0000354707he:HawaiianElectricCompanyAndSubsidiariesMemberus-gaap:PensionPlansDefinedBenefitMember2021-04-012021-06-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 FORM 10-Q
 
☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 2021
 OR
     ☐        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Exact Name of Registrant as Specified in Its Charter Commission File Number I.R.S. Employer Identification No.
HAWAIIAN ELECTRIC INDUSTRIES, INC. 1-8503 99-0208097
and Principal Subsidiary
HAWAIIAN ELECTRIC COMPANY, INC. 1-4955 99-0040500
State of Hawaii
(State or other jurisdiction of incorporation or organization)
 
Hawaiian Electric Industries, Inc. – 1001 Bishop Street, Suite 2900, Honolulu, Hawaii  96813
Hawaiian Electric Company, Inc. – 1001 Bishop Street, Suite, 2500, Honolulu, Hawaii  96813
(Address of principal executive offices and zip code)
 
Hawaiian Electric Industries, Inc. – (808) 543-5662
Hawaiian Electric Company, Inc. – (808) 543-7771
(Registrant’s telephone number, including area code) 
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
RegistrantTitle of each classTrading Symbol(s)Name of each exchange on which registered
Hawaiian Electric Industries, Inc.Common Stock, Without Par ValueHENew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Hawaiian Electric Industries, Inc.Yes☒No☐ Hawaiian Electric Company, Inc.Yes☒No☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Hawaiian Electric Industries, Inc.Yes☒No☐ Hawaiian Electric Company, Inc.Yes☒No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
Hawaiian Electric Industries, Inc.: Hawaiian Electric Company, Inc.:
Large accelerated filer☒Smaller reporting company☐Large accelerated filer☐Smaller reporting company☐
Accelerated filer☐Emerging growth company☐Accelerated filer☐Emerging growth company☐
Non-accelerated filer☐Non-accelerated filer☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Hawaiian Electric Industries, Inc.☐Hawaiian Electric Company, Inc.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Hawaiian Electric Industries, Inc.Yes☐No☒Hawaiian Electric Company, Inc.Yes☐No☒
Securities registered pursuant to 12(b) of the Act:
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.
Class of Common Stock Outstanding AprilJuly 23, 2021
Hawaiian Electric Industries, Inc. (Without Par Value) 109,181,493109,311,034 Shares
Hawaiian Electric Company, Inc. ($6-2/3 Par Value) 17,324,376 Shares (not publicly traded)
Hawaiian Electric Industries, Inc. (HEI) is the sole holder of Hawaiian Electric Company, Inc. (Hawaiian Electric) common stock.
This combined Form 10-Q is separately filed by HEI and Hawaiian Electric. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to the other registrant, except that information relating to Hawaiian Electric is also attributed to HEI.


Hawaiian Electric Industries, Inc. and Subsidiaries
Hawaiian Electric Company, Inc. and Subsidiaries
Form 10-Q—Quarter ended March 31,June 30, 2021
 
TABLE OF CONTENTS
Page No. 
ii
iv
  
 
1
  
1
 
three and six months ended March 31,June 30, 2021 and 2022020
2
 
three and six months ended March 31,June 30, 2021 and 2022020
3
 
4
 
three and six months ended March 31,June 30, 2021 and 2020
5
 
threesix months ended March 31,June 30, 2021 and 2022020
  
67
 
three and six months ended March 31,June 30, 2021 and 2022020
67
 
three and six months ended March 31,June 30, 2021 and 2020
78
 
89
 
three and six months ended March 31,June 30, 2021 and 2022020
910
 
threesix months ended March 31,June 30, 2021 and 2020
910
 
5157
5157
 
5663
 
6977
 
7686
7787
  
 
7888
7888
7888
7989
8090
 
i

Hawaiian Electric Industries, Inc. and Subsidiaries
Hawaiian Electric Company, Inc. and Subsidiaries
Form 10-Q—Quarter ended March 31,June 30, 2021
GLOSSARY OF TERMS
Terms Definitions
ACLAllowance for credit losses, which is the current credit loss standard, requires recording the allowance based on the expected loss model
AES HawaiiAES Hawaii, Inc.
AFSAvailable for sale
AMIAdvanced Metering Infrastructure
AOCI Accumulated other comprehensive income/(loss)
ARAAnnual revenue adjustment
ASB American Savings Bank, F.S.B., a wholly owned subsidiary of ASB Hawaii, Inc.
ASB Hawaii ASB Hawaii, Inc., a wholly owned subsidiary of Hawaiian Electric Industries, Inc. and the parent company of American Savings Bank, F.S.B.
ASU Accounting Standards Update
CARES ActThe Coronavirus Aid, Relief, and Economic Security Act enacted March 27, 2020
CBRECommunity-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.; Pacific Current, LLC and its subsidiaries Hamakua Holdings, LLC (and its subsidiary, Hamakua Energy, LLC), Mauo, LLC and Ka‘ie‘ie Waho Company, LLC;(listed under Pacific Current); and The Old Oahu Tug Service, Inc. (formerly Hawaiian Tug & Barge Corp.)
Consumer Advocate Division of Consumer Advocacy, Department of Commerce and Consumer Affairs of the State of Hawaii
D&O Decision and order from the PUC
Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
DOH Department of Health of the State of Hawaii
DRIP HEI Dividend Reinvestment and Stock Purchase Plan
ECRCEnergy cost recovery clause
EIP 2010 Equity and Incentive Plan, as amended and restated
EPA Environmental Protection Agency — federal
EPRMExceptional Project Recovery Mechanism
EPSEarnings per share
ERP/EAMEnterprise Resource Planning/Enterprise Asset Management
EPSEarnings per share
ESGEnvironmental, Social & Governance
ESMEarnings 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
FitchFitch Ratings, Inc.
FNMA Federal National Mortgage Association
FRB Federal Reserve Board
GAAP Accounting principles generally accepted in the United States of America
GNMA Government National Mortgage Association
Hamakua EnergyHamakua Energy, LLC, an indirect subsidiary of HEI
Hawaii Electric Light Hawaii Electric Light Company, Inc., an electric utility subsidiary of Hawaiian Electric Company, Inc.

ii
GLOSSARY OF TERMS, continued

Terms Definitions
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 and Renewable Hawaii, Inc. Uluwehiokama Biofuels Corp. was dissolved effective as of July 14, 2020
HEI Hawaiian Electric Industries, Inc., direct parent company of Hawaiian Electric Company, Inc., ASB Hawaii, Inc., Pacific Current, LLC and The Old Oahu Tug Service, Inc. (formerly Hawaiian Tug & Barge Corp.)
HEIRSP Hawaiian Electric Industries Retirement Savings Plan
HELOCHome equity line of credit
HPOWER City and County of Honolulu with respect to a power purchase agreement for a refuse-fired plant
IPP Independent power producer
Kalaeloa Kalaeloa Partners, L.P.
kWh Kilowatthour/s (as applicable)
LTIP Long-term incentive plan
Maui Electric Maui Electric Company, Limited, an electric utility subsidiary of Hawaiian Electric Company, Inc.
MauoMauo, LLC, an indirect subsidiary of HEI
Moody’sMoody’s Investors Service’s
MPIRMajor Project Interim Recovery
MSRMortgage servicing right
MW Megawatt/s (as applicable)
MRPMulti-year rate period
NII Net interest income
NPBCNet periodic benefit costs
NPPCNet periodic pension costs
O&M Other operation and maintenance
OCC Office of the Comptroller of the Currency
OPEB Postretirement benefits other than pensions
Pacific CurrentPacific Current, LLC, a wholly owned subsidiary of HEI and parent company of Hamakua Holdings, LLC, Mauo, LLC, Alenuihaha Developments, LLC and Ka‘ie‘ie Waho Company, LLC
PBRPerformance-based regulation
PGVPuna Geothermal Venture
PIMsPerformance incentive mechanisms
PPA Power purchase agreement
PPAC Purchased power adjustment clause
PUC Public Utilities Commission of the State of Hawaii
PVPhotovoltaic
RAM Rate adjustment mechanism
RBA Revenue balancing account
REIPRenewable Energy Infrastructure Program
RFP Request for proposals
ROACE Return on average common equity
RORB Return on rate base
RPS Renewable portfolio standards
S&PStandard & Poor’s
SEC Securities and Exchange Commission
See Means the referenced material is incorporated by reference
Tax Act2017 Tax Cuts and Jobs Act (H.R. 1, An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018)
TDR Troubled debt restructuring
UtilitiesHawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited
VIEVIEs Variable interest entityentities
 
iii

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 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:
•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 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; the potential impacts of global and local developments (including global economic conditions and 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; and pandemics;
•the extent of the impact of the COVID-19 pandemic, including the duration, spread, severity and any recurrence of the COVID-19 pandemic due to new variants or insufficient vaccinations, the duration and scope of related government orders and restrictions, the impact on our employees, customers and suppliers, and the impact of the COVID-19 pandemic on the overall demand for the Company’s goods and services, all of which could be affected by the pace of distribution, administration, and efficacy of COVID-19 vaccines over the short- and long-term, as well as the proportion of the population vaccinated;
•ability to adequately address risks and capitalize on opportunities related to our ESGenvironmental, social and governance (ESG) priority areas, which currently include decarbonization, economic health and affordability, reliability and resilience, 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 its facilities in an effective and safe manner, and citizen activism and stakeholder activism could delay the construction, increase project costs or preclude the completion, of third-party or Utility projects that are required to meet electricity demand, reliability objectives and renewable portfolio standards (RPS) 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, trade policy and tariffs, energy and environmental policy, and other policy and regulatory changes advanced or proposed by President Biden and his administration;
•weather, natural disasters (e.g., hurricanes, earthquakes, tsunamis, lightning strikes, lava flows and the 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 resilience and reliability of the Company’s and Utilities’ operations and the economy;
•the timing, speed and extent of changes in interest rates and the shape of the yield curve, which could result in lower portfolio yields and net interest margin;
•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 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, and the risks inherent in changes in the value of the Company’s pension liabilities, including changes driven by interest rates;
•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, as amended by the Economic Growth, Regulatory Relief and Consumer Protection Act;
•increasing competition in the banking industry (e.g., increased price competition for deposits, or an outflow of deposits to alternative investments, which may have an adverse impact on ASB’s cost of funds);
iv

•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 proposals and related costs; reliance by the Utilities on outside parties such as the state, independent power producers (IPPs) and developers; and uncertainties surrounding technologies, solar power, wind power, biofuels, environmental assessments required to meet RPS goals; the impacts of implementation of the renewable energy proposals on future costs of 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, 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, the PUC’s April 2014 statement of its 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 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, distributed generation, 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;
•fuel oil price changes, delivery of adequate fuel by suppliers and the continued availability to the electric utilities of their energy cost recovery clauses (ECRCs);
•the continued availability to the electric utilities or modifications of other cost recovery mechanisms, including the purchased power adjustment clauses (PPACs), rate adjustment mechanisms (RAMs) 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 sales;
•the ability of the Utilities to recover increasing costs and earn a reasonable return on capital investments not covered by the annual revenue adjustment (ARA);
•the ability of the Utilities to achieve performance incentive goals currently in place;
•the impact from the PUC’s implementation of performance-based ratemaking 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 performance-based regulation (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;
•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 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’ 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 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 such as the commercial development of energy storage and microgrids and banking through alternative channels;channels, including use of digital currencies, which could include a central bank digital currency;
•cybersecurity risks and the potential for cyber incidents, including potential incidents at HEI, its third-party vendors, and its subsidiaries (including at ASB branches and electric utility plants) and incidents at data processing centers used, to the extent not prevented by intrusion detection and prevention systems, anti-virus software, firewalls and other general IT controls;
•failure to achieve remaining cost savings commitment related to the Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM) project-related benefits and 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 “cap and trade” legislation that may fundamentally alter costs to produce electricity and accelerate the move to renewable generation);
v

•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;
v

•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 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 and its subsidiaries, including the adoption of new U.S. accounting standards, the potential discontinuance of regulatory accounting related to PBR or other regulatory changes, the effects of potentially required consolidation of variable interest entities (VIEs), or required finance lease or on-balance-sheet operating lease accounting for PPAs with IPPs;
•downgrades by securities rating agencies in their ratings of the securities of HEI and Hawaiian Electric and their impact on results of financing efforts;
•faster than expected loan prepayments that can cause 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 credit losses, allowance for credit losses (ACL) and charge-offs;
•changes in ASB’s deposit 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 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;
•the ability of the Company’s non-regulated subsidiary, Pacific Current, LLC (Pacific Current), to achieve its performance and growth objectives, which in turn could affect its ability to service its non-recourse debt;
•the Company’s reliance on third parties and the risk of their non-performance, which has increased due to the impact from the COVID-19 pandemic; 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.
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.
vi

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (unaudited)
Three months ended March 31
(in thousands, except per share amounts)20212020
Revenues  
Electric utility$564,864 $597,442 
Bank77,131 79,738 
Other951 6 
Total revenues642,946 677,186 
Expenses  
Electric utility495,750 553,484 
Bank41,835 60,335 
Other7,330 3,665 
Total expenses544,915 617,484 
Operating income (loss)  
Electric utility69,114 43,958 
Bank35,296 19,403 
Other(6,379)(3,659)
Total operating income98,031 59,702 
Retirement defined benefits credit (expense)—other than service costs2,435 (934)
Interest expense, net—other than on deposit liabilities and other bank borrowings(23,736)(21,775)
Allowance for borrowed funds used during construction747 688 
Allowance for equity funds used during construction2,191 2,015 
Gain on sale of investment securities, net528 0 
Income before income taxes80,196 39,696 
Income taxes15,365 5,803 
Net income64,831 33,893 
Preferred stock dividends of subsidiaries473 473 
Net income for common stock$64,358 $33,420 
Basic earnings per common share$0.59 $0.31 
Diluted earnings per common share$0.59 $0.31 
Weighted-average number of common shares outstanding109,221 109,051 
Net effect of potentially dilutive shares271 314 
Weighted-average shares assuming dilution109,492 109,365 
Three months ended June 30Six months ended June 30
(in thousands, except per share amounts)2021202020212020
Revenues    
Electric utility$601,879 $534,215 $1,166,743 $1,131,657 
Bank77,260 74,714 154,391 154,452 
Other1,118 16 2,069 22 
Total revenues680,257 608,945 1,323,203 1,286,131 
Expenses    
Electric utility534,195 466,414 1,029,945 1,019,898 
Bank37,454 66,221 79,289 126,556 
Other6,752 4,754 14,082 8,419 
Total expenses578,401 537,389 1,123,316 1,154,873 
Operating income (loss)    
Electric utility67,684 67,801 136,798 111,759 
Bank39,806 8,493 75,102 27,896 
Other(5,634)(4,738)(12,013)(8,397)
Total operating income101,856 71,556 199,887 131,258 
Retirement defined benefits credit (expense)—other than service costs1,216 (934)3,651 (1,868)
Interest expense, net—other than on deposit liabilities and other bank borrowings(23,317)(22,613)(47,053)(44,388)
Allowance for borrowed funds used during construction812 752 1,559 1,440 
Allowance for equity funds used during construction2,377 2,194 4,568 4,209 
Gain on sale of investment securities, net0 9,275 528 9,275 
Income before income taxes82,944 60,230 163,140 99,926 
Income taxes18,599 10,870 33,964 16,673 
Net income64,345 49,360 129,176 83,253 
Preferred stock dividends of subsidiaries473 473 946 946 
Net income for common stock$63,872 $48,887 $128,230 $82,307 
Basic earnings per common share$0.58 $0.45 $1.17 $0.75 
Diluted earnings per common share$0.58 $0.45 $1.17 $0.75 
Weighted-average number of common shares outstanding109,282 109,146 109,252 109,098 
Net effect of potentially dilutive shares233 159 305 276 
Weighted-average shares assuming dilution109,515 109,305 109,557 109,374 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

1

Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (unaudited)
 Three months ended March 31
(in thousands)20212020
Net income for common stock$64,358 $33,420 
Other comprehensive income (loss), net of taxes:  
Net unrealized gains on available-for-sale investment securities:  
Net unrealized gains on available-for-sale investment securities arising during the period, net of taxes of $(16,616) and $7,120, respectively(45,390)19,448 
Reclassification adjustment for net realized gains included in net income, net of taxes of $(142) and NaN, respectively(387)0 
Derivatives qualifying as cash flow hedges:  
Unrealized interest rate hedging losses arising during the period, net of taxes of $542 and $(619), respectively1,562 (1,784)
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 of $2,084 and $1,986, respectively6,010 5,706 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $(2,015) and $(1,789), respectively(5,811)(5,158)
Other comprehensive income (loss), net of taxes(44,016)18,212 
Comprehensive income attributable to Hawaiian Electric Industries, Inc.$20,342 $51,632 
 Three months ended June 30Six months ended June 30
(in thousands)2021202020212020
Net income for common stock$63,872 $48,887 $128,230 $82,307 
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 of $6,214, $356, $(10,402) and $7,476, respectively16,976 973 (28,414)20,421 
Reclassification adjustment for net realized gains included in net income, net of taxes of NaN, $(599), $(142) and $(599), respectively0 (1,638)(387)(1,638)
Derivatives qualifying as cash flow hedges:    
Unrealized interest rate hedging gains (losses) arising during the period, net of taxes of $(243), $(69), $299 and $(688), respectively(701)(198)861 (1,982)
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 of $2,086, $1,981, $4,170 and $3,967, respectively6,008 5,690 12,018 11,396 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $(2,016), $(1,789), $(4,031) and $(3,578), respectively(5,811)(5,159)(11,622)(10,317)
Other comprehensive income (loss), net of taxes16,472 (332)(27,544)17,880 
Comprehensive income attributable to Hawaiian Electric Industries, Inc.$80,344 $48,555 $100,686 $100,187 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

2

Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited) 
(dollars in thousands)(dollars in thousands)March 31, 2021December 31, 2020(dollars in thousands)June 30, 2021December 31, 2020
AssetsAssets  Assets  
Cash and cash equivalentsCash and cash equivalents$277,579 $341,421 Cash and cash equivalents$247,443 $341,421 
Restricted cashRestricted cash14,067 17,558 Restricted cash10,618 17,558 
Accounts receivable and unbilled revenues, netAccounts receivable and unbilled revenues, net273,197 281,216 Accounts receivable and unbilled revenues, net312,727 281,216 
Available-for-sale investment securities, at fair valueAvailable-for-sale investment securities, at fair value2,305,257 1,970,417 Available-for-sale investment securities, at fair value2,509,906 1,970,417 
Held-to-maturity investment securities, at amortized costHeld-to-maturity investment securities, at amortized cost295,046 226,947 Held-to-maturity investment securities, at amortized cost375,655 226,947 
Stock in Federal Home Loan Bank, at costStock in Federal Home Loan Bank, at cost10,000 8,680 Stock in Federal Home Loan Bank, at cost10,000 8,680 
Loans held for investment, netLoans held for investment, net5,218,288 5,232,642 Loans held for investment, net5,106,207 5,232,642 
Loans held for sale, at lower of cost or fair valueLoans held for sale, at lower of cost or fair value23,637 28,275 Loans held for sale, at lower of cost or fair value50,877 28,275 
Property, plant and equipment, net of accumulated depreciation of $2,947,647 and $2,903,144 at March 31, 2021 and December 31, 2020, respectively5,283,768 5,265,735 
Property, plant and equipment, net of accumulated depreciation of $2,995,484 and $2,903,144 at June 30, 2021 and December 31, 2020, respectivelyProperty, plant and equipment, net of accumulated depreciation of $2,995,484 and $2,903,144 at June 30, 2021 and December 31, 2020, respectively5,310,162 5,265,735 
Operating lease right-of-use assetsOperating lease right-of-use assets162,713 153,069 Operating lease right-of-use assets154,720 153,069 
Regulatory assetsRegulatory assets773,426 766,708 Regulatory assets767,856 766,708 
OtherOther639,505 629,149 Other668,368 629,149 
GoodwillGoodwill82,190 82,190 Goodwill82,190 82,190 
Total assetsTotal assets$15,358,673 $15,004,007 Total assets$15,606,729 $15,004,007 
Liabilities and shareholders’ equityLiabilities and shareholders’ equity  Liabilities and shareholders’ equity  
LiabilitiesLiabilities  Liabilities  
Accounts payableAccounts payable$164,936 $182,347 Accounts payable$175,060 $182,347 
Interest and dividends payableInterest and dividends payable32,405 23,547 Interest and dividends payable20,284 23,547 
Deposit liabilitiesDeposit liabilities7,745,294 7,386,957 Deposit liabilities7,873,430 7,386,957 
Short-term borrowings—other than bankShort-term borrowings—other than bank100,242 129,379 Short-term borrowings—other than bank95,748 129,379 
Other bank borrowingsOther bank borrowings102,685 89,670 Other bank borrowings129,665 89,670 
Long-term debt, net—other than bankLong-term debt, net—other than bank2,229,738 2,119,129 Long-term debt, net—other than bank2,258,043 2,119,129 
Deferred income taxesDeferred income taxes380,365 395,089 Deferred income taxes384,953 395,089 
Operating lease liabilitiesOperating lease liabilities175,334 160,432 Operating lease liabilities167,997 160,432 
Regulatory liabilitiesRegulatory liabilities956,139 959,786 Regulatory liabilities966,477 959,786 
Defined benefit pension and other postretirement benefit plans liabilityDefined benefit pension and other postretirement benefit plans liability558,191 567,438 Defined benefit pension and other postretirement benefit plans liability548,840 567,438 
OtherOther557,758 618,438 Other584,610 618,438 
Total liabilitiesTotal liabilities13,003,087 12,632,212 Total liabilities13,205,107 12,632,212 
Preferred stock of subsidiaries - not subject to mandatory redemptionPreferred stock of subsidiaries - not subject to mandatory redemption34,293 34,293 Preferred stock of subsidiaries - not subject to mandatory redemption34,293 34,293 
Commitments and contingencies (Notes 3 and 4)Commitments and contingencies (Notes 3 and 4)00Commitments and contingencies (Notes 3 and 4)00
Shareholders’ equityShareholders’ equity  Shareholders’ equity  
Preferred stock, 0 par value, authorized 10,000,000 shares; issued: NaNPreferred stock, 0 par value, authorized 10,000,000 shares; issued: NaN0 0 Preferred stock, 0 par value, authorized 10,000,000 shares; issued: NaN0 0 
Common stock, 0 par value, authorized 200,000,000 shares; issued and outstanding: 109,281,493 shares and 109,181,124 shares at March 31, 2021 and December 31, 2020, respectively1,678,973 1,678,368 
Common stock, 0 par value, authorized 200,000,000 shares; issued and outstanding: 109,311,034 shares and 109,181,124 shares at June 30, 2021 and December 31, 2020, respectivelyCommon stock, 0 par value, authorized 200,000,000 shares; issued and outstanding: 109,311,034 shares and 109,181,124 shares at June 30, 2021 and December 31, 2020, respectively1,681,820 1,678,368 
Retained earningsRetained earnings687,600 660,398 Retained earnings714,317 660,398 
Accumulated other comprehensive loss, net of tax benefitsAccumulated other comprehensive loss, net of tax benefits(45,280)(1,264)Accumulated other comprehensive loss, net of tax benefits(28,808)(1,264)
Total shareholders’ equityTotal shareholders’ equity2,321,293 2,337,502 Total shareholders’ equity2,367,329 2,337,502 
Total liabilities and shareholders’ equityTotal liabilities and shareholders’ equity$15,358,673 $15,004,007 Total liabilities and shareholders’ equity$15,606,729 $15,004,007 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

