inc., NEE Acquisition Sub II, Inc. and NEE Acquisition Sub I, LLC, dated December 3, 2014 and terminated July 16, 2016~~Moody’s Investors Service’s
MPIR		Major Project Interim Recovery
MW
MRP		Multi-year rate period
MSRs		Mortgage servicing rights
MW		Megawatt/s (as applicable)
~~NEE~~NII		~~NextEra Energy, Inc.~~
~~NEM~~	~~Net energy metering~~
~~NII~~	Net interest income
NPBC		Net periodic benefit costs
NPPC		Net periodic pension costs
O&M		Other operation and maintenance
OCC		Office of the Comptroller of the Currency
OPEB		Postretirement benefits other than pensions
~~PPA~~Pacific Current		Pacific Current, LLC, a wholly owned subsidiary of HEI and parent company of Hamakua Holdings, LLC, Mauo, LLC, Alenuihaha Developments, LLC, Kaʻieʻie Waho Company, LLC, Kaʻaipuaʻa, LLC, Upena, LLC and Mahipapa, LLC
PBR		Performance-based regulation

PIMs		Performance incentive mechanisms
PPA		Power purchase agreement
PPAC		Purchased power adjustment clause
~~PSIPs~~PUC		~~Power Supply Improvement Plans~~
~~PUC~~	Public Utilities Commission of the State of Hawaii
PV		Photovoltaic
RAM		~~Rate~~Revenue adjustment mechanism
RBA		Revenue balancing account
~~RFP~~
RFP		Request for proposals
ROACE		Return on average common equity
RORB		Return on rate base
RPS		Renewable portfolio standards
~~SEC~~S&P		S&P Global Ratings
SBA		Small Business Administration
SEC		Securities and Exchange Commission
See		Means the referenced material is incorporated by reference
~~Spin-Off~~		~~The previously planned distribution to HEI shareholders of all of the common stock of ASB Hawaii immediately prior to the Merger, which was terminated~~
~~TDR~~SOFR		Secured Overnight Financing Rate
TDR		Troubled debt restructuring
~~Trust III~~		~~HECO Capital Trust III~~
Utilities		Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited
~~VIE~~VIEs		Variable interest ~~entity~~entities



(dollars in thousands)	September 30, 2017			December 31, 2016
Assets
Cash and cash equivalents	$	202,173		$	278,452
Accounts receivable and unbilled revenues, net	264,426			237,950
Available-for-sale investment securities, at fair value	1,320,110			1,105,182
Stock in Federal Home Loan Bank, at cost	9,706			11,218
Loans receivable held for investment, net	4,623,234			4,683,160
Loans held for sale, at lower of cost or fair value	15,728			18,817
Property, plant and equipment, net of accumulated depreciation of $2,537,320 and $2,444,348 at September 30, 2017 and December 31, 2016, respectively	4,813,875			4,603,465
Regulatory assets	936,964			957,451
Other	474,444			447,621
Goodwill	82,190			82,190
Total assets	$	12,742,850		$	12,425,506
Liabilities and shareholders’ equity
Liabilities
Accounts payable	$	160,897		$	143,279
Interest and dividends payable	26,484			25,225
Deposit liabilities	5,752,326			5,548,929
Short-term borrowings—other than bank	24,498			—
Other bank borrowings	153,552			192,618
Long-term debt, net—other than bank	1,618,446			1,619,019
Deferred income taxes	756,814			728,806
Regulatory liabilities	466,216			410,693
Contributions in aid of construction	565,118			543,525
Defined benefit pension and other postretirement benefit plans liability	620,788			638,854
Other	460,396			473,512
Total liabilities	10,605,535			10,324,460
Preferred stock of subsidiaries - not subject to mandatory redemption	34,293			34,293
Commitments and contingencies (Notes 3 and 4)
Shareholders’ equity
Preferred stock, no par value, authorized 10,000,000 shares; issued: none	—			—
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 108,785,978 shares and 108,583,413 shares at September 30, 2017 and December 31, 2016, respectively	1,661,492			1,660,910
Retained earnings	470,750			438,972
Accumulated other comprehensive loss, net of tax benefits	(29,220		)	(33,129		)
Total shareholders’ equity	2,103,022			2,066,753
Total liabilities and shareholders’ equity	$	12,742,850		$	12,425,506