3

Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) 
Common stockRetainedAccumulated
other
comprehensive		  Common stockRetainedAccumulated
other
comprehensive		 
(in thousands)(in thousands)SharesAmountEarningsincome (loss)Total(in thousands)SharesAmountEarningsincome (loss)Total
Balance, December 31, 2020Balance, December 31, 2020109,181 $1,678,368 $660,398 $(1,264)$2,337,502 Balance, December 31, 2020109,181 $1,678,368 $660,398 $(1,264)$2,337,502 
Net income for common stockNet income for common stock— — 64,358 — 64,358 Net income for common stock— — 64,358 — 64,358 
Other comprehensive loss, net of tax benefitsOther comprehensive loss, net of tax benefits— — — (44,016)(44,016)
Share-based expenses and other, netShare-based expenses and other, net100 605 — — 605 
Common stock dividends (34¢ per share)Common stock dividends (34¢ per share)— — (37,156)— (37,156)
Balance, March 31, 2021Balance, March 31, 2021109,281 1,678,973 687,600 (45,280)2,321,293 
Net income for common stockNet income for common stock— — 63,872 — 63,872 
Other comprehensive income, net of taxesOther comprehensive income, net of taxes— — — (44,016)(44,016)Other comprehensive income, net of taxes— — — 16,472 16,472 
Share-based expenses and other, netShare-based expenses and other, net100 605 — — 605 Share-based expenses and other, net30 2,847 — — 2,847 
Common stock dividends (34¢ per share)Common stock dividends (34¢ per share)— — (37,156)— (37,156)Common stock dividends (34¢ per share)— — (37,155)— (37,155)
Balance, March 31, 2021109,281 $1,678,973 $687,600 $(45,280)$2,321,293 
Balance, June 30, 2021Balance, June 30, 2021109,311 $1,681,820 $714,317 $(28,808)$2,367,329 
Balance, December 31, 2019Balance, December 31, 2019108,973 $1,678,257 $622,042 $(20,039)$2,280,260 Balance, December 31, 2019108,973 $1,678,257 $622,042 $(20,039)$2,280,260 
Impact of adoption of ASU No. 2016-13
Impact of adoption of ASU No. 2016-13
— — (15,372)— (15,372)Impact of adoption of ASU No. 2016-13— — (15,372)— (15,372)
Balance, January 1, 2020 after adoption of
ASU No. 2016-13		Balance, January 1, 2020 after adoption of
ASU No. 2016-13		108,973 1,678,257 606,670 (20,039)2,264,888 Balance, January 1, 2020 after adoption of
ASU No. 2016-13		108,973 1,678,257 606,670 (20,039)2,264,888 
Net income for common stockNet income for common stock— — 33,420 — 33,420 Net income for common stock— — 33,420 — 33,420 
Other comprehensive income, net of taxesOther comprehensive income, net of taxes— — — 18,212 18,212 Other comprehensive income, net of taxes— — — 18,212 18,212 
Share-based expenses and other, netShare-based expenses and other, net172 (3,996)— — (3,996)Share-based expenses and other, net172 (3,996)— — (3,996)
Common stock dividends (33¢ per share)Common stock dividends (33¢ per share)— — (36,019)— (36,019)Common stock dividends (33¢ per share)— — (36,019)— (36,019)
Balance, March 31, 2020Balance, March 31, 2020109,145 $1,674,261 $604,071 $(1,827)$2,276,505 Balance, March 31, 2020109,145 1,674,261 604,071 (1,827)2,276,505 
Net income for common stockNet income for common stock— — 48,887 — 48,887 
Other comprehensive loss, net of tax benefitsOther comprehensive loss, net of tax benefits— — — (332)(332)
Share-based expenses and other, netShare-based expenses and other, net36 2,355 — — 2,355 
Common stock dividends (33¢ per share)Common stock dividends (33¢ per share)— — (36,017)— (36,017)
Balance, June 30, 2020Balance, June 30, 2020109,181 $1,676,616 $616,941 $(2,159)$2,291,398 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

4

Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30
(in thousands)20212020
Cash flows from operating activities  
Net income$129,176 $83,253 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation of property, plant and equipment122,921 119,367 
Other amortization17,896 26,055 
Provision for credit losses(20,642)25,534 
Loans originated, held for sale(239,761)(277,738)
Proceeds from sale of loans, held for sale266,497 259,268 
Gain on sale of investment securities, net(528)(9,275)
Gain on sale of loans, net(6,225)(8,252)
Deferred income taxes(7,355)(21,565)
Share-based compensation expense5,454 4,059 
Allowance for equity funds used during construction(4,568)(4,209)
Other(5,037)(3,854)
Changes in assets and liabilities  
Decrease (increase) in accounts receivable and unbilled revenues, net(41,884)23,458 
Decrease (increase) in fuel oil stock(43,681)31,583 
Decrease (increase) in regulatory assets(17,731)9,432 
Increase in regulatory liabilities5,824 1,717 
Increase (decrease) in accounts, interest and dividends payable2,683 (48,336)
Change in prepaid and accrued income taxes, tax credits and utility revenue taxes(1,818)(12,306)
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability(3,834)16,312 
Change in other assets and liabilities(39,800)(17,120)
Net cash provided by operating activities117,587 197,383 
Cash flows from investing activities  
Available-for-sale investment securities purchased(1,101,289)(476,582)
Principal repayments on available-for-sale investment securities320,597 181,451 
Proceeds from sale of available-for-sale investment securities197,354 169,157 
Purchases of held-to-maturity investment securities(187,172)0 
Proceeds from repayments or maturities of held-to-maturity investment securities38,401 15,093 
Purchase of stock from Federal Home Loan Bank(32,780)(22,966)
Redemption of stock from Federal Home Loan Bank31,460 21,520 
Net decrease (increase) in loans held for investment91,686 (328,356)
Proceeds from sale of residential loans17,398 0 
Capital expenditures(148,414)(197,816)
Proceeds from sale of low-income housing investments0 6,725 
Contributions to low income housing investments(6,478)(1,951)
Other7,805 4,469 
Net cash used in investing activities(771,432)(629,256)
Three months ended March 31
(in thousands)20212020
Cash flows from operating activities  
Net income$64,831 $33,893 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation of property, plant and equipment61,427 59,614 
Other amortization10,951 11,418 
Provision for credit losses(8,435)10,401 
Loans originated, held for sale(162,901)(76,770)
Proceeds from sale of loans, held for sale170,862 72,533 
Gain on sale of investment securities, net(528)0 
Gain on sale of loans(4,300)(2,000)
Deferred income taxes(2,196)(4,996)
Share-based compensation expense2,602 1,704 
Allowance for equity funds used during construction(2,191)(2,015)
Other(3,519)224 
Changes in assets and liabilities  
Decrease (increase) in accounts receivable and unbilled revenues, net5,664 (6,563)
Decrease (increase) in fuel oil stock(16,400)2,566 
Decrease (increase) in regulatory assets(14,869)1,171 
Increase (decrease) in regulatory liabilities(4,716)16,586 
Increase in accounts, interest and dividends payable7,677 8,935 
Change in prepaid and accrued income taxes, tax credits and utility revenue taxes(25,513)(45,205)
Decrease in defined benefit pension and other postretirement benefit plans liability(2,621)(490)
Change in other assets and liabilities(34,095)(19,713)
Net cash provided by operating activities41,730 61,293 
Cash flows from investing activities  
Available-for-sale investment securities purchased(781,992)(159,173)
Principal repayments on available-for-sale investment securities184,755 77,642 
Proceeds from sale of available-for-sale investment securities197,354 0 
Principal repayments of held-to-maturity investment securities20,185 4,851 
Purchases of held-to-maturity investment securities(88,262)0 
Purchase of stock from Federal Home Loan Bank(22,296)(20,766)
Redemption of stock from Federal Home Loan Bank20,976 19,440 
Net increase in loans held for investment23,922 (65,544)
Proceeds from sale of low-income housing investments0 6,725 
Capital expenditures(74,079)(125,554)
Contributions to low income housing investments(3,205)(1,026)
Other4,622 2,942 
Net cash used in investing activities(518,020)(260,463)
Cash flows from financing activities  
Net increase in deposit liabilities358,337 111,881 
Net increase (decrease) in short-term borrowings with original maturities of three months or less35,751 (135,710)
Net increase in other bank borrowings with original maturities of three months or less13,015 42,495 
Proceeds from issuance of short-term debt0 50,000 
Repayment of short-term debt(65,000)0 
Proceeds from issuance of long-term debt161,800 186,925 
Repayment of long-term debt(50,699)(909)
Withheld shares for employee taxes on vested share-based compensation(1,997)(5,700)
Common stock dividends(37,156)(36,018)
Preferred stock dividends of subsidiaries(473)(473)
Other(4,621)(4,590)
Net cash provided by financing activities408,957 207,901 
Net increase (decrease) in cash, cash equivalents and restricted cash(67,333)8,731 
Cash, cash equivalents and restricted cash, beginning of period358,979 227,685 
Cash, cash equivalents and restricted cash, end of period291,646 236,416 
Less: Restricted cash(14,067)(30,902)
Cash and cash equivalents, end of period$277,579 $205,514 
(continued)

5

Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)(continued)
Six months ended June 30
(in thousands)20212020
Cash flows from financing activities  
Net increase in deposit liabilities486,473 758,050 
Net increase (decrease) in short-term borrowings with original maturities of three months or less31,257 (119,211)
Net increase (decrease) in other bank borrowings with original maturities of three months or less39,995 (20,135)
Proceeds from issuance of short-term debt0 165,000 
Repayment of short-term debt(65,000)(100,000)
Proceeds from issuance of other bank borrowings0 30,000 
Proceeds from issuance of long-term debt191,487 351,942 
Repayment of long-term debt and funds transferred for repayment of long-term debt(51,989)(177,245)
Withheld shares for employee taxes on vested share-based compensation(2,002)(5,700)
Common stock dividends(74,311)(72,037)
Preferred stock dividends of subsidiaries(946)(946)
Other(2,037)(1,672)
Net cash provided by financing activities552,927 808,046 
Net increase (decrease) in cash, cash equivalents and restricted cash(100,918)376,173 
Cash, cash equivalents and restricted cash, beginning of period358,979 227,685 
Cash, cash equivalents and restricted cash, end of period258,061 603,858 
Less: Restricted cash(10,618)(29,376)
Cash and cash equivalents, end of period$247,443 $574,482 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.
56

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (unaudited)
Three months ended March 31
(in thousands)20212020
Revenues$564,864 $597,442 
Expenses  
Fuel oil127,427 173,221 
Purchased power142,296 139,816 
Other operation and maintenance114,570 127,547 
Depreciation57,355 55,850 
Taxes, other than income taxes54,102 57,050 
Total expenses495,750 553,484 
Operating income69,114 43,958 
Allowance for equity funds used during construction2,191 2,015 
Retirement defined benefits credit (expense)—other than service costs1,021 (381)
Interest expense and other charges, net(17,983)(16,594)
Allowance for borrowed funds used during construction747 688 
Income before income taxes55,090 29,686 
Income taxes11,233 5,282 
Net income43,857 24,404 
Preferred stock dividends of subsidiaries229 229 
Net income attributable to Hawaiian Electric43,628 24,175 
Preferred stock dividends of Hawaiian Electric270 270 
Net income for common stock$43,358 $23,905 
Three months ended June 30Six months ended June 30
(in thousands)2021202020212020
Revenues$601,879 $534,215 $1,166,743 $1,131,657 
Expenses    
Fuel oil139,136 112,451 266,563 285,672 
Purchased power162,465 136,838 304,761 276,654 
Other operation and maintenance118,142 110,041 232,712 237,588 
Depreciation57,381 55,696 114,736 111,546 
Taxes, other than income taxes57,071 51,388 111,173 108,438 
Total expenses534,195 466,414 1,029,945 1,019,898 
Operating income67,684 67,801 136,798 111,759 
Allowance for equity funds used during construction2,377 2,194 4,568 4,209 
Retirement defined benefits credit (expense)—other than service costs1,020 (382)2,041 (763)
Interest expense and other charges, net(17,995)(17,338)(35,978)(33,932)
Allowance for borrowed funds used during construction812 752 1,559 1,440 
Income before income taxes53,898 53,027 108,988 82,713 
Income taxes11,498 10,199 22,731 15,481 
Net income42,400 42,828 86,257 67,232 
Preferred stock dividends of subsidiaries229 229 458 458 
Net income attributable to Hawaiian Electric42,171 42,599 85,799 66,774 
Preferred stock dividends of Hawaiian Electric270 270 540 540 
Net income for common stock$41,901 $42,329 $85,259 $66,234 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 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 March 31
(in thousands)20212020
Net income for common stock$43,358 $23,905 
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 of $2,027 and $1,798, respectively5,845 5,184 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $(2,015) and $(1,789), respectively(5,811)(5,158)
Other comprehensive income, net of taxes34 26 
Comprehensive income attributable to Hawaiian Electric Company, Inc.$43,392 $23,931 
 Three months ended June 30Six months ended June 30
(in thousands)2021202020212020
Net income for common stock$41,901 $42,329 $85,259 $66,234 
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 of $2,028, $1,798, $4,055 and $3,596, respectively5,846 5,184 11,691 10,368 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $(2,016), $(1,789), $(4,031) and $(3,578), respectively(5,811)(5,159)(11,622)(10,317)
Other comprehensive income, net of taxes35 25 69 51 
Comprehensive income attributable to Hawaiian Electric Company, Inc.$41,936 $42,354 $85,328 $66,285 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.
67

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(dollars in thousands, except par value)March 31, 2021December 31, 2020
Assets  
Property, plant and equipment
Utility property, plant and equipment  
Land$51,611 $51,611 
Plant and equipment7,551,879 7,509,343 
Less accumulated depreciation(2,859,719)(2,819,079)
Construction in progress203,988 188,342 
Utility property, plant and equipment, net4,947,759 4,930,217 
Nonutility property, plant and equipment, less accumulated depreciation of $116 and $115 as of March 31, 2021 and December 31, 2020, respectively6,952 6,953 
Total property, plant and equipment, net4,954,711 4,937,170 
Current assets  
Cash and cash equivalents51,743 47,360 
Restricted cash11,506 15,966 
Customer accounts receivable, net141,649 147,832 
Accrued unbilled revenues, net101,813 101,036 
Other accounts receivable, net5,073 7,673 
Fuel oil stock, at average cost74,688 58,238 
Materials and supplies, at average cost69,726 67,344 
Prepayments and other36,419 44,083 
Regulatory assets54,322 30,435 
Total current assets546,939 519,967 
Other long-term assets  
Operating lease right-of-use assets138,534 127,654 
Regulatory assets719,104 736,273 
Other135,620 136,309 
Total other long-term assets993,258 1,000,236 
Total assets$6,494,908 $6,457,373 
Capitalization and liabilities  
Capitalization  
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 17,324,376 shares at
March 31, 2021 and December 31, 2020)
$115,515 $115,515 
Premium on capital stock746,987 746,987 
Retained earnings1,297,768 1,282,335 
Accumulated other comprehensive loss, net of tax benefits-retirement benefit plans(2,885)(2,919)
Common stock equity2,157,385 2,141,918 
Cumulative preferred stock — not subject to mandatory redemption34,293 34,293 
Long-term debt, net1,675,863 1,561,302 
Total capitalization3,867,541 3,737,513 
Commitments and contingencies (Note 3)00
Current liabilities  
Current portion of operating lease liabilities66,301 64,730 
Short-term borrowings from non-affiliates0 49,979 
Accounts payable123,199 133,849 
Interest and preferred dividends payable28,172 20,350 
Taxes accrued, including revenue taxes155,125 192,524 
Regulatory liabilities30,370 37,301 
Other70,000 74,262 
Total current liabilities473,167 572,995 
Deferred credits and other liabilities  
Operating lease liabilities84,102 69,494 
Deferred income taxes396,758 397,798 
Regulatory liabilities925,769 922,485 
Unamortized tax credits110,181 111,915 
Defined benefit pension and other postretirement benefit plans liability522,286 530,532 
Other115,104 114,641 
Total deferred credits and other liabilities2,154,200 2,146,865 
Total capitalization and liabilities$6,494,908 $6,457,373 
(dollars in thousands, except par value)June 30, 2021December 31, 2020
Assets  
Property, plant and equipment
Utility property, plant and equipment  
Land$51,612 $51,611 
Plant and equipment7,619,886 7,509,343 
Less accumulated depreciation(2,903,421)(2,819,079)
Construction in progress201,802 188,342 
Utility property, plant and equipment, net4,969,879 4,930,217 
Nonutility property, plant and equipment, less accumulated depreciation of $57 and $115 as of June 30, 2021 and December 31, 2020, respectively6,951 6,953 
Total property, plant and equipment, net4,976,830 4,937,170 
Current assets  
Cash and cash equivalents23,666 47,360 
Restricted cash8,968 15,966 
Customer accounts receivable, net152,392 147,832 
Accrued unbilled revenues, net132,978 101,036 
Other accounts receivable, net5,168 7,673 
Fuel oil stock, at average cost102,066 58,238 
Materials and supplies, at average cost72,959 67,344 
Prepayments and other31,913 44,083 
Regulatory assets59,905 30,435 
Total current assets590,015 519,967 
Other long-term assets  
Operating lease right-of-use assets131,622 127,654 
Regulatory assets707,951 736,273 
Other141,556 136,309 
Total other long-term assets981,129 1,000,236 
Total assets$6,547,974 $6,457,373 
Capitalization and liabilities  
Capitalization  
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 17,324,376 shares at
June 30, 2021 and December 31, 2020)
$115,515 $115,515 
Premium on capital stock746,987 746,987 
Retained earnings1,311,744 1,282,335 
Accumulated other comprehensive loss, net of tax benefits-retirement benefit plans(2,850)(2,919)
Common stock equity2,171,396 2,141,918 
Cumulative preferred stock — not subject to mandatory redemption34,293 34,293 
Long-term debt, net1,676,043 1,561,302 
Total capitalization3,881,732 3,737,513 
Commitments and contingencies (Note 3)00
Current liabilities  
Current portion of operating lease liabilities68,090 64,730 
Short-term borrowings from non-affiliates37,999 49,979 
Accounts payable131,633 133,849 
Interest and preferred dividends payable17,827 20,350 
Taxes accrued, including revenue taxes175,814 192,524 
Regulatory liabilities31,713 37,301 
Other60,951 74,262 
Total current liabilities524,027 572,995 
Deferred credits and other liabilities  
Operating lease liabilities76,066 69,494 
Deferred income taxes393,275 397,798 
Regulatory liabilities934,764 922,485 
Unamortized tax credits108,286 111,915 
Defined benefit pension and other postretirement benefit plans liability514,075 530,532 
Other115,749 114,641 
Total deferred credits and other liabilities2,142,215 2,146,865 
Total capitalization and liabilities$6,547,974 $6,457,373 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.
78

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Common Stock Equity (unaudited)
 Common stockPremium
on
capital		RetainedAccumulated
other
comprehensive		 
(in thousands)SharesAmountstockearningsincome (loss)Total
Balance, December 31, 202017,324 $115,515 $746,987 $1,282,335 $(2,919)$2,141,918 
Net income for common stock— — — 43,358 — 43,358 
Other comprehensive income, net of taxes— — — — 34 34 
Common stock dividends— — — (27,925)— (27,925)
Balance, March 31, 202117,324 $115,515 $746,987 $1,297,768 $(2,885)$2,157,385 
Balance, December 31, 201917,048 $113,678 $714,824 $1,220,129 $(1,279)$2,047,352 
Net income for common stock— — — 23,905 — 23,905 
Other comprehensive income, net of taxes— — — — 26 26 
Common stock dividends— — — (26,784)— (26,784)
Balance, March 31, 202017,048 $113,678 $714,824 $1,217,250 $(1,253)$2,044,499 
 Common stockPremium
on
capital		RetainedAccumulated
other
comprehensive		 
(in thousands)SharesAmountstockearningsincome (loss)Total
Balance, December 31, 202017,324 $115,515 $746,987 $1,282,335 $(2,919)$2,141,918 
Net income for common stock— — — 43,358 — 43,358 
Other comprehensive income, net of taxes— — — — 34 34 
Common stock dividends— — — (27,925)— (27,925)
Balance, March 31, 202117,324 115,515 746,987 1,297,768 (2,885)2,157,385 
Net income for common stock— — — 41,901 — 41,901 
Other comprehensive income, net of taxes— — — — 35 35 
Common stock dividends— — — (27,925)— (27,925)
Balance, June 30, 202117,324 $115,515 $746,987 $1,311,744 $(2,850)$2,171,396 
Balance, December 31, 201917,048 $113,678 $714,824 $1,220,129 $(1,279)$2,047,352 
Net income for common stock— — — 23,905 — 23,905 
Other comprehensive income, net of taxes— — — — 26 26 
Common stock dividends— — — (26,784)— (26,784)
Balance, March 31, 202017,048 113,678 714,824 1,217,250 (1,253)2,044,499 
Net income for common stock— — — 42,329 — 42,329 
Other comprehensive income, net of taxes— — — — 25 25 
Common stock dividends— — — (26,784)— (26,784)
Balance, June 30, 202017,048 $113,678 $714,824 $1,232,795 $(1,228)$2,060,069 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.


89

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31
(in thousands)20212020
Cash flows from operating activities  
Net income$43,857 $24,404 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation of property, plant and equipment57,355 55,850 
Other amortization6,577 7,704 
Deferred income taxes(4,671)(3,762)
State refundable credit(2,662)(2,530)
Bad debt expense457 2,724 
Allowance for equity funds used during construction(2,191)(2,015)
Other(1)20 
Changes in assets and liabilities  
Decrease (increase) in accounts receivable6,078 (9,020)
Decrease (increase) in accrued unbilled revenues(427)2,704 
Decrease (increase) in fuel oil stock(16,450)2,410 
Increase in materials and supplies(2,382)(496)
Decrease (increase) in regulatory assets(14,869)1,171 
Increase (decrease) in regulatory liabilities(4,716)16,586 
Increase (decrease) in accounts payable6,254 (7,153)
Change in prepaid and accrued income taxes, tax credits and revenue taxes(24,802)(43,919)
Decrease in defined benefit pension and other postretirement benefit plans liability(1,434)(1,017)
Change in other assets and liabilities(14,012)(4,520)
Net cash provided by operating activities31,961 39,141 
Cash flows from investing activities  
Capital expenditures(70,361)(119,144)
Other1,863 2,713 
Net cash used in investing activities(68,498)(116,431)
Cash flows from financing activities  
Common stock dividends(27,925)(26,784)
Preferred stock dividends of Hawaiian Electric and subsidiaries(499)(499)
Proceeds from issuance of short-term debt0 50,000 
Repayment of short-term debt(50,000)0 
Proceeds from issuance of long-term debt115,000 95,000 
Net decrease in short-term borrowings from non-affiliates and affiliates with original maturities of three months or less0 (38,987)
Other(116)(23)
Net cash provided by financing activities36,460 78,707 
Net increase (decrease) in cash and cash equivalents(77)1,417 
Cash, cash equivalents and restricted cash, beginning of period63,326 41,894 
Cash, cash equivalents and restricted cash, end of period63,249 43,311 
Less: Restricted cash(11,506)(30,902)
Cash and cash equivalents, end of period$51,743 $12,409 
Six months ended June 30
(in thousands)20212020
Cash flows from operating activities  
Net income$86,257 $67,232 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation of property, plant and equipment114,736 111,546 
Other amortization12,245 16,275 
Deferred income taxes(11,871)(16,237)
State refundable credit(5,309)(5,060)
Bad debt expense810 1,089 
Allowance for equity funds used during construction(4,568)(4,209)
Other810 116 
Changes in assets and liabilities  
Decrease (increase) in accounts receivable(12,972)10,730 
Decrease (increase) in accrued unbilled revenues(31,398)15,780 
Decrease (increase) in fuel oil stock(43,828)31,458 
Increase in materials and supplies(5,615)(5,542)
Decrease (increase) in regulatory assets(17,731)9,432 
Increase in regulatory liabilities5,824 1,717 
Increase (decrease) in accounts payable12,297 (48,209)
Change in prepaid and accrued income taxes, tax credits and revenue taxes(9,051)(14,700)
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability(2,549)14,968 
Change in other assets and liabilities(30,634)(4,918)
Net cash provided by operating activities57,453 181,468 
Cash flows from investing activities  
Capital expenditures(138,025)(186,532)
Other4,670 5,441 
Net cash used in investing activities(133,355)(181,091)
Cash flows from financing activities  
Common stock dividends(55,850)(53,568)
Preferred stock dividends of Hawaiian Electric and subsidiaries(998)(998)
Proceeds from issuance of short-term debt0 100,000 
Repayment of short-term debt(50,000)(100,000)
Proceeds from issuance of long-term debt115,000 255,000 
Repayment of long-term debt and funds transferred for repayment of long-term debt0 (109,000)
Net Increase (decrease) in short-term borrowings from non-affiliates and affiliates with original maturities of three months or less37,999 (38,987)
Other(941)(1,347)
Net cash provided by financing activities45,210 51,100 
Net increase (decrease) in cash and cash equivalents(30,692)51,477 
Cash, cash equivalents and restricted cash, beginning of period63,326 41,894 
Cash, cash equivalents and restricted cash, end of period32,634 93,371 
Less: Restricted cash(8,968)(29,376)
Cash and cash equivalents, end of period$23,666 $63,995 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

910

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, 2020.
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 March 31,June 30, 2021 and December 31, 2020 and the results of their operations for the three and six months ended June 30, 2021 and 2020 and cash flows for the threesix months ended March 31,June 30, 2021 and 2020. 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.
Income Taxes. In December 2019, Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which removes specific exceptions to the general principles in Topic 740, improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP under certain situations. ASU No. 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted the ASU as of January 1, 2021 with no material impact on its consolidated financial statements and related disclosures.

Leases

.

 On July 19, 2021 FASB issued ASU No. 2021-05, “Leases (Topic 842): Lessors–Certain Leases with Variable Lease Payments.” The ASU allows lessors to treat sales-type leases with variable payments to be classified as operating leases if the sales-type lease treatment under Topic 842 would result in a selling loss at lease commencement (day-one loss). The Company plans to early adopt ASU No. 2021-05 as of September 30, 2021 retrospectively to leases that commenced on or after the adoption of ASU No. 2016-02. The impact of the adoption of ASU No. 2021-05 on the Company’s consolidated financial statements is not expected to be material.
1011

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 2 · Segment financial information
(in thousands) (in thousands) Electric utilityBankOtherTotal(in thousands) Electric utilityBankOtherTotal
Three months ended March 31, 2021    
Three months ended June 30, 2021Three months ended June 30, 2021    
Revenues from external customersRevenues from external customers$564,855 $77,131 $960 $642,946 Revenues from external customers$601,869 $77,260 $1,128 $680,257 
Intersegment revenues (eliminations)Intersegment revenues (eliminations)9 0 (9)0 Intersegment revenues (eliminations)10 0 (10)0 
RevenuesRevenues$564,864 $77,131 $951 $642,946 Revenues$601,879 $77,260 $1,118 $680,257 
Income (loss) before income taxesIncome (loss) before income taxes$55,090 $37,102 $(11,996)$80,196 Income (loss) before income taxes$53,898 $39,992 $(10,946)$82,944 
Income taxes (benefit)Income taxes (benefit)11,233 7,546 (3,414)15,365 Income taxes (benefit)11,498 9,708 (2,607)18,599 
Net income (loss)Net income (loss)43,857 29,556 (8,582)64,831 Net income (loss)42,400 30,284 (8,339)64,345 
Preferred stock dividends of subsidiariesPreferred stock dividends of subsidiaries499 0 (26)473 Preferred stock dividends of subsidiaries499 0 (26)473 
Net income (loss) for common stockNet income (loss) for common stock$43,358 $29,556 $(8,556)$64,358 Net income (loss) for common stock$41,901 $30,284 $(8,313)$63,872 
Total assets (at March 31, 2021)$6,494,908 $8,718,024 $145,741 $15,358,673 
Three months ended March 31, 2020    
Six months ended June 30, 2021Six months ended June 30, 2021    
Revenues from external customersRevenues from external customers$1,166,724 $154,391 $2,088 $1,323,203 
Intersegment revenues (eliminations)Intersegment revenues (eliminations)19 0 (19)0 
RevenuesRevenues$1,166,743 $154,391 $2,069 $1,323,203 
Income (loss) before income taxesIncome (loss) before income taxes$108,988 $77,094 $(22,942)$163,140 
Income taxes (benefit)Income taxes (benefit)22,731 17,254 (6,021)33,964 
Net income (loss)Net income (loss)86,257 59,840 (16,921)129,176 
Preferred stock dividends of subsidiariesPreferred stock dividends of subsidiaries998 0 (52)946 
Net income (loss) for common stockNet income (loss) for common stock$85,259 $59,840 $(16,869)$128,230 
Total assets (at June 30, 2021)Total assets (at June 30, 2021)$6,547,974 $8,909,904 $148,851 $15,606,729 
Three months ended June 30, 2020Three months ended June 30, 2020    
Revenues from external customersRevenues from external customers$534,206 $74,714 $25 $608,945 
Intersegment revenues (eliminations)Intersegment revenues (eliminations)9 0 (9)0 
RevenuesRevenues$534,215 $74,714 $16 $608,945 
Income (loss) before income taxesIncome (loss) before income taxes$53,027 $17,334 $(10,131)$60,230 
Income taxes (benefit)Income taxes (benefit)10,199 3,320 (2,649)10,870 
Net income (loss)Net income (loss)42,828 14,014 (7,482)49,360 
Preferred stock dividends of subsidiariesPreferred stock dividends of subsidiaries499 0 (26)473 
Net income (loss) for common stockNet income (loss) for common stock$42,329 $14,014 $(7,456)$48,887 
Six months ended June 30, 2020Six months ended June 30, 2020    
Revenues from external customersRevenues from external customers$597,430 $79,738 $18 $677,186 Revenues from external customers$1,131,636 $154,452 $43 $1,286,131 
Intersegment revenues (eliminations)Intersegment revenues (eliminations)12 0 (12)0 Intersegment revenues (eliminations)21 0 (21)0 
RevenuesRevenues$597,442 $79,738 $6 $677,186 Revenues$1,131,657 $154,452 $22 $1,286,131 
Income (loss) before income taxesIncome (loss) before income taxes$29,686 $18,969 $(8,959)$39,696 Income (loss) before income taxes$82,713 $36,303 $(19,090)$99,926 
Income taxes (benefit)Income taxes (benefit)5,282 3,208 (2,687)5,803 Income taxes (benefit)15,481 6,528 (5,336)16,673 
Net income (loss)Net income (loss)24,404 15,761 (6,272)33,893 Net income (loss)67,232 29,775 (13,754)83,253 
Preferred stock dividends of subsidiariesPreferred stock dividends of subsidiaries499 0 (26)473 Preferred stock dividends of subsidiaries998 0 (52)946 
Net income (loss) for common stockNet income (loss) for common stock$23,905 $15,761 $(6,246)$33,420 Net income (loss) for common stock$66,234 $29,775 $(13,702)$82,307 
Total assets (at December 31, 2020)Total assets (at December 31, 2020)$6,457,373 $8,396,533 $150,101 $15,004,007 Total assets (at December 31, 2020)$6,457,373 $8,396,533 $150,101 $15,004,007 
 
Intercompany electricity sales of the Utilities to 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.
Hamakua Energy, LLC’s (Hamakua Energy’s) sales to Hawaii Electric Light (a regulated affiliate) are eliminated in consolidation.
1112

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 3 · Electric utility segment
Unconsolidated variable interest entities.
Power purchase agreements.  As of March 31,June 30, 2021, the Utilities had 5 PPAs for firm capacity (including the Puna Geothermal Venture (PGV) PPA as PGVthat went offline in May 2018 due to lava flow on Hawaii Island, but returned to service with firm capacity of 13 MW in the first quarter of 2021 and ramped up to 23.9 MW in the second quarter of 2021) and other PPAs with independent power producers (IPPs) and Schedule Q providers (i.e., customers with cogeneration and/or power production facilities who buy power from or sell power to the Utilities), none of which are 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 Hamakua Energy by reason of the provisions of the PPA that the Utilities have with the 3 IPPs. However, management has concluded that the Utilities are not the primary beneficiary of Kalaeloa, AES Hawaii and Hamakua Energy because the Utilities do not have the power to direct the activities that most significantly impact the 3 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 and Hamakua Energy in its condensed consolidated financial statements. Hamakua Energy is an indirect subsidiary of Pacific Current and is consolidated in HEI’s condensed consolidated financial statements.
For the other PPAs with IPPs, the Utilities have concluded that the consolidation of the IPPs was not required because either the Utilities do not have variable interests in the IPPs due to the absence of an obligation in the PPAs for the Utilities to absorb any variability of the IPPs, or the IPP was considered a “governmental organization,” and thus excluded from the scope of accounting standards for VIEs. 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 to the IPP.
Commitments and contingencies.
Contingencies. The Utilities are subject in the normal course of business to pending and threatened legal proceedings. Management does not anticipate that the aggregate ultimate liability arising out of these pending or threatened legal proceedings will be material to its financial position. However, the Utilities cannot rule out the possibility that such outcomes could have a material effect on the results of operations or liquidity for a particular reporting period in the future.
Power purchase agreements.  Purchases from all IPPs were as follows:
Three months ended March 31 Three months ended June 30Six months ended June 30
(in millions)(in millions)20212020(in millions)2021202020212020
KalaeloaKalaeloa$37 $38 Kalaeloa$49 $34 $86 $72 
AES HawaiiAES Hawaii30 31 AES Hawaii36 32 66 63 
HPOWERHPOWER17 17 HPOWER14 17 31 34 
Hamakua EnergyHamakua Energy11 13 Hamakua Energy12 11 23 24 
Puna Geothermal VenturePuna Geothermal Venture4 0 Puna Geothermal Venture7 0 11 0 
Wind IPPsWind IPPs29 28 Wind IPPs28 25 57 53 
Solar IPPsSolar IPPs12 11 Solar IPPs16 17 28 28 
Other IPPs 1
Other IPPs 1
2 2 
Other IPPs 1
1 1 3 3 
Total IPPsTotal IPPs$142 $140 Total IPPs$163 $137 $305 $277 
1Includes hydro power and other PPAs
Kalaeloa Partners, L.P.  Under a 1988 PPA, as amended, Hawaiian Electric is committed to purchase 208 MW of firm capacity from Kalaeloa. Hawaiian Electric and Kalaeloa continue 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. Hawaiian Electric and Kalaeloa have agreed that neither party will terminate the PPA (which has been subject to automatic extension on a month-to-month basis)give notice of termination of negotiation prior to MayOctober 31, 2021, to allow for a negotiated resolution. As a result, since the PPA provides for a 60-day notice of termination of the PPA, the PPA will remain in full force and effect through October 31, 2021, and from month to month thereafter, subject to termination on not less than 60 days notice.
13

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
AES Hawaii, Inc. Under a PPA entered into in March 1988, as amended (through Amendment No. 2) for a period of 30 years ending September 2022, Hawaiian Electric agreed to purchase 180 MW of firm capacity from AES Hawaii. Hawaiian
12