($ 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



	September 30, 2017						Three months ended September 30, 2017				Nine months ended September 30, 2017
(in thousands)	Recorded investment		Unpaid principal balance		Related Allowance		Average recorded investment		Interest income recognized*		Average recorded investment		Interest income recognized*
With no related allowance recorded
Real estate:
Residential 1-4 family	$	9,987	$	10,541	$	—	$	9,650	$	70	$	9,503	$	230
Commercial real estate	—		—		—		—		—		121		11
Home equity line of credit	1,565		1,889		—		1,918		32		2,108		97
Residential land	1,134		1,425		—		1,209		73		1,080		107
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	2,901		6,257		—		1,808		29		2,888		37
Consumer	—		—		—		—		—		—		—
	$	15,587	$	20,112	$	—	$	14,585	$	204	$	15,700	$	482
With an allowance recorded
Real estate:
Residential 1-4 family	$	9,770	$	9,972	$	1,317	$	9,788	$	97	$	9,963	$	333
Commercial real estate	1,281		1,281		72		1,284		13		1,292		41
Home equity line of credit	5,513		5,543		409		5,076		68		4,670		164
Residential land	1,251		1,251		373		1,251		12		1,620		73
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	2,585		2,595		667		2,482		225		4,104		694
Consumer	67		67		30		67		1		55		2
	$	20,467	$	20,709	$	2,868	$	19,948	$	416	$	21,704	$	1,307
Total
Real estate:
Residential 1-4 family	$	19,757	$	20,513	$	1,317	$	19,438	$	167	$	19,466	$	563
Commercial real estate	1,281		1,281		72		1,284		13		1,413		52
Home equity line of credit	7,078		7,432		409		6,994		100		6,778		261
Residential land	2,385		2,676		373		2,460		85		2,700		180
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	5,486		8,852		667		4,290		254		6,992		731
Consumer	67		67		30		67		1		55		2
	$	36,054	$	40,821	$	2,868	$	34,533	$	620	$	37,404	$	1,789



	December 31, 2016						Three months ended September 30, 2016				Nine months ended September 30, 2016
(in thousands)	Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized*		Average recorded investment		Interest income recognized*
With no related allowance recorded
Real estate:
Residential 1-4 family	$	9,571	$	10,400	$	—	$	10,069	$	65	$	10,378	$	268
Commercial real estate	223		228		—		1,206		—		1,177		—
Home equity line of credit	1,500		1,900		—		1,220		6		1,035		15
Residential land	1,218		1,803		—		1,521		16		1,532		47
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	6,299		8,869		—		14,352		141		9,240		154
Consumer	—		—		—		10		—		3		—
	$	18,811	$	23,200	$	—	$	28,378	$	228	$	23,365	$	484
With an allowance recorded
Real estate:
Residential 1-4 family	$	10,283	$	10,486	$	1,352	$	11,800	$	119	$	11,933	$	356
Commercial real estate	1,346		1,346		80		2,444		—		1,939		—
Home equity line of credit	4,658		4,712		215		4,165		36		3,470		91
Residential land	2,411		2,411		789		2,915		44		3,090		165
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	14,240		14,240		1,641		11,433		65		15,075		275
Consumer	10		10		6		11		—		12		—
	$	32,948	$	33,205	$	4,083	$	32,768	$	264	$	35,519	$	887
Total
Real estate:
Residential 1-4 family	$	19,854	$	20,886	$	1,352	$	21,869	$	184	$	22,311	$	624
Commercial real estate	1,569		1,574		80		3,650		—		3,116		—
Home equity line of credit	6,158		6,612		215		5,385		42		4,505		106
Residential land	3,629		4,214		789		4,436		60		4,622		212
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	20,539		23,109		1,641		25,785		206		24,315		429
Consumer	10		10		6		21		—		15		—
	$	51,759	$	56,405	$	4,083	$	61,146	$	492	$	58,884	$	1,371



(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



	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 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



	Three months ended September 30				Nine months ended September 30
Mortgage revenue bond	2017		2016		2017		2016
(in thousands)
Beginning balance	$	15,427	$	—	$	15,427	$	—
Principal payments received	—		—		—		—
Purchases	—		—		—		—
Unrealized gain (loss) included in other comprehensive income	—		—		—		—
Ending balance	$	15,427	$	—	$	15,427	$	—



			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



					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%



(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



Test year (dollars in millions)	Date (filed/ implemented)	Amount		% over rates in effect	ROACE (%)	RORB (%)	Rate base		Common equity %	Stipulated agreement reached with Consumer Advocate
Hawaiian Electric
2014
Request	6/27/14
2017
Request	12/16/16	$	106.4	6.9	10.60	8.28	$	2,002	57.36
Hawaii Electric Light
2016
Request	9/19/16	$	19.3	6.5	10.60	8.44	$	479	57.12	Yes
Interim increase	8/31/17	9.9		3.4	9.50	7.80	482		56.69
Maui Electric
2015
Request	12/30/14
2018
Request	10/12/17	$	30.1	9.3	10.60	8.05	$	473	56.94



	Nine months ended September 30,
(in thousands)	2017			2016			Change
Net cash provided by operating activities	$	229,902		$	275,271		$	(45,369	)
Net cash used in investing activities	(229,287		)	(226,036		)	(3,251		)
Net cash used in financing activities	(64,914		)	(50,707		)	(14,207		)



	Three months ended September 30		Nine months ended September 30
(percent)	2017	2016	2017	2016
Return on average assets	1.07	0.97	1.02	0.89
Return on average equity	11.64	10.36	11.24	9.50
Net interest margin	3.69	3.57	3.68	3.59



	September 30, 2017			December 31, 2016
Outstanding balance of home equity loans (in thousands)	$	905,249		$	863,163
Percent of portfolio in first lien position	47.2		%	45.1		%
Annualized net charge-off (recovery) ratio	(0.04		)%	0.01		%
Delinquency ratio	0.38		%	0.35		%



							End of draw period – interest only									Current
September 30, 2017	Total			Interest only			2017-2018			2019-2021			Thereafter			amortizing
Outstanding balance (in thousands)	$	905,249		$	718,843		$	55,842		$	97,061		$	565,940		$	186,406
% of total	100		%	79		%	6		%	11		%	62		%	21		%



	Nine months ended September 30						Year ended December 31,
(in thousands)	2017			2016			2016
Allowance for loan losses, January 1	$	55,533		$	50,038		$	50,038
Provision for loan losses	7,231			15,266			16,763
Less: net charge-offs	9,717			6,567			11,268
Allowance for loan losses, end of period	$	53,047		$	58,737		$	55,533
Ratio of net charge-offs during the period to average loans outstanding (annualized)	0.27		%	0.19		%	0.24		%



Effective dates	1/1/2015		1/1/2016		1/1/2017		1/1/2018		1/1/2019
Capital conservation buffer			0.625	%	1.25	%	1.875	%	2.50	%
Common equity Tier-1 ratio + conservation buffer	4.50	%	5.125	%	5.75	%	6.375	%	7.00	%
Tier-1 capital ratio + conservation buffer	6.00	%	6.625	%	7.25	%	7.875	%	8.50	%
Total capital ratio + conservation buffer	8.00	%	8.625	%	9.25	%	9.875	%	10.50	%
Tier-1 leverage ratio	4.00	%	4.00	%	4.00	%	4.00	%	4.00	%
Countercyclical capital buffer — not applicable to ASB			0.625	%	1.25	%	1.875	%	2.50	%



	Nine months ended September 30		Years ended December 31
	2017	2016	2016	2015	2014	2013	2012
HEI and Subsidiaries
Excluding interest on ASB deposits	3.92	5.34	5.05	3.68	3.80	3.55	3.30
Including interest on ASB deposits	3.66	5.04	4.75	3.54	3.65	3.42	3.15
Hawaiian Electric and Subsidiaries	3.58	4.18	4.11	3.97	4.04	3.72	3.37

(in millions)

Gross amount of
recognized liabilities

Gross amount offset in
the Balance Sheet

Net amount of liabilities presented
in the Balance Sheet

Repurchase agreements

September 30, 2017

December 31, 2016