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Electric and AES Hawaii have been in dispute over an additional 9 MW of capacity. In February 2018, Hawaiian Electric reached agreement with AES Hawaii on an amendment to the PPA. However, in June 2018, the PUC issued an order suspending review of the amendment pending a Department of Health of the State of Hawaii (DOH) decision on AES Hawaii’s request for approval of its Emission Reduction Plan and partnership with Hawaiian Electric. If approved by the PUC, the amendment will resolve AES Hawaii’s claims related to the additional capacity. Hawaiian Electric does not intend to extend the term of the PPA which will expire on September 1, 2022.
Hu Honua Bioenergy, LLC (Hu Honua). In May 2012, Hawaii Electric Light signed a PPA, which the PUC approved in December 2013, with Hu Honua for 21.5 MW of renewable, dispatchable firm capacity fueled by locally grown biomass from a facility on the island of Hawaii. 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, which resulted in an amended and restated PPA between Hawaii Electric Light and Hu Honua dated May 9, 2017. In July 2017, the PUC approved the amended and restated PPA, which becomes effective once the PUC’s order is final and non-appealable. In August 2017, the PUC’s approval was appealed by a third party. On May 10, 2019, the Hawaii Supreme Court issued a decision remanding the matter to the PUC for further proceedings consistent with the court’s decision which must include express consideration of greenhouse gas (GHG) emissions that would result from approving the PPA, whether the cost of energy under the PPA is reasonable in light of the potential for GHG emissions, and whether the terms of the PPA are prudent and in the public interest, in light of its potential hidden and long-term consequences. On June 20, 2019,As a result, the PUC issued an order reopeningreopened the docket for further proceedings, including re-examining all of the issues in the proceedings. On September 29, 2019, the PUC issued an order setting the procedural schedule for the matter and on December 20, 2019, issued an order modifying the procedural schedule. Pre-hearing matters were completed on March 6, 2020. On July 9, 2020, the PUC issued an order denying Hawaii Electric Light’s request to waive the amended and restated PPA from the PUC’s competitive bidding requirements and therefore, dismissed the request for approval of the amended and restated PPA without prejudice to possible participation in any future competitive bidding process. On July 20,September 9, 2020, the PUC denied Hu Honua filed aHonua’s motion for reconsideration of the PUC’s order which was denied by the PUC on September 9, 2020. On September 16, 2020,order. Hu Honua filed its notice of appeal to the Hawaii Supreme Court of the PUC’s order denying Hu Honua’s motion for reconsideration. Oral arguments were held beforeOn May 24, 2021, the Hawaii Supreme Court on April 22, 2021.vacated the PUC’s decision and remanded the matter back to the PUC for further proceedings. On June 30, 2021, the PUC issued an order reopening the docket consistent with the Hawaii Supreme Court’s order.
Molokai New Energy Partners (MNEP). In July 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 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 all claims within the original and amended complaint.
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 caps on project costs are expected to be exceeded, project costs may need to be written off in amounts that could result in significant reductions in Hawaiian Electric’s consolidated net income.
Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM) implementation project. The ERP/EAM Implementation Project went live in October 2018. Hawaii Electric Light and Hawaiian Electric began to incorporate their portion of the deferred project costs in rate base and started the amortization over a 12-year period in January 2020 and November 2020, respectively. The PUC required the benefit savings of the project to be passed on to customers.
In February 2019, the PUC approved a methodology for passing the future cost saving benefits of the new ERP/EAM system to customers developed by the Utilities in collaboration with the Consumer Advocate. The Utilities filed a benefits clarification document on June 10, 2019, reflecting $150 million in future net O&M expense reductions and cost avoidance, and $96 million in capital cost reductions and tax savings over the 12-year service life. To the extent the reduction in O&M expense relates to amounts reflected in electric rates, the Utilities would reduce future rates for such amounts. In October 2019, the PUC approved the Utilities and the Consumer Advocate’s Stipulated Performance Metrics and Tracking Mechanism. As of March 31,June 30, 2021, the Utilities’ regulatory liability was $11.2$11.1 million ($6.56.1 million for Hawaiian Electric, $1.9$2.0 million for Hawaii Electric Light and $2.8$3.0 million for Maui Electric) for the O&M expense savings that are being amortized or to be included in future rates. As part of the settlement agreement approved in the Hawaiian Electric 2020 test year rate 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 will be considered flowed through to customers. As part of the PBR proceeding, the regulatory liability as of
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was considered flowed through to customers. As part of the PBR proceeding, the regulatory liability as of December 31, 2020 of approximately $1.6 million and $2.3 million, respectively, for Hawaii Electric Light and Maui Electric will bewas flowed to customers as part of the customer dividend in the annual revenue adjustment in 2021.
At the PUC’s direction, the Utilities have been filing Semi-Annual Enterprise System Benefits (SAESB) reports on the achieved benefits savings. The most recent SAESB report was filed on February 26, 2021 for the period July 1 through December 31, 2020.
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 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 Molokai Electric Company. Molokai Electric Company had sold its former generation site (Site) in 1983, but continued to operate at the Site under a lease until 1985. The federal Environmental Protection Agency (EPA) has since identified environmental impacts in the subsurface soil at the Site. In cooperation with the DOH and EPA, Maui Electric further investigated the Site and the Adjacent Parcel to determine the extent of impacts of polychlorinated biphenyls (PCBs), residual fuel oils and other subsurface contaminants. Maui Electric has a reserve balance of $2.7 million as of March 31,June 30, 2021, representing the probable and reasonably estimable undiscounted cost for remediation of the Site and the Adjacent Parcel; however, final costs of remediation will depend on the cleanup approach implemented.
Pearl Harbor sediment study. In July 2014, the U.S. Navy notified Hawaiian Electric of the Navy’s determination that Hawaiian Electric is a Potentially Responsible Party responsible for the costs of investigation and cleanup of PCBs contamination in sediment in the area offshore of the Waiau Power Plant as part of the Pearl Harbor Superfund Site. Hawaiian Electric was also required by the EPA to assess potential sources and extent of PCB contamination onshore at Waiau Power Plant.
As of March 31,June 30, 2021, the reserve account balance recorded by Hawaiian Electric to address the PCB contamination was $9.8$10.5 million. The reserve balance represents the probable and reasonably estimable undiscounted cost for the onshore and offshore investigation and remediation. The final remediation costs will depend on the actual onshore and offshore cleanup costs.
Regulatory proceedings
Current decouplingDecoupling. 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 currentPrior to the implementation of the performance-based regulation framework (PBR Framework), the decoupling mechanism hashad the following major components: (1) monthly revenue balancing account (RBA) revenues or refunds for the difference between PUC-approved target revenues and recorded adjusted revenues, which delinks revenues from kWh sales, (2) rate adjustment mechanism (RAM) revenues for escalation in certain O&M expenses and rate base changes, (3) major project interim recovery (MPIR) component,adjustment mechanism, (4) performance incentive mechanisms (PIMs), and (5) an earnings sharing mechanism (ESM), which would provide for a reduction of revenues between rate cases in the event the utility exceeds the return on average common equity (ROACE) allowed in its most recent rate case.
Performance-based regulation framework. On December 23, 2020, the PUC issued a D&O (PBR D&O) approving athe new performance-based regulation framework (PBR Framework).PBR Framework. Under the PBR Framework, the Utilities’ current decoupling will continue to be used with modifications, as described below. The existing cost recovery mechanisms will continue as currently implemented (e.g., the Energy Cost Recovery Clause (ECRC), Purchased Power Adjustment Clause (PPAC), Demand Side Management surcharge (DSM), Renewable Energy Infrastructure Program (REIP), Demand Response Adjustment Clause (DRAC), Pension and Other Post-Employment Benefits (OPEB) tracking mechanisms). In addition to annual revenues provided by the annual revenue adjustment (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 (MPIR)MPIR adjustment mechanism) and earn financial rewards for exemplary performance as provided through a portfolio of Performance Incentive Mechanisms (PIMs)PIMs and Shared Savings Mechanisms (SSMs). The PBR Framework will incorporate a variety of other 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)ESM which protects the Utilities
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and customers from excessive earnings or losses, as measured by the Utilities’ Return on Equity (ROE) and a Re-Opener
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mechanism, under which the PUC will open an examination, at its discretion, to determine if adjustments or modifications to specific PBR mechanisms are appropriate.
Subsequent to the issuance of the PBR D&O, the PUC has initiated a collaborative process during which working groups consisting of the PUC, the Utilities and other parties have addressed the development of the proposed PBR implementation tariffs and the final details of the Prioritized Performance Mechanisms (i.e., Interconnection Approval PIM, Low-to-Moderate Income (LMI) Energy Efficiency PIM, Advanced Metering Infrastructure (AMI) Utilization PIM and the portfolio of Scorecards and Reported Metrics). The Utilities and other parties filed their refined proposals addressing the Prioritized Performance Mechanisms on March 16, 2021 and April 9, 2021. An order addressing the Prioritized Performance Mechanisms is expected to be issued in May 2021. Written tariffs to implement the PBR Framework have been either approved (see below) or will be submitted for PUC approval in May 2021 and expected to go into effect June 1, 2021.
Rate adjustment mechanism. The existing RAM is based on the lesser of: a) an inflationary adjustment for certain O&M expenses and return on investment for certain rate base changes, or b) cumulative annual compounded increase in Gross Domestic Product Price Index applied to annualized target revenues (the RAM Cap). Annualized target revenues may be reset upon the issuance of an interim or final decision and order (D&O) in a rate case. All Utilities were limited to the RAM Cap in 2020. Under the new PBR Framework, the ARA mechanism will replacereplaced the RAM, and became effective on June 1, 2021. The transition to the new ARA includes the continuation of the 2020 RAM Revenuerevenue adjustment.
Annual revenue adjustment mechanism. The PBR Framework established a five-year multi-year rate period during which there will be no general rate cases. Target revenues will 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 Utilities’ control and (iv) a customer dividend consisting of a negative adjustment of 0.22% compounded annually and a flow through of the “pre-PBR” savings commitment from the management audit recommendations developed in a prior docket.
As a result of an Order issued by the PUC pursuant to a motion for partial reconsideration the customer dividend for “pre-PBR” savings commitment portion to be delivered to customers will be at a rate of $6.6 million per year from 2021 to 2025, and the Enterprise Resource Planning system benefits savings of $3.9 million, to be delivered to customers in 2021. The implementation of the ARA is scheduled to occuroccurred on June 1, 2021.
Earnings sharing mechanism. A symmetrical ESM for actual return on equity outside of a 300 basis points dead band above and below a target ROE of 9.5%, which is the current authorized ROE for the Utilities. There is a 50/50 sharing between customers and Utilities for the actual earnings 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 will be triggered if the Utilities credit rating outlook indicates a potential credit downgrade below investment grade status, or if its earned ROE enters the outer most tier of the ESM.
Major project interim recovery. On April 27, 2017, the PUC issued an order that provided guidelines for interim recovery of revenues to support major projects placed in service between general rate cases.
Projects eligible for recovery through the MPIR adjustment mechanism are major projects (i.e., projects with capital expenditures net of customer contributions in excess of $2.5 million), including, but not restricted to, renewable energy, energy efficiency, utility scale generation, grid modernization and smaller qualifying projects grouped into programs for review. The MPIR adjustment mechanism provides the opportunity to recover revenues for approved costs of 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 the MPIR adjustment mechanism must be offset by any related benefits. The guidelines provide for accrual of revenues approved for recovery upon in-service date to be collected from customers through the annual RBA tariff. Capital projects that are not recovered through the MPIR would be included in the RAM and be subject to the RAM Cap, until the next rate case when the Utilities would request recovery in base rates.
On March 31,May 26, 2021, the Utilities submittedPUC approved 2021 MPIR amounts totaling $21.8 million, including revenue taxes, for the Schofield Generating Station ($17.6 million), West Loch PV Project ($3.3 million), and Grid Modernization Strategy Phase 1 project ($0.9 million for all three utilities) for the accrual of revenues effective January 1, 2021, that included the 2021 return on project amount (based on approved amounts) in rate base, depreciation and incremental O&M expenses. Subject to PUC approval, as part of the transition toUnder the PBR framework, the Utilities will beginbegan recovery of the annualized 2021 MPIR amounts effective June 1, 2021 through the RBA rate adjustment.
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Exceptional project recovery mechanism. TheUnder the PBR framework, the existing MPIR adjustment mechanism was renamed EPRM to include deferred and O&M expense projects and to permit the Utilities to include the full amount of approved costs in the EPRM for recovery in the first year the project goes into service, pro-rated for the portion of the year the project is in service. Any pending application for MPIR relief submitted by the Utilities prior to the PBR D&O, will be grandfathered under the MPIR Guidelines. The Utilities may alternatively request that pending MPIR applications be reviewed under EPRM Guidelines. EPRM recovery will be in accordance with the EPRM Guidelines limited to the lesser of actual incurred project costs or PUC- approvedPUC-approved amounts, net of savings. To date,Currently, the Utilities have requested approvalare seeking EPRM recovery of 47 projects with total estimated capitalproject costs of $95$245 million, subject to PUC approval.

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Pilot process. The PBR D&O approved a Pilot Process to foster innovation by establishing an expedited implementation process for pilots that test new technologies, programs, business models, and other arrangements. This is intended to support initiatives by the Utilities to test new programs and ideas quickly and elevate any successful pilots for consideration of full-scale implementation. The proposed pilots would be subject to PUC approval with a total annual cap of $10 million. The Pilot Process will feature the two primary activities: an initial “Workplan Development” phase, during which the Utilities identify and scope areas of interests, so as to inform the subsequent “Implementation” phase, during which the Utilities submit specific pilot proposals for expedited review by the PUC and implement the pilot upon approval. The PUC will issue an order, approving, denying, or modifying a proposed Pilot within 45 days of receiving notice of a specific pilot project.
On July 9, 2021, the PUC issued an order approving the Utilities’ proposed Pilot Process submitted in April 2021, including a cost recovery process that generally allows the Utilities to defer and recover total annual expenditures of approved pilot projects in full over twelve months beginning June 1 of the year following implementation through EPRM.the RBA rate adjustment, although the Utilities may determine on a case-by-case basis that a particular project’s deferred costs should be amortized over a period greater than twelve months.
Performance incentive mechanisms. The PUC has established the following PIMs: (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.
•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 be re-determined upon issuance of an interim or final order in a general rate case for each utility.
•Service Reliability Performance measured by System Average Interruption Duration and Frequency Indexes (penalties only). Target performance is based on each utility’s historical 10-year average performance with a deadband of one 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 $6.8 million - for both indices in total for the three utilities).
•Call Center Performance measured by the percentage of calls answered within 30 seconds. Target performance is based on the annual average performance for each utility for the most recent 8 quarters with a deadband of 3% above and below the target. The maximum penalty or 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 $1.4 million - in total for the three utilities).
In December 2020, the Utilities accrued $0.9 million in estimated rewards for call center performance, net of service reliability penalties, for 2020. The net service quality performance rewards related to 2020 was reflected in the 2021 annual decoupling filing and pending PUC’s approval, willwhich was approved by the PUC on May 26, 2021, resulting in an increase to customer rates effective June 1, 2021.
•Phase 1 RFP PIM. Procurement of low-cost variable renewable resources through the request for proposalRFP process in 2018 is measured by comparison of the procurement price to target prices. Half of the incentive was earned upon PUC approval of the PPAs. Based on the 7 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, which is estimated to occur from 2023 to 2024.
•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. The order requires contracts under the Grid Service RFP be filed for approval by May 2020 (subsequently extended to July 9, 2020), and by September 2020 under the Renewable RFPs, with a declining PIM for projects that are not filed by these deadlines. On July 9, 2020, the Utilities filed 2 Grid Service Purchase Agreements for the Grid Service RFP whichthat potentially qualify for PIMs,a demand response PIM, however, details of the incentive metrics will be determined by the PUC. On September 15, 2020, the Utilities filed 8 power purchase agreements for the Phase 2 RFP. Of those 8, only 1 project qualified for a potential PIM incentive. On February 16, 2021, the Utilities filed 1 additional power purchase agreement that qualifies for the declining PIM. On December 31, 2020, the PUC approved the 2 Grid Services Purchase Agreements without further clarification regarding the demand response PIM. The Utility has filed a letter to the PUC in January 2021 to seekwith the PUC seeking guidance toon the next step of definingsteps to define the details of thedemand response incentive metrics.metric details.
•The PUC established the following 2 new PIMs in its PBR D&O, which were approved in an order issued on March 23, 2021. The2021 and became effective date for these PIM tariffs ison June 1, 2021.
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•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 multi-year rate period (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.
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•Grid Services Procurement PIM that provides financial rewards for grid services acquired in 2021 and 2022. The Utilities can earn a total maximum reward of $1.5 million over 2021 and 2022. The evaluation period commenced on January 1, 2021.
•The PUC also established the following 3 new PIMs in its PBR D&O, which are subject towere approved by the PUC final design approval anticipated byon May 17, 2021 and became effective on June 1, 2021.
•Interconnection Approval PIM that provides financial rewards and penalties for interconnection times for distributed energy resources 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. The evaluation period commenced on January 1, 2021.
•Low-to-Moderate Income (LMI) Energy Efficiency PIM that provides financial rewardsreward for collaboration between the Utilities and the third-party Public Benefits Fee Administrator to deliver energy savings for low- and moderate-income customers. The rewards for the PIM metrics will be collectively capped atUtilities 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 will commence asis based on Hawaii Energy’s program year with the initial evaluation year being the period of the date of the effective tariff.July 1, 2021 through June 30, 2022.
•Advanced Metering Infrastructure (AMI) Utilization PIM that provides financial rewards for acceleration ofleveraging grid modernization investments and engaging customers beyond what is already planned in the number of customers with advanced meters enabled to support time-varying rates and next generation distributed energy resources programs.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 will commence as of the date of the effective tariff.commenced on January 1, 2021.
Annual decoupling filings. The Utilities filed annual decoupling filings on Marchfiling reflected ARA revenues for 2021 to be collected from June 1 through December 31, 2021, which are subject to PUC approval. as follows:
(in millions)Hawaiian ElectricHawaii Electric LightMaui ElectricTotal
2021 ARA revenues$6.9 $1.7 $1.7 $10.3 
Management Audit savings commitment(4.6)(1.0)(1.0)(6.6)
Net incremental revenues$2.3 $0.7 $0.7 $3.7 

The net annual incremental amounts proposed to be collected (refunded) from June 1, 2021 through December 31, 2021 under the RBA rate tariffs are as follows:
(in millions)(in millions)Hawaiian ElectricHawaii Electric LightMaui ElectricTotal(in millions)Hawaiian ElectricHawaii Electric LightMaui ElectricTotal
2021 Annual incremental RAM adjusted revenues and ARA revenues$(13.8)$(2.0)$(5.9)$(21.7)
Incremental RAM revenues and ARA revenuesIncremental RAM revenues and ARA revenues$(14.7)$(2.2)$(6.1)$(23.0)
Annual change in accrued RBA balance as of December 31, 2020 (and associated revenue taxes)Annual change in accrued RBA balance as of December 31, 2020 (and associated revenue taxes)10.4 5.7 8.9 25.0 Annual change in accrued RBA balance as of December 31, 2020 (and associated revenue taxes)10.4 5.7 8.9 25.0 
Incremental Performance Incentive Mechanisms (net)Incremental Performance Incentive Mechanisms (net)0 0.2 0.5 0.7 Incremental Performance Incentive Mechanisms (net)0 0.2 0.5 0.7 
Incremental MPIR/EPRM Revenue AdjustmentIncremental MPIR/EPRM Revenue Adjustment12.6 0.1 0.1 12.8Incremental MPIR/EPRM Revenue Adjustment12.6 0.1 0.1 12.8
Incremental Affiliate Transaction Refund/PUC Ordered AdjustmentIncremental Affiliate Transaction Refund/PUC Ordered Adjustment0 N/A2.0 2.0Incremental Affiliate Transaction Refund/PUC Ordered Adjustment0 N/A2.0 2.0
Net annual incremental amount to be collected under the tariffs$9.1 $4.0 $5.6 $18.7 
Net incremental amount to be collected under the RBA rate tariffsNet incremental amount to be collected under the RBA rate tariffs$8.3 $3.8 $5.3 $17.4 
Note: Columns may not foot due to rounding.
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Most recent rate proceedings.
Hawaiian Electric 2020 test year rate case. On October 22, 2020, the PUC issued a final D&O approving the stipulated settlement agreement filed in the proceeding. As a result, there will be no increase in base electric rates established in the 2017 test year rate case. In the final D&O, the PUC approved the capital structure that consists of a 58% total equity ratio, and a ROACE of 9.5% for the 2020 test year. The resulting return on rate base (RORB) is 7.37%. The D&O approved the agreement to implement the overall lower depreciation rates approved in the last depreciation study proceeding, effective January 1, 2020. See “Annual revenue adjustment mechanism” under “Performance-based regulation framework” above, regarding the PUC’s decision on the treatment of Hawaiian Electric’s Management Audit savings commitment. Hawaiian Electric’s proposed RBA provision tariff and ECRC tariff submitted on November 6, 2020 were approved by the PUC on December 11, 2020 and took effect on January 1, 2021.
Hawaii Electric Light 2019 test year rate case. On July 28, 2020, the PUC issued a final D&O, approving the Stipulated Partial Settlement Letter in part and ordering final rates for the 2019 test year to remain at current effective rates such that there is a zero increase in rates. The PUC determined that an appropriate ROACE for the 2019 test year is 9.5%, approved a capital structure of 58% total equity and approved as fair a 7.52% RORB. In addition, the order, among others, (1) approved a 10-year amortization period for the state investment tax credit; and (2) approved a modification to Hawaii Electric Light’s ECRC to incorporate a 98%/2% risk-sharing split between customers and Hawaii Electric Light with an annual maximum exposure cap of +/- $600,000. The proposed final tariffs and PIM tariffs took effect on November 1, 2020, and the ECRC tariff took effect on January 1, 2021.
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
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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. On June 30, 2020, the PUC issued an order approving the Utilities’ request made in April 2020 for deferral treatment of COVID-19 related costs through December 31, 2020. On March 8, 2021, the PUC approved the Utilities’ request to extend the deferral period to June 30, 2021. The Utilities’ request to extend the deferral period to December 31, 2021 is pending PUC approval. The Utilities are required to file quarterly reports to update the Utilities’ financial condition, report measures in place to assist their customers during the COVID-19 emergency situation, identify the planned deferred costs and details for the deferred costs, and identify funds received or benefits received that have resulted from the COVID-19 emergency period. The recovery of the regulatory assets would be determined in a subsequent proceeding and management believes the deferred costs are probable of recovery. In addition, starting in December 2020 and monthly moving forward until otherwise ordered by the PUC, the Utilities are required to file information on, among other things, number of customers, arrears balances, payment arrangements entered into, and available assistance used to assists customer bill payment. The monthly report is intended to assist the PUC in determining next steps regarding appropriate regulatory measures. As of March 31,June 30, 2021, the Utilities recorded a total of $22.2$25.6 million in regulatory assets pursuant to the orders.
Collective bargaining agreement. As of June 30, 2021, approximately 47% of the Utilities’ employees are members of the International Brotherhood of Electrical Workers, AFL-CIO, Local 1260. The current collective bargaining agreement with the union is set to expire on October 31, 2021. The Utilities are currently renegotiating the contract with the union.
Condensed consolidating financial information. Condensed consolidating financial information for Hawaiian Electric and its subsidiaries are presented for the three and six month periods ended March 31,June 30, 2021 and 2020, and as of March 31,June 30, 2021 and December 31, 2020.
Hawaiian Electric 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. 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.
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Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Three months ended March 31,June 30, 2021

(in thousands)(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric
Consolidated		(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustments
Hawaiian Electric
Consolidated
RevenuesRevenues$400,554 85,149 79,181 0 (20)$564,864 Revenues$422,697 91,512 87,670 0 0 $601,879 
ExpensesExpensesExpenses
Fuel oilFuel oil88,728 16,485 22,214 0 0 127,427 Fuel oil91,345 19,586 28,205 0 0 139,136 
Purchased powerPurchased power108,604 21,597 12,095 0 0 142,296 Purchased power124,948 24,236 13,281 0 0 162,465 
Other operation and maintenanceOther operation and maintenance77,335 17,912 19,323 0 0 114,570 Other operation and maintenance77,903 19,474 20,765 0 0 118,142 
DepreciationDepreciation38,914 10,048 8,393 0 0 57,355 Depreciation38,907 10,053 8,421 0 0 57,381 
Taxes, other than income taxesTaxes, other than income taxes38,627 7,993 7,482 0 0 54,102 Taxes, other than income taxes40,301 8,539 8,231 0 0 57,071 
Total expenses Total expenses352,208 74,035 69,507 0 0 495,750  Total expenses373,404 81,888 78,903 0 0 534,195 
Operating incomeOperating income48,346 11,114 9,674 0 (20)69,114 Operating income49,293 9,624 8,767 0 0 67,684 
Allowance for equity funds used during constructionAllowance for equity funds used during construction1,748 132 311 0 0 2,191 Allowance for equity funds used during construction1,930 140 307 0 0 2,377 
Equity in earnings of subsidiariesEquity in earnings of subsidiaries12,510 0 0 0 (12,510)0 Equity in earnings of subsidiaries10,744 0 0 0 (10,744)0 
Retirement defined benefits expense—other than service costsRetirement defined benefits expense—other than service costs886 168 (33)0 0 1,021 Retirement defined benefits expense—other than service costs884 169 (33)0 0 1,020 
Interest expense and other charges, netInterest expense and other charges, net(12,832)(2,581)(2,590)0 20 (17,983)Interest expense and other charges, net(12,829)(2,573)(2,593)0 0 (17,995)
Allowance for borrowed funds used during constructionAllowance for borrowed funds used during construction591 44 112 0 0 747 Allowance for borrowed funds used during construction654 48 110 0 0 812 
Income before income taxesIncome before income taxes51,249 8,877 7,474 0 (12,510)55,090 Income before income taxes50,676 7,408 6,558 0 (10,744)53,898 
Income taxesIncome taxes7,621 2,051 1,561 0 0 11,233 Income taxes8,505 1,668 1,325 0011,498 
Net incomeNet income43,628 6,826 5,913 0 (12,510)43,857 Net income42,171 5,740 5,233 0 (10,744)42,400 
Preferred stock dividends of subsidiariesPreferred stock dividends of subsidiaries0 134 95 0 0 229 Preferred stock dividends of subsidiaries0 133 96 0 0229 
Net income attributable to Hawaiian ElectricNet income attributable to Hawaiian Electric43,628 6,692 5,818 0 (12,510)43,628 Net income attributable to Hawaiian Electric42,171 5,607 5,137 0 (10,744)42,171 
Preferred stock dividends of Hawaiian ElectricPreferred stock dividends of Hawaiian Electric270 0 0 0 0 270 Preferred stock dividends of Hawaiian Electric270 0 0 0 0 270 
Net income for common stockNet income for common stock$43,358 6,692 5,818 0 (12,510)$43,358 Net income for common stock$41,901 5,607 5,137 0 (10,744)$41,901 


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Three months ended March 31,June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries		Consolidating
adjustments		Hawaiian Electric
Consolidated
Net income for common stock$41,901 5,607 5,137 0 (10,744)$41,901 
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 tax benefits5,846 834 761 0 (1,595)5,846 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes(5,811)(834)(761)0 1,595 (5,811)
Other comprehensive income, net of taxes35 0 0 0 0 35 
Comprehensive income attributable to common shareholder$41,936 5,607 5,137 0 (10,744)$41,936 

(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric Consolidated
Net income for common stock$43,358 6,692 5,818 0 (12,510)$43,358 
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 taxes5,845 835 761 0 (1,596)5,845 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes(5,811)(834)(761)0 1,595 (5,811)
Other comprehensive income, net of taxes34 1 0 0 (1)34 
Comprehensive income attributable to common shareholder$43,392 6,693 5,818 0 (12,511)$43,392 

1920

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Three months ended March 31,June 30, 2020


(in thousands)(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric
Consolidated		(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustments
Hawaiian Electric
Consolidated
RevenuesRevenues$421,166 89,293 87,198 0 (215)$597,442 Revenues$380,634 78,505 75,216 0 (140)$534,215 
ExpensesExpensesExpenses
Fuel oilFuel oil120,535 22,432 30,254 0 0 173,221 Fuel oil77,290 16,254 18,907 0 0 112,451 
Purchased powerPurchased power107,951 19,521 12,344 0 0 139,816 Purchased power108,946 15,846 12,046 0 0 136,838 
Other operation and maintenanceOther operation and maintenance85,637 19,104 22,806 0 0 127,547 Other operation and maintenance74,274 17,581 18,186 0 0 110,041 
DepreciationDepreciation38,011 9,760 8,079 0 0 55,850 Depreciation37,860 9,761 8,075 0 0 55,696 
Taxes, other than income taxesTaxes, other than income taxes40,501 8,342 8,207 0 0 57,050 Taxes, other than income taxes36,673 7,470 7,245 0 0 51,388 
Total expenses Total expenses392,635 79,159 81,690 0 0 553,484  Total expenses335,043 66,912 64,459 0 0 466,414 
Operating incomeOperating income28,531 10,134 5,508 0 (215)43,958 Operating income45,591 11,593 10,757 0 (140)67,801 
Allowance for equity funds used during constructionAllowance for equity funds used during construction1,743 119 153 0 0 2,015 Allowance for equity funds used during construction1,807 193 194 0 0 2,194 
Equity in earnings of subsidiariesEquity in earnings of subsidiaries8,804 0 0 0 (8,804)0 Equity in earnings of subsidiaries13,776 0 0 0 (13,776)0 
Retirement defined benefits expense—other than service costsRetirement defined benefits expense—other than service costs(546)194 (29)0 0 (381)Retirement defined benefits expense—other than service costs(546)193 (29)0 0 (382)
Interest expense and other charges, netInterest expense and other charges, net(12,002)(2,484)(2,323)0 215 (16,594)Interest expense and other charges, net(12,499)(2,533)(2,446)0 140 (17,338)
Allowance for borrowed funds used during constructionAllowance for borrowed funds used during construction602 36 50 0 0 688 Allowance for borrowed funds used during construction626 62 64 0 0 752 
Income before income taxesIncome before income taxes27,132 7,999 3,359 0 (8,804)29,686 Income before income taxes48,755 9,508 8,540 0 (13,776)53,027 
Income taxesIncome taxes2,957 1,798 527 005,282 Income taxes6,156 2,196 1,847 0010,199 
Net incomeNet income24,175 6,201 2,832 0 (8,804)24,404 Net income42,599 7,312 6,693 0 (13,776)42,828 
Preferred stock dividends of subsidiariesPreferred stock dividends of subsidiaries0 134 95 0 0229 Preferred stock dividends of subsidiaries0 133 96 0 0229 
Net income attributable to Hawaiian ElectricNet income attributable to Hawaiian Electric24,175 6,067 2,737 0 (8,804)24,175 Net income attributable to Hawaiian Electric42,599 7,179 6,597 0 (13,776)42,599 
Preferred stock dividends of Hawaiian ElectricPreferred stock dividends of Hawaiian Electric270 0 0 0 0 270 Preferred stock dividends of Hawaiian Electric270 0 0 0 0 270 
Net income for common stockNet income for common stock$23,905 6,067 2,737 0 (8,804)$23,905 Net income for common stock$42,329 7,179 6,597 0 (13,776)$42,329 


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Three months ended March 31,June 30, 2020
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries		Consolidating
adjustments		Hawaiian Electric
Consolidated
Net income for common stock$42,329 7,179 6,597 0 (13,776)$42,329 
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 benefits5,184 751 650 0 (1,401)5,184 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes(5,159)(748)(653)0 1,401 (5,159)
Other comprehensive income (loss), net of taxes25 3 (3)0 0 25 
Comprehensive income attributable to common shareholder$42,354 7,182 6,594 0 (13,776)$42,354 

(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric Consolidated
Net income for common stock$23,905 6,067 2,737 0 (8,804)$23,905 
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 benefits5,184 748 652 0 (1,400)5,184 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes(5,158)(747)(652)0 1,399 (5,158)
Other comprehensive income, net of taxes26 1 0 0 (1)26 
Comprehensive income attributable to common shareholder$23,931 6,068 2,737 0 (8,805)$23,931 

20

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
March 31, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsi-
diaries		Consoli-
dating
adjustments		Hawaiian Electric
Consolidated
Assets      
Property, plant and equipment
Utility property, plant and equipment      
Land$42,411 5,606 3,594 0 0 $51,611 
Plant and equipment4,986,417 1,358,367 1,207,095 0 0 7,551,879 
Less accumulated depreciation(1,706,529)(604,021)(549,169)0 0 (2,859,719)
Construction in progress160,331 13,927 29,730 0 0 203,988 
Utility property, plant and equipment, net3,482,630 773,879 691,250 0 0 4,947,759 
Nonutility property, plant and equipment, less accumulated depreciation5,305 115 1,532 0 0 6,952 
Total property, plant and equipment, net3,487,935 773,994 692,782 0 0 4,954,711 
Investment in wholly owned subsidiaries, at equity631,976 0 0 0 (631,976)0 
Current assets      
Cash and cash equivalents29,727 7,730 14,209 77 0 51,743 
Restricted cash11,506 0 0 0 0 11,506 
Customer accounts receivable, net101,605 21,358 18,686 0 0 141,649 
Accrued unbilled revenues, net72,784 14,911 14,118 0 0 101,813 
Other accounts receivable, net12,967 3,006 3,570 0 (14,470)5,073 
Fuel oil stock, at average cost51,894 9,981 12,813 0 0 74,688 
Materials and supplies, at average cost40,395 9,873 19,458 0 0 69,726 
Prepayments and other29,769 3,534 3,791 0 (675)36,419 
Regulatory assets42,852 2,840 8,630 0 0 54,322 
Total current assets393,499 73,233 95,275 77 (15,145)546,939 
Other long-term assets      
Operating lease right-of-use assets123,992 14,198 344 0 0 138,534 
Regulatory assets501,393 111,700 106,011 0 0 719,104 
Other102,767 18,591 20,424 0 (6,162)135,620 
Total other long-term assets728,152 144,489 126,779 0 (6,162)993,258 
Total assets$5,241,562 991,716 914,836 77 (653,283)$6,494,908 
Capitalization and liabilities      
Capitalization      
Common stock equity$2,157,385 320,494 311,405 77 (631,976)$2,157,385 
Cumulative preferred stock—not subject to mandatory redemption22,293 7,000 5,000 0 0 34,293 
Long-term debt, net1,176,229 246,310 253,324 0 0 1,675,863 
Total capitalization3,355,907 573,804 569,729 77 (631,976)3,867,541 
Current liabilities      
Current portion of operating lease liabilities64,423 1,844 34 0 0 66,301 
Accounts payable87,437 16,037 19,725 0 0 123,199 
Interest and preferred dividends payable20,075 3,698 4,400 0 (1)28,172 
Taxes accrued, including revenue taxes107,552 25,372 22,876 0 (675)155,125 
Regulatory liabilities17,000 5,901 7,469 0 0 30,370 
Other55,478 11,951 17,189 0 (14,618)70,000 
Total current liabilities351,965 64,803 71,693 0 (15,294)473,167 
Deferred credits and other liabilities      
Operating lease liabilities71,431 12,353 318 0 0 84,102 
Deferred income taxes282,513 53,582 60,663 0 0 396,758 
Regulatory liabilities658,584 174,820 92,365 0 0 925,769 
Unamortized tax credits81,297 15,126 13,758 0 0 110,181 
Defined benefit pension and other postretirement benefit plans liability373,376 76,357 78,566 0 (6,013)522,286 
Other66,489 20,871 27,744 0 0 115,104 
Total deferred credits and other liabilities1,533,690 353,109 273,414 0 (6,013)2,154,200 
Total capitalization and liabilities$5,241,562 991,716 914,836 77 (653,283)$6,494,908 

21

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Six months ended June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric
Consolidated
Revenues$823,251 176,661 166,851 0 (20)$1,166,743 
Expenses
Fuel oil180,073 36,071 50,419 0 0 266,563 
Purchased power233,552 45,833 25,376 0 0 304,761 
Other operation and maintenance155,238 37,386 40,088 0 0 232,712 
Depreciation77,821 20,101 16,814 0 0 114,736 
Taxes, other than income taxes78,928 16,532 15,713 0 0 111,173 
   Total expenses725,612 155,923 148,410 0 0 1,029,945 
Operating income97,639 20,738 18,441 0 (20)136,798 
Allowance for equity funds used during construction3,678 272 618 0 0 4,568 
Equity in earnings of subsidiaries23,254 0 0 0 (23,254)0 
Retirement defined benefits expense—other than service costs1,770 337 (66)0 0 2,041 
Interest expense and other charges, net(25,661)(5,154)(5,183)0 20 (35,978)
Allowance for borrowed funds used during construction1,245 92 222 0 0 1,559 
Income before income taxes101,925 16,285 14,032 0 (23,254)108,988 
Income taxes16,126 3,719 2,886 0 0 22,731 
Net income85,799 12,566 11,146 0 (23,254)86,257 
Preferred stock dividends of subsidiaries0 267 191 0 0 458 
Net income attributable to Hawaiian Electric85,799 12,299 10,955 0 (23,254)85,799 
Preferred stock dividends of Hawaiian Electric540 0 0 0 0 540 
Net income for common stock$85,259 12,299 10,955 0 (23,254)$85,259 


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Six months ended June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric Consolidated
Net income for common stock$85,259 12,299 10,955 0 (23,254)$85,259 
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 taxes11,691 1,669 1,522 0 (3,191)11,691 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes(11,622)(1,668)(1,522)0 3,190 (11,622)
Other comprehensive income, net of taxes69 1 0 0 (1)69 
Comprehensive income attributable to common shareholder$85,328 12,300 10,955 0 (23,255)$85,328 

22

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Six months ended June 30, 2020

(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric
Consolidated
Revenues$801,800 167,798 162,414 0 (355)$1,131,657 
Expenses
Fuel oil197,825 38,686 49,161 0 0 285,672 
Purchased power216,897 35,367 24,390 0 0 276,654 
Other operation and maintenance159,911 36,685 40,992 0 0 237,588 
Depreciation75,871 19,521 16,154 0 0 111,546 
Taxes, other than income taxes77,174 15,812 15,452 0 0 108,438 
   Total expenses727,678 146,071 146,149 0 0 1,019,898 
Operating income74,122 21,727 16,265 0 (355)111,759 
Allowance for equity funds used during construction3,550 312 347 0 0 4,209 
Equity in earnings of subsidiaries22,580 0 0 0 (22,580)0 
Retirement defined benefits expense—other than service costs(1,092)387 (58)0 0 (763)
Interest expense and other charges, net(24,501)(5,017)(4,769)0 355 (33,932)
Allowance for borrowed funds used during construction1,228 98 114 0 0 1,440 
Income before income taxes75,887 17,507 11,899 0 (22,580)82,713 
Income taxes9,113 3,994 2,374 0 0 15,481 
Net income66,774 13,513 9,525 0 (22,580)67,232 
Preferred stock dividends of subsidiaries0 267 191 0 0 458 
Net income attributable to Hawaiian Electric66,774 13,246 9,334 0 (22,580)66,774 
Preferred stock dividends of Hawaiian Electric540 0 0 0 0 540 
Net income for common stock$66,234 13,246 9,334 0 (22,580)$66,234 


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Six months ended June 30, 2020
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric Consolidated
Net income for common stock$66,234 13,246 9,334 0 (22,580)$66,234 
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 benefits10,368 1,499 1,302 0 (2,801)10,368 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes(10,317)(1,495)(1,305)0 2,800 (10,317)
Other comprehensive income (loss), net of taxes51 4 (3)0 (1)51 
Comprehensive income attributable to common shareholder$66,285 13,250 9,331 0 (22,581)$66,285 

23

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsi-
diaries		Consoli-
dating
adjustments		Hawaiian Electric
Consolidated
Assets      
Property, plant and equipment
Utility property, plant and equipment      
Land$42,412 5,606 3,594 0 0 $51,612 
Plant and equipment5,030,706 1,368,603 1,220,577 0 0 7,619,886 
Less accumulated depreciation(1,735,717)(612,065)(555,639)0 0 (2,903,421)
Construction in progress159,300 12,961 29,541 0 0 201,802 
Utility property, plant and equipment, net3,496,701 775,105 698,073 0 0 4,969,879 
Nonutility property, plant and equipment, less accumulated depreciation5,304 115 1,532 0 0 6,951 
Total property, plant and equipment, net3,502,005 775,220 699,605 0 0 4,976,830 
Investment in wholly owned subsidiaries, at equity635,296 0 0 0 (635,296)0 
Current assets      
Cash and cash equivalents17,367 3,754 2,468 77 0 23,666 
Restricted cash8,968 0 0 0 0 8,968 
Advances to affiliates3,800 0 0 0 (3,800)0 
Customer accounts receivable, net104,190 25,316 22,886 0 0 152,392 
Accrued unbilled revenues, net98,422 17,169 17,387 0 0 132,978 
Other accounts receivable, net13,370 4,036 4,661 0 (16,899)5,168 
Fuel oil stock, at average cost74,673 11,193 16,200 0 0 102,066 
Materials and supplies, at average cost42,641 10,326 19,992 0 0 72,959 
Prepayments and other25,319 4,510 2,084 0 0 31,913 
Regulatory assets47,934 3,911 8,060 0 0 59,905 
Total current assets436,684 80,215 93,738 77 (20,699)590,015 
Other long-term assets      
Operating lease right-of-use assets107,191 24,095 336 0 0 131,622 
Regulatory assets494,195 109,656 104,100 0 0 707,951 
Other110,278 18,970 18,290 0 (5,982)141,556 
Total other long-term assets711,664 152,721 122,726 0 (5,982)981,129 
Total assets$5,285,649 1,008,156 916,069 77 (661,977)$6,547,974 
Capitalization and liabilities      
Capitalization      
Common stock equity$2,171,396 322,451 312,768 77 (635,296)$2,171,396 
Cumulative preferred stock—not subject to mandatory redemption22,293 7,000 5,000 0 0 34,293 
Long-term debt, net1,176,353 246,335 253,355 0 0 1,676,043 
Total capitalization3,370,042 575,786 571,123 77 (635,296)3,881,732 
Current liabilities      
Current portion of operating lease liabilities64,725 3,331 34 0 0 68,090 
Short-term borrowings from non-affiliates37,999 0 0 0 0 37,999 
Short-term borrowings from affiliate0 3,100 700 0 (3,800)0 
Accounts payable90,840 18,624 22,169 0 0 131,633 
Interest and preferred dividends payable12,801 2,694 2,333 0 (1)17,827 
Taxes accrued, including revenue taxes122,268 27,743 25,803 0 0 175,814 
Regulatory liabilities18,306 5,653 7,754 0 0 31,713 
Other50,487 11,508 16,004 — (17,048)60,951 
Total current liabilities397,426 72,653 74,797 0 (20,849)524,027 
Deferred credits and other liabilities      
Operating lease liabilities54,992 20,764 310 0 0 76,066 
Deferred income taxes280,920 53,115 59,240 0 0 393,275 
Regulatory liabilities666,554 175,771 92,439 0 0 934,764 
Unamortized tax credits79,867 14,890 13,529 0 0 108,286 
Defined benefit pension and other postretirement benefit plans liability367,530 75,010 77,367 0 (5,832)514,075 
Other68,318 20,167 27,264 0 0 115,749 
Total deferred credits and other liabilities1,518,181 359,717 270,149 0 (5,832)2,142,215 
Total capitalization and liabilities$5,285,649 1,008,156 916,069 77 (661,977)$6,547,974 

24

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
December 31, 2020
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsi-diaries		Consoli-
dating
adjustments		Hawaiian Electric
Consolidated
Assets      
Property, plant and equipment
Utility property, plant and equipment      
Land$42,411 5,606 3,594 0 0 $51,611 
Plant and equipment4,960,470 1,352,885 1,195,988 0 0 7,509,343 
Less accumulated depreciation(1,677,256)(597,606)(544,217)0 0 (2,819,079)
Construction in progress143,616 13,043 31,683 0 0 188,342 
Utility property, plant and equipment, net3,469,241 773,928 687,048 0 0 4,930,217 
Nonutility property, plant and equipment, less accumulated depreciation5,306 115 1,532 0 0 6,953 
Total property, plant and equipment, net3,474,547 774,043 688,580 0 0 4,937,170 
Investment in wholly owned subsidiaries, at equity
626,890 0 0 0 (626,890)0 
Current assets      
Cash and cash equivalents42,205 3,046 2,032 77 0 47,360 
Restricted cash15,966 0 0 0 0 15,966 
Advances to affiliates26,700 0 0 0 (26,700)0 
Customer accounts receivable, net102,736 23,989 21,107 0 0 147,832 
Accrued unbilled revenues, net73,628 13,631 13,777 0 0 101,036 
Other accounts receivable, net17,984 3,028 2,856 0 (16,195)7,673 
Fuel oil stock, at average cost38,777 8,471 10,990 0 0 58,238 
Materials and supplies, at average cost38,786 9,896 18,662 0 0 67,344 
Prepayments and other34,306 5,197 4,580 0 0 44,083 
Regulatory assets22,095 1,954 6,386 0 0 30,435 
Total current assets413,183 69,212 80,390 77 (42,895)519,967 
Other long-term assets      
Operating lease right-of-use assets125,858 1,443 353 0 0 127,654 
Regulatory assets513,192 114,461 108,620 0 0 736,273 
Other98,307 17,992 20,010 0 0 136,309 
Total other long-term assets737,357 133,896 128,983 0 0 1,000,236 
Total assets$5,251,977 977,151 897,953 77 (669,785)$6,457,373 
Capitalization and liabilities      
Capitalization
Common stock equity$2,141,918 317,451 309,363 77 (626,891)$2,141,918 
Cumulative preferred stock—not subject to mandatory redemption22,293 7,000 5,000 0 0 34,293 
Long-term debt, net1,116,426 216,447 228,429 0 0 1,561,302 
Total capitalization3,280,637 540,898 542,792 77 (626,891)3,737,513 
Current liabilities     
Current portion of operating lease liabilities64,599 98 33 0 0 64,730 
Short-term borrowings-non-affiliate49,979 0 0 0 0 49,979 
Short-term borrowings-affiliate0 18,800 7,900 0 (26,700)0 
Accounts payable97,102 19,570 17,177 0 0 133,849 
Interest and preferred dividends payable14,480 3,138 2,790 0 (58)20,350 
Taxes accrued, including revenue taxes135,018 29,869 27,637 0 0 192,524 
Regulatory liabilities20,224 8,785 8,292 0 0 37,301 
Other57,926 13,851 18,621 0 (16,136)74,262 
Total current liabilities439,328 94,111 82,450 0 (42,894)572,995 
Deferred credits and other liabilities     
Operating lease liabilities67,824 1,344 326 0 0 69,494 
Deferred income taxes282,685 54,108 61,005 0 0 397,798 
Regulatory liabilities656,270 173,938 92,277 0 0 922,485 
Unamortized tax credits82,563 15,363 13,989 0 0 111,915 
Defined benefit pension and other postretirement benefit plans liability373,112 77,679 79,741 0 0 530,532 
Other69,558 19,710 25,373 0 0 114,641 
Total deferred credits and other liabilities1,532,012 342,142 272,711 0 0 2,146,865 
Total capitalization and liabilities$5,251,977 977,151 897,953 77 (669,785)$6,457,373 

2225

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Changes in Common Stock Equity
ThreeSix months ended March 31,June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries		Consolidating
adjustments		Hawaiian Electric
Consolidated
Balance, December 31, 2020$2,141,918 317,451 309,363 77 (626,891)$2,141,918 
Net income for common stock43,358 6,692 5,818 — (12,510)43,358 
Other comprehensive income, net of taxes34 1 — — (1)34 
Common stock dividends(27,925)(3,650)(3,776)— 7,426 (27,925)
Balance, March 31, 2021$2,157,385 320,494 311,405 77 (631,976)$2,157,385 
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries		Consolidating
adjustments		Hawaiian Electric
Consolidated
Balance, December 31, 2020$2,141,918 317,451 309,363 77 (626,891)$2,141,918 
Net income for common stock85,259 12,299 10,955 — (23,254)85,259 
Other comprehensive income, net of taxes69 1 — — (1)69 
Common stock dividends(55,850)(7,300)(7,550)— 14,850 (55,850)
Balance, June 30, 2021$2,171,396 322,451 312,768 77 (635,296)$2,171,396 
 
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Changes in Common Stock Equity
ThreeSix months ended March 31,June 30, 2020
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries		Consolidating
adjustments		Hawaiian Electric
Consolidated
Balance, December 31, 2019$2,047,352 298,998 292,870 101 (591,969)$2,047,352 
Net income for common stock23,905 6,067 2,737 — (8,804)23,905 
Other comprehensive income, net of taxes26 1 — — (1)26 
Common stock dividends(26,784)(4,080)(3,596)— 7,676 (26,784)
Common stock issuance expenses— — (1)— 1 0 
Balance, March 31, 2020$2,044,499 300,986 292,010 101 (593,097)$2,044,499 
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries		Consolidating
adjustments		Hawaiian Electric
Consolidated
Balance, December 31, 2019$2,047,352 298,998 292,870 101 (591,969)$2,047,352 
Net income for common stock66,234 13,246 9,334 — (22,580)66,234 
Other comprehensive income (loss), net of taxes51 4 (3)— (1)51 
Common stock dividends(53,568)(8,160)(7,192)— 15,352 (53,568)
Balance, June 30, 2020$2,060,069 304,088 295,009 101 (599,198)$2,060,069 

2326

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
ThreeSix months ended March 31,June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries		Consolidating
adjustments		Hawaiian Electric
Consolidated
Net cash provided by operating activities$18,764 9,635 10,988 0 (7,426)$31,961 
Cash flows from investing activities      
Capital expenditures(45,293)(12,728)(12,340)0 0 (70,361)
Advances from affiliates26,700 0 0 0 (26,700)0 
Other1,182 372 309 0 0 1,863 
Net cash used in investing activities(17,411)(12,356)(12,031)0 (26,700)(68,498)
Cash flows from financing activities      
Common stock dividends(27,925)(3,650)(3,776)0 7,426 (27,925)
Preferred stock dividends of Hawaiian Electric and subsidiaries(270)(134)(95)0 0 (499)
Repayment of short-term debt(50,000)0 0 0 0 (50,000)
Proceeds from issuance of long-term debt60,000 30,000 25,000 0 0 115,000 
Net decrease in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less0 (18,800)(7,900)0 26,700 0 
Other(96)(11)(9)0 0 (116)
Net cash provided by (used in) financing activities(18,291)7,405 13,220 0 34,126 36,460 
Net increase (decrease) in cash and cash equivalents(16,938)4,684 12,177 0 0 (77)
Cash, cash equivalents and restricted cash, beginning of period58,171 3,046 2,032 77 0 63,326 
Cash, cash equivalents and restricted cash, end of period41,233 7,730 14,209 77 0 63,249 
Less: Restricted cash(11,506)0 0 0 0 (11,506)
Cash and cash equivalents, end of period$29,727 7,730 14,209 77 0 $51,743 
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries		Consolidating
adjustments		Hawaiian Electric
Consolidated
Net cash provided by operating activities$43,623 15,315 13,365 0 (14,850)$57,453 
Cash flows from investing activities      
Capital expenditures(92,352)(22,135)(23,538)0 0 (138,025)
Advances from affiliates22,900 0 0 0 (22,900)0 
Other3,087 911 672 0 0 4,670 
Net cash used in investing activities(66,365)(21,224)(22,866)0 (22,900)(133,355)
Cash flows from financing activities      
Common stock dividends(55,850)(7,300)(7,550)0 14,850 (55,850)
Preferred stock dividends of Hawaiian Electric and subsidiaries(540)(267)(191)0 0 (998)
Repayment of short-term debt(50,000)0 0 0 0 (50,000)
Proceeds from issuance of long-term debt60,000 30,000 25,000 0 0 115,000 
Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less37,999 (15,700)(7,200)0 22,900 37,999 
Other(703)(116)(122)0 0 (941)
Net cash provided by (used in) financing activities(9,094)6,617 9,937 0 37,750 45,210 
Net increase (decrease) in cash and cash equivalents(31,836)708 436 0 0 (30,692)
Cash, cash equivalents and restricted cash, beginning of period58,171 3,046 2,032 77 0 63,326 
Cash, cash equivalents and restricted cash, end of period26,335 3,754 2,468 77 0 32,634 
Less: Restricted cash(8,968)0 0 0 0 (8,968)
Cash and cash equivalents, end of period$17,367 3,754 2,468 77 0 $23,666 

2427

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
ThreeSix months ended March 31,June 30, 2020
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries		Consolidating
adjustments		Hawaiian Electric
Consolidated
Net cash provided by operating activities$29,004 9,478 7,931 0 (7,272)$39,141 
Cash flows from investing activities                                                                                                                                        
Capital expenditures(83,191)(18,181)(17,772)0 0 (119,144)
Advances from (to) affiliates(17,000)8,000 0 0 9,000 0 
Other2,752 64 301 0 (404)2,713 
Net cash used in investing activities(97,439)(10,117)(17,471)0 8,596 (116,431)
Cash flows from financing activities     
Common stock dividends(26,784)(4,080)(3,596)0 7,676 (26,784)
Preferred stock dividends of Hawaiian Electric and subsidiaries(270)(134)(95)0 0 (499)
Proceeds from issuance of short-term debt50,000 0 0 0 0 50,000 
Proceeds from issuance of long-term debt95,000 0 0 0 0 95,000 
Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less(46,987)2,500 14,500 0 (9,000)(38,987)
Other(21)(1)(1)0 0 (23)
Net cash provided by (used in) financing activities70,938 (1,715)10,808 0 (1,324)78,707 
Net increase (decrease) in cash and cash equivalents2,503 (2,354)1,268 0 0 1,417 
Cash, cash equivalents and restricted cash, beginning of period32,988 7,008 1,797 101 0 41,894 
Cash, cash equivalents and restricted cash, end of period35,491 4,654 3,065 101 0 43,311 
Less: Restricted cash(30,902)0 0 0 0 (30,902)
Cash and cash equivalents, end of period$4,589 4,654 3,065 101 0 $12,409 
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries		Consolidating
adjustments		Hawaiian Electric
Consolidated
Net cash provided by operating activities$154,967 20,307 21,601 0 (15,407)$181,468 
Cash flows from investing activities     
Capital expenditures(129,829)(30,785)(25,918)0 0 (186,532)
Advances from affiliates14,200 8,000 0 0 (22,200)0 
Other4,354 552 480 0 55 5,441 
Net cash used in investing activities(111,275)(22,233)(25,438)0 (22,145)(181,091)
Cash flows from financing activities     
Common stock dividends(53,568)(8,160)(7,192)0 15,352 (53,568)
Preferred stock dividends of Hawaiian Electric and subsidiaries(540)(267)(191)0 0 (998)
Proceeds from issuance of short-term debt100,000 0 0 0 0 100,000 
Repayment of short-term debt(100,000)0 0 0 0 (100,000)
Proceeds from issuance of long-term debt205,000 10,000 40,000 0 0 255,000 
Repayment of long-term debt and funds transferred for repayment of long-term debt(95,000)(14,000)0 0 0 (109,000)
Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less(46,987)12,000 (26,200)0 22,200 (38,987)
Other(1,039)(61)(247)0 0 (1,347)
Net cash provided by (used in) financing activities7,866 (488)6,170 0 37,552 51,100 
Net increase (decrease) in cash and cash equivalents51,558 (2,414)2,333 0 0 51,477 
Cash, cash equivalents and restricted cash, beginning of period32,988 7,008 1,797 101 0 41,894 
Cash, cash equivalents and restricted cash, end of period84,546 4,594 4,130 101 0 93,371 
Less: Restricted cash(29,376)0 0 0 0 (29,376)
Cash and cash equivalents, end of period$55,170 4,594 4,130 101 0 $63,995 

2528

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 4 · Bank segment
Selected financial information
American Savings Bank, F.S.B.
Statements of Income and Comprehensive Income Data
 Three months ended March 31
(in thousands)20212020
Interest and dividend income  
Interest and fees on loans$49,947 $55,545 
Interest and dividends on investment securities8,673 9,430 
Total interest and dividend income58,620 64,975 
Interest expense  
Interest on deposit liabilities1,462 3,587 
Interest on other borrowings27 313 
Total interest expense1,489 3,900 
Net interest income57,131 61,075 
Provision for credit losses(8,435)10,401 
Net interest income after provision for credit losses65,566 50,674 
Noninterest income  
Fees from other financial services5,073 4,571 
Fee income on deposit liabilities3,863 5,113 
Fee income on other financial products2,442 1,872 
Bank-owned life insurance2,561 794 
Mortgage banking income4,300 2,000 
Gain on sale of investment securities, net528 0 
Other income, net272 413 
Total noninterest income19,039 14,763 
Noninterest expense  
Compensation and employee benefits28,037 25,777 
Occupancy4,969 5,267 
Data processing4,351 3,837 
Services2,862 2,809 
Equipment2,222 2,339 
Office supplies, printing and postage1,044 1,341 
Marketing648 802 
FDIC insurance816 102 
Other expense2,554 4,194 
Total noninterest expense47,503 46,468 
Income before income taxes37,102 18,969 
Income taxes7,546 3,208 
Net income29,556 15,761 
Other comprehensive income (loss), net of taxes(45,754)19,847 
Comprehensive income (loss)$(16,198)$35,608 
 Three months ended June 30Six months ended June 30
(in thousands)2021202020212020
Interest and dividend income    
Interest and fees on loans$51,026 $53,541 $100,973 $109,086 
Interest and dividends on investment securities11,040 6,288 19,713 15,718 
Total interest and dividend income62,066 59,829 120,686 124,804 
Interest expense    
Interest on deposit liabilities1,281 3,071 2,743 6,658 
Interest on other borrowings23 75 50 388 
Total interest expense1,304 3,146 2,793 7,046 
Net interest income60,762 56,683 117,893 117,758 
Provision for credit losses(12,207)15,133 (20,642)25,534 
Net interest income after provision for credit losses72,969 41,550 138,535 92,224 
Noninterest income    
Fees from other financial services5,464 3,102 10,537 7,673 
Fee income on deposit liabilities3,904 2,897 7,767 8,010 
Fee income on other financial products2,201 1,212 4,643 3,084 
Bank-owned life insurance1,624 1,673 4,185 2,467 
Mortgage banking income1,925 6,252 6,225 8,252 
Gain on sale of investment securities, net0 9,275 528 9,275 
Other income, net76 (251)348 162 
Total noninterest income15,194 24,160 34,233 38,923 
Noninterest expense    
Compensation and employee benefits27,670 25,079 55,707 50,856 
Occupancy5,100 5,442 10,069 10,709 
Data processing4,533 3,849 8,884 7,686 
Services2,475 2,474 5,337 5,283 
Equipment2,394 2,290 4,616 4,629 
Office supplies, printing and postage978 1,049 2,022 2,390 
Marketing665 379 1,313 1,181 
FDIC insurance788 751 1,604 853 
Other expense1
3,568 7,063 6,122 11,257 
Total noninterest expense48,171 48,376 95,674 94,844 
Income before income taxes39,992 17,334 77,094 36,303 
Income taxes9,708 3,320 17,254 6,528 
Net income30,284 14,014 59,840 29,775 
Other comprehensive income (loss), net of taxes16,999 (280)(28,755)19,567 
Comprehensive income$47,283 $13,734 $31,085 $49,342 


1 The three- and six-month periods ended June 30, 2021 include approximately $0.1 million and $0.4 million, respectively, of certain direct and incremental COVID-19 related costs. The three- and six-month periods ended June 30, 2020 include approximately $3.7 million and $3.8 million, respectively, of certain significant direct and incremental COVID-19 related costs. These costs for the first six months of 2020, which have been recorded in Other expense, include $2.3 million of compensation expense and $1.1 million of enhanced cleaning and sanitation costs.
2629

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Reconciliation to amounts per HEI Condensed Consolidated Statements of Income*:
 Three months ended March 31
(in thousands)20212020
Interest and dividend income$58,620 $64,975 
Noninterest income19,039 14,763 
Less: Gain on sale of investment securities, net528 0 
*Revenues-Bank77,131 79,738 
Total interest expense1,489 3,900 
Provision for credit losses(8,435)10,401 
Noninterest expense47,503 46,468 
Less: Retirement defined benefits expense (credit)—other than service costs(1,278)434 
*Expenses-Bank41,835 60,335 
*Operating income-Bank35,296 19,403 
Add back: Retirement defined benefits expense (credit)—other than service costs(1,278)434 
Add back: Gain on sale of investment securities, net528 0 
Income before income taxes$37,102 $18,969 
 Three months ended June 30,Six months ended June 30
(in thousands)2021202020212020
Interest and dividend income$62,066 $59,829 $120,686 $124,804 
Noninterest income15,194 24,160 34,233 38,923 
Less: Gain on sale of investment securities, net0 9,275 528 9,275 
*Revenues-Bank77,260 74,714 154,391 154,452 
Total interest expense1,304 3,146 2,793 7,046 
Provision for credit losses(12,207)15,133 (20,642)25,534 
Noninterest expense48,171 48,376 95,674 94,844 
Less: Retirement defined benefits expense (credit)—other than service costs(186)434 (1,464)868 
*Expenses-Bank37,454 66,221 79,289 126,556 
*Operating income-Bank39,806 8,493 75,102 27,896 
Add back: Retirement defined benefits expense (credit)—other than service costs(186)434 (1,464)868 
Add back: Gain on sale of investment securities, net0 9,275 528 9,275 
Income before income taxes$39,992 $17,334 $77,094 $36,303 


2730

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
American Savings Bank, F.S.B.
Balance Sheets Data
(in thousands)March 31, 2021December 31, 2020
Assets    
Cash and due from banks $113,698  $178,422 
Interest-bearing deposits110,365 114,304 
Cash and cash equivalents224,063 292,726 
Investment securities
Available-for-sale, at fair value 2,305,257  1,970,417 
Held-to-maturity, at amortized cost (fair value of $285,599 and $229,963, respectively)295,046 226,947 
Stock in Federal Home Loan Bank, at cost 10,000  8,680 
Loans held for investment 5,310,081  5,333,843 
Allowance for credit losses (91,793) (101,201)
Net loans 5,218,288  5,232,642 
Loans held for sale, at lower of cost or fair value 23,637  28,275 
Other 559,543  554,656 
Goodwill 82,190  82,190 
Total assets $8,718,024  $8,396,533 
Liabilities and shareholder’s equity    
Deposit liabilities—noninterest-bearing $2,833,844  $2,598,500 
Deposit liabilities—interest-bearing 4,911,450  4,788,457 
Other borrowings 102,685  89,670 
Other 154,418  183,731 
Total liabilities 8,002,397  7,660,358 
Commitments and contingencies 0 0
Common stock 1  1 
Additional paid-in capital352,408 351,758 
Retained earnings 394,026  369,470 
Accumulated other comprehensive income (loss), net of taxes    
Net unrealized gains (losses) on securities$(25,791) $19,986 
Retirement benefit plans(5,017)(30,808)(5,040)14,946 
Total shareholder’s equity715,627  736,175 
Total liabilities and shareholder’s equity $8,718,024  8,396,533 
Other assets    
Bank-owned life insurance $162,821  $163,265 
Premises and equipment, net 206,247  206,134 
Accrued interest receivable 24,381  24,616 
Mortgage-servicing rights 10,685  10,020 
Low-income housing investments80,791 83,435 
Other 74,618  67,186 
  $559,543  $554,656 
Other liabilities    
Accrued expenses $55,073  $62,694 
Federal and state income taxes payable 1,709  6,582 
Cashier’s checks 29,363  38,011 
Advance payments by borrowers 5,863  10,207 
Other 62,410  66,237 
  $154,418  $183,731 
(in thousands)June 30, 2021December 31, 2020
Assets    
Cash and due from banks $115,567  $178,422 
Interest-bearing deposits105,800 114,304 
Cash and cash equivalents221,367 292,726 
Investment securities
Available-for-sale, at fair value 2,509,906  1,970,417 
Held-to-maturity, at amortized cost (fair value of $374,141 and $229,963, respectively)375,655 226,947 
Stock in Federal Home Loan Bank, at cost 10,000  8,680 
Loans held for investment 5,184,459  5,333,843 
Allowance for credit losses (78,252) (101,201)
Net loans 5,106,207  5,232,642 
Loans held for sale, at lower of cost or fair value 50,877  28,275 
Other 553,702  554,656 
Goodwill 82,190  82,190 
Total assets $8,909,904  $8,396,533 
Liabilities and shareholder’s equity    
Deposit liabilities—noninterest-bearing $2,868,770  $2,598,500 
Deposit liabilities—interest-bearing 5,004,660  4,788,457 
Other borrowings 129,665  89,670 
Other 166,419  183,731 
Total liabilities 8,169,514  7,660,358 
Commitments and contingencies 0 0
Common stock 1  1 
Additional paid-in capital352,888 351,758 
Retained earnings 401,310  369,470 
Accumulated other comprehensive income (loss), net of taxes    
Net unrealized gains (losses) on securities$(8,815) $19,986 
Retirement benefit plans(4,994)(13,809)(5,040)14,946 
Total shareholder’s equity740,390  736,175 
Total liabilities and shareholder’s equity $8,909,904  $8,396,533 
Other assets    
Bank-owned life insurance $164,453  $163,265 
Premises and equipment, net 205,917  206,134 
Accrued interest receivable 23,064  24,616 
Mortgage-servicing rights 10,754  10,020 
Low-income housing investments87,371 83,435 
Other 62,143  67,186 
  $553,702  $554,656 
Other liabilities    
Accrued expenses $61,156  $62,694 
Federal and state income taxes payable 1,508  6,582 
Cashier’s checks 30,818  38,011 
Advance payments by borrowers 10,374  10,207 
Other 62,563  66,237 
  $166,419  $183,731 
    
2831

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 federal funds purchased and advances from the Federal Home Loan Bank (FHLB) of $102.7$129.7 million NaN and NaN, respectively, as of March 31, 2021 and $89.7 million NaNat June 30, 2021 and NaN, respectively, as of December 31, 2020.2020, respectively.
Investment securities.  The major components of investment securities were as follows:
Amortized costGross unrealized gainsGross unrealized lossesEstimated fair
value		Gross unrealized losses Amortized costGross unrealized gainsGross unrealized lossesEstimated fair
value		Gross unrealized losses
Less than 12 months12 months or longer Less than 12 months12 months or longer
(dollars in thousands)(dollars in thousands)Number of issuesFair 
value		AmountNumber of issuesFair 
value		Amount(dollars in thousands)Number of issuesFair 
value		AmountNumber of issuesFair 
value		Amount
March 31, 2021        
June 30, 2021June 30, 2021        
Available-for-saleAvailable-for-saleAvailable-for-sale
U.S. Treasury and federal agency obligationsU.S. Treasury and federal agency obligations$55,969 $1,719 $(41)$57,647 1 $4,908 $(41)0 $0 $0 U.S. Treasury and federal agency obligations$94,716 $1,612 $(19)$96,309 1 $19,920 $(19)0 $0 $0 
Mortgage-backed securities*Mortgage-backed securities*2,239,311 15,404 (53,363)2,201,352 92 1,613,008 (53,344)1 958 (19)Mortgage-backed securities*2,381,062 15,932 (30,693)2,366,301 76 1,301,202 (30,679)1 771 (14)
Corporate bondsCorporate bonds29,781 1,050 0 30,831 0 0 0 0 0 0 Corporate bonds30,743 1,126 0 31,869 0 0 0 0 0 0 
Mortgage revenue bondsMortgage revenue bonds15,427 0 0 15,427 0 0 0 0 0 0 Mortgage revenue bonds15,427 0 0 15,427 0 0 0 0 0 0 
$2,340,488 $18,173 $(53,404)$2,305,257 93 $1,617,916 $(53,385)1 $958 $(19) $2,521,948 $18,670 $(30,712)$2,509,906 77 $1,321,122 $(30,698)1 $771 $(14)
Held-to-maturityHeld-to-maturityHeld-to-maturity
U.S. Treasury and Federal agency obligationsU.S. Treasury and Federal agency obligations$40,065 $316 $0 $40,381 0 $0 $0 0 $0 $0 
Mortgage-backed securities*Mortgage-backed securities*$295,046 $2,812 $(12,259)$285,599 16 $220,908 $(12,259)0 $0 $0 Mortgage-backed securities*335,590 3,463 (5,293)333,760 14 191,612 (5,293)0 0 0 
$295,046 $2,812 $(12,259)$285,599 16 $220,908 $(12,259)0 $0 $0  $375,655 $3,779 $(5,293)$374,141 14 $191,612 $(5,293)0 $0 $0 
December 31, 2020December 31, 2020December 31, 2020
Available-for-saleAvailable-for-saleAvailable-for-sale
U.S. Treasury and federal agency obligationsU.S. Treasury and federal agency obligations$60,260 $2,062 $0 $62,322 0 $0 $0 0 $0 $0 U.S. Treasury and federal agency obligations$60,260 $2,062 $0 $62,322 0 $0 $0 0 $0 $0 
Mortgage-backed securities*Mortgage-backed securities*1,825,893 26,817 (3,151)1,849,559 22 373,924 (3,151)0 0 0 Mortgage-backed securities*1,825,893 26,817 (3,151)1,849,559 22 373,924 (3,151)0 0 0 
Corporate bondsCorporate bonds29,776 1,575 0 31,351 0 0 0 0 0 0 Corporate bonds29,776 1,575 0 31,351 0 0 0 0 0 0 
Mortgage revenue bondsMortgage revenue bonds27,185 0 0 27,185 0 0 0 0 0 0 Mortgage revenue bonds27,185 0 0 27,185 0 0 0 0 0 0 
$1,943,114 $30,454 $(3,151)$1,970,417 22 $373,924 $(3,151)0 $0 $0  $1,943,114 $30,454 $(3,151)$1,970,417 22 $373,924 $(3,151)0 $0 $0 
Held-to-maturityHeld-to-maturityHeld-to-maturity
Mortgage-backed securities*Mortgage-backed securities*$226,947 $3,846 $(830)$229,963 7 $114,152 $(830)0 $0 $0 Mortgage-backed securities*$226,947 $3,846 $(830)$229,963 7 $114,152 $(830)0 $0 $0 
$226,947 $3,846 $(830)$229,963 7 $114,152 $(830)0 $0 $0  $226,947 $3,846 $(830)$229,963 7 $114,152 $(830)0 $0 $0 
* 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 MarchJune 30, 2021 and December 31, 2021,2020, represent a credit loss. Total gross unrealized losses were primarily attributable to change in market conditions. On a quarterly basis the investment securities are evaluated for changes in financial condition of the issuer. Based upon ASB’s evaluation, all securities held within the investment portfolio continue to be investment grade by one or more agencies. The contractual cash flows of the U.S. Treasury, federal agency obligations and 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’s investment securities portfolio did not require an allowance for credit losses at March 31,June 30, 2021 and December 31, 2020.
U.S. Treasury, federal agency obligations, corporate bonds, and mortgage revenue bonds have contractual terms to maturity. Mortgage-backed securities have contractual terms to maturity, but require periodic payments to reduce principal. In addition, expected maturities will differ from contractual maturities because borrowers have the right to prepay the underlying mortgages.
2932

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
The contractual maturities of investment securities were as follows:
June 30, 2021Amortized costFair value
(in thousands)  
Available-for-sale
Due in one year or less$0 $0 
Due after one year through five years79,832 81,989 
Due after five years through ten years45,627 46,189 
Due after ten years15,427 15,427 
 140,886 143,605 
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies2,381,062 2,366,301 
Total available-for-sale securities$2,521,948 $2,509,906 
Held-to-maturity
Due in one year or less$0 $0 
Due after one year through five years0 0 
Due after five years through ten years40,065 40,381 
Due after ten years0 0 
40,065 40,381 
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies335,590 333,760 
Total held-to-maturity securities$375,655 $374,141 
March 31, 2021Amortized costFair value
(in thousands)  
Available-for-sale
Due in one year or less$11,996 $12,011 
Due after one year through five years43,530 45,180 
Due after five years through ten years30,224 31,287 
Due after ten years15,427 15,427 
 101,177 103,905 
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies2,239,311 2,201,352 
Total available-for-sale securities$2,340,488 $2,305,257 
Held-to-maturity
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies$295,046 $285,599 
Total held-to-maturity securities$295,046 $285,599 
ProceedsThe proceeds, gross gains and losses from the salesales of available-for-sale securities were $197.4 million and NaN, respectively, for the three months ended March 31, 2021 and 2020. Gross realized gains and losses for the three months ended March 31, 2021 were $1.0 million and $0.5 million, respectively. Gross realized gains and losses for the three months ended March 31, 2020 were NaN.as follows:
Loans.
Three months ended June 30Six months ended June 30
2021202020212020
(in thousands)
Proceeds$0 $169,157 $197,354 $169,157 
Gross gains0 9,312 975 9,312 
Gross losses0 37 447 37 
Tax expense on realized gains0 2,492 142 2,492 
The components of loans were summarized as follows:
March 31, 2021December 31, 2020June 30, 2021December 31, 2020
(in thousands)(in thousands)  (in thousands)  
Real estate:Real estate:  Real estate:  
Residential 1-4 familyResidential 1-4 family$2,107,537 $2,144,239 Residential 1-4 family$2,122,873 $2,144,239 
Commercial real estateCommercial real estate1,012,968 983,865 Commercial real estate1,071,716 983,865 
Home equity line of creditHome equity line of credit901,462 963,578 Home equity line of credit870,182 963,578 
Residential landResidential land17,468 15,617 Residential land18,865 15,617 
Commercial constructionCommercial construction114,455 121,424 Commercial construction115,625 121,424 
Residential constructionResidential construction13,365 11,022 Residential construction10,574 11,022 
Total real estateTotal real estate4,167,255 4,239,745 Total real estate4,209,835 4,239,745 
CommercialCommercial1,010,004 936,748 Commercial856,336 936,748 
ConsumerConsumer148,511 168,733 Consumer132,855 168,733 
Total loansTotal loans5,325,770 5,345,226 Total loans5,199,026 5,345,226 
Deferred fees and discounts(15,689)(11,383)
Less: Deferred fees and discountsLess: Deferred fees and discounts(14,567)(11,383)
Allowance for credit losses Allowance for credit losses(91,793)(101,201) Allowance for credit losses(78,252)(101,201)
Total loans, netTotal loans, net$5,218,288 $5,232,642 Total loans, net$5,106,207 $5,232,642 
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
33

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
property purchases, the loan-to-value ratio may not exceed 75% of the lower of the appraised value or purchase price at origination.
30

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Allowance for credit losses. The allowance for credit losses (balances and changes) by portfolio segment were as follows:
(in thousands)(in thousands)Residential
1-4 family		Commercial real
estate		Home
equity line of credit		Residential landCommercial constructionResidential constructionCommercial loansConsumer loansTotal(in thousands)Residential
1-4 family		Commercial real
estate		Home
equity line of credit		Residential landCommercial constructionResidential constructionCommercial loansConsumer loansTotal
Three months ended March 31, 2021        
Three months ended June 30, 2021Three months ended June 30, 2021        
Allowance for credit losses:Allowance for credit losses:         
Beginning balanceBeginning balance$5,261 $34,345 $5,901 $573 $1,453 $16 $24,504 $19,740 $91,793 
Charge-offsCharge-offs(20)0 10 0 0 0 (319)(1,931)(2,260)
RecoveriesRecoveries51 0 61 11 0 0 366 1,187 1,676 
ProvisionProvision226 (5,637)(637)34 176 0 (4,493)(2,626)(12,957)
Ending balanceEnding balance$5,518 $28,708 $5,335 $618 $1,629 $16 $20,058 $16,370 $78,252 
Three months ended June 30, 2020Three months ended June 30, 2020        
Allowance for credit losses:Allowance for credit losses:         
Beginning balanceBeginning balance$4,476 $16,587 $6,225 $352 $3,446 $14 $12,977 $33,007 $77,084 
Charge-offsCharge-offs(7)0 0 (343)0 0 (699)(6,331)(7,380)
RecoveriesRecoveries2 0 0 5 0 0 106 657 770 
ProvisionProvision(560)4,513 (11)342 1,311 0 1,484 3,754 10,833 
Ending balanceEnding balance$3,911 $21,100 $6,214 $356 $4,757 $14 $13,868 $31,087 $81,307 
Six months ended June 30, 2021Six months ended June 30, 2021        
Allowance for credit losses:Allowance for credit losses:         Allowance for credit losses:         
Beginning balanceBeginning balance$4,600 $35,607 $6,813 $609 $4,149 $11 $25,462 $23,950 $101,201 Beginning balance$4,600 $35,607 $6,813 $609 $4,149 $11 $25,462 $23,950 $101,201 
Charge-offsCharge-offs0 0 (50)0 0 0 (771)(2,860)(3,681)Charge-offs(20)0 (40)0 0 0 (1,090)(4,791)(5,941)
RecoveriesRecoveries3 0 15 10 0 0 273 1,007 1,308 Recoveries54 0 76 21 0 0 639 2,194 2,984 
ProvisionProvision658 (1,262)(877)(46)(2,696)5 (460)(2,357)(7,035)Provision884 (6,899)(1,514)(12)(2,520)5 (4,953)(4,983)(19,992)
Ending balanceEnding balance$5,261 $34,345 $5,901 $573 $1,453 $16 $24,504 $19,740 $91,793 Ending balance$5,518 $28,708 $5,335 $618 $1,629 $16 $20,058 $16,370 $78,252 
Three months ended March 31, 2020        
Six months ended June 30, 2020Six months ended June 30, 2020        
Allowance for credit losses:Allowance for credit losses:         Allowance for credit losses:         
Beginning balance, prior to adoption of ASU No. 2016-13
Beginning balance, prior to adoption of ASU No. 2016-13
$2,380 $15,053 $6,922 $449 $2,097 $3 $10,245 $16,206 $53,355 Beginning balance, prior to adoption of ASU No. 2016-13$2,380 $15,053 $6,922 $449 $2,097 $3 $10,245 $16,206 $53,355 
Impact of adopting ASU No. 2016-13
Impact of adopting ASU No. 2016-13
2,150 208 (541)(64)289 14 922 16,463 19,441 Impact of adopting ASU No. 2016-132,150 208 (541)(64)289 14 922 16,463 19,441 
Charge-offsCharge-offs0 0 0 (8)0 0 (369)(6,254)(6,631)Charge-offs(7)0 0 (351)0 0 (1,068)(12,585)(14,011)
RecoveriesRecoveries53 0 6 9 0 0 186 764 1,018 Recoveries55 0 6 14 0 0 292 1,421 1,788 
ProvisionProvision(107)1,326 (162)(34)1,060 (3)1,993 5,828 9,901 Provision(667)5,839 (173)308 2,371 (3)3,477 9,582 20,734 
Ending balanceEnding balance$4,476 $16,587 $6,225 $352 $3,446 $14 $12,977 $33,007 $77,084 Ending balance$3,911 $21,100 $6,214 $356 $4,757 $14 $13,868 $31,087 $81,307 

34

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)(in thousands)Home equity
 line of credit		Commercial constructionCommercial loansTotal(in thousands)Home equity
 line of credit		Commercial constructionCommercial loansTotal
Three months ended March 31, 2021
Three months ended June 30, 2021Three months ended June 30, 2021
Allowance for loan commitments:Allowance for loan commitments:Allowance for loan commitments:
Beginning balanceBeginning balance$300 $3,000 $1,000 $4,300 Beginning balance$400 $1,300 $1,200 $2,900 
ProvisionProvision100 (1,700)200 (1,400)Provision0 1,100 (350)750 
Ending balanceEnding balance$400 $1,300 $1,200 $2,900 Ending balance$400 $2,400 $850 $3,650 
Three months ended March 31, 2020
Three months ended June 30, 2020Three months ended June 30, 2020
Allowance for loan commitments:Allowance for loan commitments:
Beginning balanceBeginning balance$300 $3,191 $309 $3,800 
ProvisionProvision0 4,309 (9)4,300 
Ending balanceEnding balance$300 $7,500 $300 $8,100 
Six months ended June 30, 2021Six months ended June 30, 2021
Allowance for loan commitments:Allowance for loan commitments:
Beginning balanceBeginning balance$300 $3,000 $1,000 $4,300 
ProvisionProvision100 (600)(150)(650)
Ending balanceEnding balance$400 $2,400 $850 $3,650 
Six months ended June 30, 2020Six months ended June 30, 2020
Allowance for loan commitments:Allowance for loan commitments:Allowance for loan commitments:
Beginning balance, prior to adoption of ASU No. 2016-13Beginning balance, prior to adoption of ASU No. 2016-13$392 $931 $418 $1,741 Beginning balance, prior to adoption of ASU No. 2016-13$392 $931 $418 $1,741 
Impact of adopting ASU No. 2016-13
Impact of adopting ASU No. 2016-13
(92)1,745 (94)1,559 Impact of adopting ASU No. 2016-13(92)1,745 (94)1,559 
ProvisionProvision0 515 (15)500 Provision0 4,824 (24)4,800 
Ending balanceEnding balance$300 $3,191 $309 $3,800 Ending balance$300 $7,500 $300 $8,100 
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 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.
3135

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 YearRevolving Loans
(in thousands)20212020201920182017PriorRevolvingConverted to term loansTotal
March 31, 2021
Residential 1-4 family
Current$150,713 $549,327 $184,339 $97,560 $179,131 $934,471 $0 $0 $2,095,541 
30-59 days past due0 280 0 0 0 2,081 0 0 2,361 
60-89 days past due0 0 3,018 431 0 1,954 0 0 5,403 
Greater than 89 days past due0 0 942 0 0 3,290 0 0 4,232 
150,713 549,607 188,299 97,991 179,131 941,796 0 0 2,107,537 
Home equity line of credit
Current0 0 0 0 0 0 861,116 36,792 897,908 
30-59 days past due0 0 0 0 0 0 659 473 1,132 
60-89 days past due0 0 0 0 0 0 261 73 334 
Greater than 89 days past due0 0 0 0 0 0 1,243 845 2,088 
0 0 0 0 0 0 863,279 38,183 901,462 
Residential land
Current2,794 8,354 2,884 1,290 855 292 0 0 16,469 
30-59 days past due0 0 0 0 0 699 0 0 699 
60-89 days past due0 0 0 0 0 0 0 0 0 
Greater than 89 days past due0 0 0 0 0 300 0 0 300 
2,794 8,354 2,884 1,290 855 1,291 0 0 17,468 
Residential construction
Current1,114 7,865 3,344 383 659 0 0 0 13,365 
30-59 days past due0 0 0 0 0 0 0 0 0 
60-89 days past due0 0 0 0 0 0 0 0 0 
Greater than 89 days past due0 0 0 0 0 0 0 0 0 
1,114 7,865 3,344 383 659 0 0 0 13,365 
Consumer
Current6,658 25,307 57,781 29,734 4,219 475 16,332 3,729 144,235 
30-59 days past due125 164 577 452 90 1 106 125 1,640 
60-89 days past due0 149 623 372 119 1 80 92 1,436 
Greater than 89 days past due0 218 356 280 56 1 199 90 1,200 
6,783 25,838 59,337 30,838 4,484 478 16,717 4,036 148,511 
Commercial real estate
Pass23,091 274,952 69,384 60,627 28,174 222,617 11,000 0 689,845 
Special Mention0 4,914 29,597 57,489 51,586 97,247 0 0 240,833 
Substandard0 0 14,647 4,170 1,877 61,596 0 0 82,290 
Doubtful0 0 0 0 0 0 0 0 0 
23,091 279,866 113,628 122,286 81,637 381,460 11,000 0 1,012,968 
Commercial construction
Pass0 21,414 39,513 26,990 0 2,917 20,972 0 111,806 
Special Mention245 2,404 0 0 0 0 0 0 2,649 
Substandard0 0 0 0 0 0 0 0 0 
Doubtful0 0 0 0 0 0 0 0 0 
245 23,818 39,513 26,990 0 2,917 20,972 0 114,455 
Commercial
Pass169,095 337,753 96,251 60,462 28,545 51,072 91,178 19,666 854,022 
Special Mention65 38,316 15,024 1,820 6,725 33,990 26,301 26 122,267 
Substandard0 275 7,921 2,004 3,765 11,276 6,665 1,809 33,715 
Doubtful0 0 0 0 0 0 0 0 0 
169,160 376,344 119,196 64,286 39,035 96,338 124,144 21,501 1,010,004 
Total loans$353,900 $1,271,692 $526,201 $344,064 $305,801 $1,424,280 $1,036,112 $63,720 $5,325,770 

Term Loans by Origination YearRevolving Loans
(in thousands)20212020201920182017PriorRevolvingConverted to term loansTotal
June 30, 2021
Residential 1-4 family
Current$362,487 $492,182 $166,552 $85,279 $157,993 $844,110 $0 $0 $2,108,603 
30-59 days past due0 278 0 0 0 2,920 0 0 3,198 
60-89 days past due0 0 0 0 0 1,813 0 0 1,813 
Greater than 89 days past due0 0 3,960 430 0 4,869 0 0 9,259 
362,487 492,460 170,512 85,709 157,993 853,712 0 0 2,122,873 
Home equity line of credit
Current0 0 0 0 0 0 829,421 38,267 867,688 
30-59 days past due0 0 0 0 0 0 484 397 881 
60-89 days past due0 0 0 0 0 0 104 0 104 
Greater than 89 days past due0 0 0 0 0 0 1,035 474 1,509 
0 0 0 0 0 0 831,044 39,138 870,182 
Residential land
Current5,586 8,055 2,524 892 523 289 0 0 17,869 
30-59 days past due0 0 0 0 0 0 0 0 0 
60-89 days past due0 0 0 0 0 696 0 0 696 
Greater than 89 days past due0 0 0 0 0 300 0 0 300 
5,586 8,055 2,524 892 523 1,285 0 0 18,865 
Residential construction
Current2,148 5,264 2,883 0 279 0 0 0 10,574 
30-59 days past due0 0 0 0 0 0 0 0 0 
60-89 days past due0 0 0 0 0 0 0 0 0 
Greater than 89 days past due0 0 0 0 0 0 0 0 0 
2,148 5,264 2,883 0 279 0 0 0 10,574 
Consumer
Current15,289 21,974 48,127 22,699 2,138 356 14,764 4,027 129,374 
30-59 days past due172 139 558 349 77 0 157 76 1,528 
60-89 days past due0 85 443 319 63 0 62 51 1,023 
Greater than 89 days past due0 100 308 248 44 0 106 124 930 
15,461 22,298 49,436 23,615 2,322 356 15,089 4,278 132,855 
Commercial real estate
Pass90,683 280,206 68,625 64,694 31,668 255,806 11,000 0 802,682 
Special Mention1,360 4,254 29,642 53,347 47,653 61,926 0 0 198,182 
Substandard0 0 14,098 1,883 1,859 53,012 0 0 70,852 
Doubtful0 0 0 0 0 0 0 0 0 
92,043 284,460 112,365 119,924 81,180 370,744 11,000 0 1,071,716 
Commercial construction
Pass10,260 30,287 31,553 11,342 0 0 28,698 0 112,140 
Special Mention650 2,835 0 0 0 0 0 0 3,485 
Substandard0 0 0 0 0 0 0 0 0 
Doubtful0 0 0 0 0 0 0 0 0 
10,910 33,122 31,553 11,342 0 0 28,698 0 115,625 
Commercial
Pass199,625 182,533 87,875 60,800 21,238 50,243 97,465 17,412 717,191 
Special Mention58 35,160 12,433 448 6,204 29,376 25,297 23 108,999 
Substandard0 244 7,309 1,915 3,135 9,075 6,677 1,791 30,146 
Doubtful0 0 0 0 0 0 0 0 0 
199,683 217,937 107,617 63,163 30,577 88,694 129,439 19,226 856,336 
Total loans$688,318 $1,063,596 $476,890 $304,645 $272,874 $1,314,791 $1,015,270 $62,642 $5,199,026 
3236

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Term Loans by Origination YearRevolving Loans
(in thousands)20202019201820172016PriorRevolvingConverted to term loansTotal
December 31, 2020
Residential 1-4 family
Current$567,282 $218,988 $111,243 $203,916 $184,888 $849,788 $0 $0 $2,136,105 
30-59 days past due0 0 0 0 0 2,629 0 0 2,629 
60-89 days past due0 476 0 0 0 2,314 0 0 2,790 
Greater than 89 days past due0 0 0 353 0 2,362 0 0 2,715 
567,282 219,464 111,243 204,269 184,888 857,093 0 0 2,144,239 
Home equity line of credit
Current0 0 0 0 0 0 927,106 33,228 960,334 
30-59 days past due0 0 0 0 0 0 552 298 850 
60-89 days past due0 0 0 0 0 0 267 75 342 
Greater than 89 days past due0 0 0 0 0 0 1,463 589 2,052 
0 0 0 0 0 0 929,388 34,190 963,578 
Residential land
Current8,357 3,427 1,598 939 22 272 0 0 14,615 
30-59 days past due0 0 0 0 0 702 0 0 702 
60-89 days past due0 0 0 0 0 0 0 0 0 
Greater than 89 days past due0 0 0 0 0 300 0 0 300 
8,357 3,427 1,598 939 22 1,274 0 0 15,617 
Residential construction
Current6,919 3,093 385 625 0 0 0 0 11,022 
30-59 days past due0 0 0 0 0 0 0 0 0 
60-89 days past due0 0 0 0 0 0 0 0 0 
Greater than 89 days past due0 0 0 0 0 0 0 0 0 
6,919 3,093 385 625 0 0 0 0 11,022 
Consumer
Current28,818 67,159 37,072 7,207 293 348 18,351 3,758 163,006 
30-59 days past due406 1,085 727 155 4 0 138 90 2,605 
60-89 days past due191 549 427 165 3 0 97 59 1,491 
Greater than 89 days past due131 532 409 119 7 0 262 171 1,631 
29,546 69,325 38,635 7,646 307 348 18,848 4,078 168,733 
Commercial real estate
Pass270,603 63,301 62,168 28,432 55,089 155,654 11,000 0 646,247 
Special Mention10,261 36,405 57,952 33,763 68,287 48,094 0 0 254,762 
Substandard0 14,720 4,181 1,892 4,423 57,640 0 0 82,856 
Doubtful0 0 0 0 0 0 0 0 0 
280,864 114,426 124,301 64,087 127,799 261,388 11,000 0 983,865 
Commercial construction
Pass14,480 31,965 26,990 0 5,562 0 22,517 0 101,514 
Special Mention1,910 0 0 18,000 0 0 0 0 19,910 
Substandard0 0 0 0 0 0 0 0 0 
Doubtful0 0 0 0 0 0 0 0 0 
16,390 31,965 26,990 18,000 5,562 0 22,517 0 121,424 
Commercial
Pass392,088 117,791 75,533 29,211 12,520 35,770 74,520 11,004 748,437 
Special Mention37,836 23,087 1,920 6,990 30,264 13,250 31,362 11,218 155,927 
Substandard304 7,785 2,043 4,017 7,542 3,113 5,265 1,928 31,997 
Doubtful0 0 0 0 0 0 387 0 387 
430,228 148,663 79,496 40,218 50,326 52,133 111,534 24,150 936,748 
Total loans$1,339,586 $590,363 $382,648 $335,784 $368,904 $1,172,236 $1,093,287 $62,418 $5,345,226 
3337

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Revolving loans converted to term loans during the threesix months ended March 31,June 30, 2021 in the commercial, home equity line of credit and consumer portfolios was $0.5were $0.6 million, $6.2$9.8 million and $0.7$1.5 million, respectively. Revolving loans converted to term loans during the threesix months ended March 31,June 30, 2020 in the commercial, home equity line of credit and consumer portfolios was $2.0were $13.7 million, $1.8$8.7 million and $1.0$1.4 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		CurrentTotal
financing
receivables		Amortized cost>
90 days and
accruing
March 31, 2021       
Real estate:       
Residential 1-4 family$2,361 $5,403 $4,232 $11,996 $2,095,541 $2,107,537 $0 
Commercial real estate1,681 0 0 1,681 1,011,287 1,012,968 0 
Home equity line of credit1,132 334 2,088 3,554 897,908 901,462 0 
Residential land699 0 300 999 16,469 17,468 0 
Commercial construction0 0 0 0 114,455 114,455 0 
Residential construction0 0 0 0 13,365 13,365 0 
Commercial146 47 73 266 1,009,738 1,010,004 0 
Consumer1,640 1,436 1,200 4,276 144,235 148,511 0 
Total loans$7,659 $7,220 $7,893 $22,772 $5,302,998 $5,325,770 $0 
December 31, 2020       
Real estate:       
Residential 1-4 family$2,629 $2,790 $2,715 $8,134 $2,136,105 $2,144,239 $0 
Commercial real estate0 488 0 488 983,377 983,865 0 
Home equity line of credit850 342 2,052 3,244 960,334 963,578 0 
Residential land702 0 300 1,002 14,615 15,617 0 
Commercial construction0 0 0 0 121,424 121,424 0 
Residential construction0 0 0 0 11,022 11,022 0 
Commercial608 300 132 1,040 935,708 936,748 0 
Consumer2,605 1,491 1,631 5,727 163,006 168,733 0 
Total loans$7,394 $5,411 $6,830 $19,635 $5,325,591 $5,345,226 $0 
(in thousands)30-59
days
past due		60-89
days
past due		 
Greater than
90 days		Total
past due		CurrentTotal
financing
receivables		Amortized cost>
90 days and
accruing
June 30, 2021       
Real estate:       
Residential 1-4 family$3,198 $1,813 $9,259 $14,270 $2,108,603 $2,122,873 $0 
Commercial real estate0 0 170 170 1,071,546 1,071,716 0 
Home equity line of credit881 104 1,509 2,494 867,688 870,182 0 
Residential land0 696 300 996 17,869 18,865 0 
Commercial construction0 0 0 0 115,625 115,625 0 
Residential construction0 0 0 0 10,574 10,574 0 
Commercial298 224 116 638 855,698 856,336 0 
Consumer1,528 1,023 930 3,481 129,374 132,855 0 
Total loans$5,905 $3,860 $12,284 $22,049 $5,176,977 $5,199,026 $0 
December 31, 2020       
Real estate:       
Residential 1-4 family$2,629 $2,790 $2,715 $8,134 $2,136,105 $2,144,239 $0 
Commercial real estate0 488 0 488 983,377 983,865 0 
Home equity line of credit850 342 2,052 3,244 960,334 963,578 0 
Residential land702 0 300 1,002 14,615 15,617 0 
Commercial construction0 0 0 0 121,424 121,424 0 
Residential construction0 0 0 0 11,022 11,022 0 
Commercial608 300 132 1,040 935,708 936,748 0 
Consumer2,605 1,491 1,631 5,727 163,006 168,733 0 
Total loans$7,394 $5,411 $6,830 $19,635 $5,325,591 $5,345,226 $0 

The credit risk profile based on nonaccrual loans were as follows:
(in thousands)March 31, 2021December 31, 2020
With a Related ACLWithout a Related ACLTotalWith a Related ACLWithout a Related ACLTotal
Real estate:
Residential 1-4 family$16,945 $2,987 $19,932 $8,991 $2,835 $11,826 
Commercial real estate15,634 2,828 18,462 15,847 2,875 18,722 
Home equity line of credit5,075 1,587 6,662 5,791 1,567 7,358 
Residential land107 300 407 108 300 408 
Commercial construction0 0 0 0 0 0 
Residential construction0 0 0 0 0 0 
Commercial1,763 2,918 4,681 1,819 3,328 5,147 
Consumer3,192 0 3,192 3,935 0 3,935 
  Total$42,716 $10,620 $53,336 $36,491 $10,905 $47,396 
(in thousands)June 30, 2021December 31, 2020
With a Related ACLWithout a Related ACLTotalWith a Related ACLWithout a Related ACLTotal
Real estate:
Residential 1-4 family$14,076 $7,666 $21,742 $8,991 $2,835 $11,826 
Commercial real estate15,514 1,437 16,951 15,847 2,875 18,722 
Home equity line of credit5,200 1,415 6,615 5,791 1,567 7,358 
Residential land801 300 1,101 108 300 408 
Commercial construction0 0 0 0 0 0 
Residential construction0 0 0 0 0 0 
Commercial1,718 2,505 4,223 1,819 3,328 5,147 
Consumer2,641 0 2,641 3,935 0 3,935 
  Total$39,950 $13,323 $53,273 $36,491 $10,905 $47,396 

3438

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
The credit risk profile based on loans whose terms have been modified and accruing interest were as follows:
(in thousands)March 31, 2021December 31, 2020
Real estate:
Residential 1-4 family$7,453 $7,932 
Commercial real estate3,254 3,281 
Home equity line of credit7,727 8,148 
Residential land1,738 1,555 
Commercial construction0 0 
Residential construction0 0 
Commercial5,737 6,108 
Consumer54 54 
Total troubled debt restructured loans accruing interest$25,963 $27,078 
(in thousands)June 30, 2021December 31, 2020
Real estate:
Residential 1-4 family$7,596 $7,932 
Commercial real estate3,203 3,281 
Home equity line of credit7,617 8,148 
Residential land995 1,555 
Commercial construction0 0 
Residential construction0 0 
Commercial5,258 6,108 
Consumer53 54 
Total troubled debt restructured loans accruing interest$24,722 $27,078 

ASB did not recognize interest on nonaccrual loans for the three and six months ended March 31,June 30, 2021 and 2020.
Troubled debt restructurings.  A loan modification is deemed to be a TDR when the borrower is determined to be experiencing financial difficulties and ASB grants a concession it would not otherwise consider.
The allowance for credit losses on TDR loans that do not share risk characteristics are individually evaluated based on the present value of expected future cash flows discounted at the loan’s effective original contractual rate or based on the fair value of collateral less cost to sell. The financial impact of the estimated loss 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 credit losses.
Loan modifications that occurred during the first three and six months ofended June 30, 2021 and 2020 were as follows:
Loans modified as a TDRThree months ended March 31, 2021
(dollars in thousands)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 family12 $8,283 $298 
Commercial real estate1 482 0 
Home equity line of credit1 170 21 
Residential land1 271 11 
Commercial construction0 0 0 
Residential construction0 0 0 
Commercial2 59 19 
Consumer0 0 0 
 17 $9,265 $349 
Loans modified as a TDRThree months ended June 30, 2021Six months ended June 30, 2021
(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 family3 $1,835 $77 15 $10,024 $271 
Commercial real estate0 0 0 0 0 0 
Home equity line of credit0 0 0 1 163 18 
Residential land1 288 12 2 558 23 
Commercial construction0 0 0 0 0 0 
Residential construction0 0 0 0 0 0 
Commercial4 237 11 6 296 26 
Consumer0 0 0 0 0 0 
 8 $2,360 $100 24 $11,041 $338 



3539

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Three months ended March 31, 2020
(dollars in thousands)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 family1 $148 $8 
Commercial real estate2 16,584 4,281 
Home equity line of credit0 0 0 
Residential land0 0 0 
Commercial construction0 0 0 
Residential construction0 0 0 
Commercial4 756 278 
Consumer0 0 0 
 7 $17,488 $4,567 

Three months ended June 30, 2020Six months ended June 30, 2020
(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 family0 $0 $0 1 $147 $7 
Commercial real estate0 0 0 2 16,430 4,301 
Home equity line of credit2 19 3 2 19 3 
Residential land2 330 0 2 330 0 
Commercial construction0 0 0 0 0 0 
Residential construction0 0 0 0 0 0 
Commercial0 0 0 4 751 275 
Consumer0 0 0 0 0 0 
 4 $349 $3 11 $17,677 $4,586 
1 The period end balances reflect all paydowns and charge-offs since the modification period. TDRs fully paid off, charged-off, or foreclosed upon by period end are not included.

There were no loans modified in TDRs that experienced a payment default of 90 days or more during the second quarter and first threesix months of 2021 and 2020.
If a loan modified in a TDR subsequently 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 NaN at March 31,June 30, 2021 and December 31, 2020.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides that a financial institution may elect to suspend the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and any related impairment for accounting purposes.
In response to the COVID-19 pandemic, the Board of Governors of the FRB, the FDIC, the National Credit Union Administration, the OCC, and the Consumer Financial Protection Bureau, in consultation with the state financial regulators (collectively, the “agencies”) issued a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to the Company include, but are not limited to accounting for loan modifications, past due reporting and nonaccrual status and charge-offs.
Loan modifications that do not meet the conditions of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. The agencies confirmed with the FASB staff that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or insignificant delays in payment. Financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would not be considered past due during the period of the deferral. Lastly, during short-term COVID-19 modifications, these loans generally should not be reported as nonaccrual or as classified.
36

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
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.
40

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Loans considered collateral-dependent were as follows:
March 31, 2021December 31, 2020Amortized cost
(in thousands)(in thousands)Amortized costAmortized costCollateral type(in thousands)June 30, 2021December 31, 2020Collateral type
Real estate:Real estate:Real estate:
Residential 1-4 family Residential 1-4 family$2,782 $2,541  Residential real estate property Residential 1-4 family$4,454 $2,541  Residential real estate property
Commercial real estateCommercial real estate2,828 2,875  Commercial real estate propertyCommercial real estate1,437 2,875  Commercial real estate property
Home equity line of credit Home equity line of credit1,587 1,567  Residential real estate property Home equity line of credit1,415 1,567  Residential real estate property
Residential landResidential land300 300  Residential real estate propertyResidential land300 300  Residential real estate property
Total real estate Total real estate7,497 7,283  Total real estate7,606 7,283 
CommercialCommercial889 934  Business assetsCommercial840 934  Business assets
Total Total$8,386 $8,217  Total$8,446 $8,217 
ASB had $3.8 million of mortgage loans collateralized by residential real estate property that were in the process of foreclosure at March 31,June 30, 2021 and December 31, 2020.
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 $170.9$95.6 million and $72.5$186.8 million for the three months ended March 31,June 30, 2021 and 2020, respectively, $266.5 million and $259.3 million for the six months ended June 30, 2021 and 2020, respectively, and recognized gains on such sales of $4.3$1.9 million and $2.0$6.3 million for the three months ended March 31,June 30, 2021 and 2020, respectively, $6.2 million and $8.3 million for the six months ended June 30, 2021 and 2020, respectively.
There were no repurchased mortgage loans for the three and six months ended March 31,June 30, 2021 and 2020. The repurchase reserve, which represents ASB’s loss estimate related to mortgage loan repurchases, was $0.1 million as of March 31,June 30, 2021 and 2020.
Mortgage servicing fees, a component of other income, net, were $0.9$1.0 million and $0.8 million for the three months ended March 31,June 30, 2021 and 2020, respectively, and were $1.9 million and $1.6 million for the six months ended June 30, 2021 and 2020, respectively.
Changes in the carrying value of MSRs were as follows:
(in thousands)
Gross
carrying amount1
Accumulated amortizationValuation allowanceNet
carrying amount
March 31, 2021$20,830 $(10,141)$(4)$10,685 
December 31, 202022,950 (12,670)(260)10,020 
(in thousands)
Gross
carrying amount1
Accumulated amortizationValuation allowanceNet
carrying amount
June 30, 2021$21,865 $(11,111)$0 $10,754 
December 31, 202022,950 (12,670)(260)10,020 
1     Reflects impact of loans paid in full
Changes related to MSRs were as follows:
Three months ended March 31
(in thousands)20212020
Mortgage servicing rights
Beginning balance$10,280 $9,101 
Amount capitalized1,547 636 
Amortization(1,138)(617)
Other-than-temporary impairment0 0 
Carrying amount before valuation allowance10,689 9,120 
Valuation allowance for mortgage servicing rights
Beginning balance260 0 
Provision(256)0 
Other-than-temporary impairment0 0 
Ending balance4 0 
Net carrying value of mortgage servicing rights$10,685 $9,120 
3741

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Changes related to MSRs were as follows:
Three months ended June 30,Six months ended June 30
(in thousands)2021202020212020
Mortgage servicing rights
Beginning balance$10,689 $9,120 $10,280 $9,101 
Amount capitalized1,023 1,726 2,570 2,362 
Amortization(958)(935)(2,096)(1,552)
Other-than-temporary impairment0 0 0 0 
Carrying amount before valuation allowance10,754 9,911 10,754 9,911 
Valuation allowance for mortgage servicing rights
Beginning balance4 0 260 0 
Provision(4)264 (260)264 
Other-than-temporary impairment0 0 0 0 
Ending balance0 264 0 264 
Net carrying value of mortgage servicing rights$10,754 $9,647 $10,754 $9,647 
ASB capitalizes MSRs acquired upon the sale of mortgage loans with servicing rights retained. On a monthly basis, ASB compares the net carrying value of the MSRs to its fair value to determine if there are any changes to the valuation allowance and/or other-than-temporary impairment for the MSRs.
ASB uses a present value cash flow model 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.
Key assumptions used in estimating the fair value of ASB’s MSRs used in the impairment analysis were as follows:
(dollars in thousands)June 30, 2021December 31, 2020
Unpaid principal balance$1,535,932 $1,450,312 
Weighted average note rate3.47 %3.68 %
Weighted average discount rate9.25 %9.25 %
Weighted average prepayment speed11.3 %17.7 %
(dollars in thousands)March 31, 2021December 31, 2020
Unpaid principal balance$1,505,963 $1,450,312 
Weighted average note rate3.57 %3.68 %
Weighted average discount rate9.25 %9.25 %
Weighted average prepayment speed12.0 %17.7 %
The sensitivity analysis of fair value of MSRs to hypothetical adverse changes of 25 and 50 basis points in certain key assumptions was as follows:
(dollars in thousands)March 31, 2021December 31, 2020
Prepayment rate:
  25 basis points adverse rate change$(659)$(738)
  50 basis points adverse rate change(1,376)(1,445)
Discount rate:
  25 basis points adverse rate change(110)(68)
  50 basis points adverse rate change(218)(135)
(dollars in thousands)June 30, 2021December 31, 2020
Prepayment rate:
  25 basis points adverse rate change$(771)$(738)
  50 basis points adverse rate change(1,738)(1,445)
Discount rate:
  25 basis points adverse rate change(120)(68)
  50 basis points adverse rate change(238)(135)
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 March 31,June 30, 2021 and December 31, 2020, ASB had no FHLB advances outstanding or federal funds purchased with the Federal Reserve Bank. ASB was in compliance with all Advances, Pledge and Security Agreement requirements as of March 31,June 30, 2021.
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
42

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
securities sold under agreements to repurchase on a gross basis in the balance sheet. The following tables present information about the securities sold under agreements to repurchase, including the related collateral received from or pledged to counterparties:
(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   
June 30, 2021$130 $0 $130 
December 31, 202090 0 90 
(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   
March 31, 2021$103 $0 $103 
December 31, 202090 0 90 

 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
March 31, 2021$103 $122 $0 
December 31, 202090 92 0 
38

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
June 30, 2021$130 $158 $0 
December 31, 202090 92 0 
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:
 June 30, 2021December 31, 2020
(in thousands)Notional amountFair valueNotional amountFair value
Interest rate lock commitments$15,516 $371 $120,980 $4,536 
Forward commitments20,036 (41)100,500 (500)
 March 31, 2021December 31, 2020
(in thousands)Notional amountFair valueNotional amountFair value
Interest rate lock commitments$49,316 $438 $120,980 $4,536 
Forward commitments49,500 340 100,500 (500)
43

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
ASB’s derivative financial instruments, their fair values and balance sheet location were as follows:
Derivative Financial Instruments Not Designated as Hedging Instruments 1
March 31, 2021December 31, 2020
(in thousands) Asset derivatives Liability
derivatives		 Asset derivatives Liability
derivatives
Interest rate lock commitments$456 $(18)$4,536 $0 
Forward commitments340 0 0 500 
 $796 $(18)$4,536 $500 
Derivative Financial Instruments Not Designated as Hedging Instruments 1
June 30, 2021December 31, 2020
(in thousands) Asset derivatives Liability
derivatives		 Asset derivatives Liability
derivatives
Interest rate lock commitments$371 $0 $4,536 $0 
Forward commitments6 47 0 500 
 $377 $47 $4,536 $500 
1 Asset derivatives are included in other assets and liability derivatives are included in other liabilities in the balance sheets.
The following table presents ASB’s derivative financial instruments and the amount and location of the net gains or losses recognized in ASB’s statements of income:
Derivative Financial Instruments Not Designated as Hedging InstrumentsLocation of net gains (losses) recognized in the Statements of IncomeThree months ended March 31
(in thousands)20212020
Interest rate lock commitmentsMortgage banking income$(4,098)$1,555 
Forward commitmentsMortgage banking income840 (543)
 $(3,258)$1,012 
Derivative Financial Instruments Not Designated as Hedging InstrumentsLocation of net gains (losses) recognized in the Statements of IncomeThree months ended June 30,Six months ended June 30
(in thousands)2021202020212020
Interest rate lock commitmentsMortgage banking income$(67)$489 $(4,165)$2,044 
Forward commitmentsMortgage banking income(381)298 459 (245)
 $(448)$787 $(3,706)$1,799 
Low-Income Housing Tax Credit (LIHTC). ASB’s unfunded commitments to fund its LIHTC investment partnerships were $37.8$43.8 million and $41.0 million at March 31,June 30, 2021 and December 31, 2020, respectively. These unfunded commitments were unconditional and legally binding and are recorded in other liabilities with a corresponding increase in other assets. As of March 31,June 30, 2021, ASB did not have any impairment losses resulting from forfeiture or ineligibility of tax credits or other circumstances related to its LIHTC investment partnerships.
3944

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 5 · Credit agreements
On May 14, 2021, HEI and Hawaiian Electric (each a Company, and collectively the Companies) each entered into a separate agreement with a syndicate of 89 financial institutions (the HEI Facility and Hawaiian Electric Facility, respectively, and together, the CreditAmended Facilities), effective July 3, 2017, to amend and restate their respective previously existing revolving unsecured credit agreements. The HEI Facility was increased to $175 million from $150 million HEI Facility and its term was extended to May 14, 2026. The $200 million Hawaiian Electric Facility bothhas an initial term that expires on May 13, 2022, but its term will terminate on June 30, 2022. Neitherextend to May 14, 2026 upon approval by the PUC during the initial term, which approval has been requested. In addition to extending the term, Hawaiian Electric also requested PUC approval to exercise its options of 2 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.
None of the facilities are collateralized. As of March 31,June 30, 2021 and December 31, 2020, 0 amounts were outstanding under the Credit Facilities.
The Credit 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.
Under the Amended Facilities, draws would generally bear interest, based on each Company’s respective current long-term credit ratings, at the “Adjusted LIBO Rate,” as defined in the Amended Facilities, plus 137.5 and 125.0 basis points for HEI and Hawaiian Electric, hasrespectively, and incur annual fees on undrawn commitments, excluding swingline borrowings, of 20.0 and 17.5 basis points for HEI and Hawaiian Electric, respectively. The Amended Facilities also include provisions to accommodate a transition from the London Interbank Offered Rate (LIBOR) to an alternative reference rate, based on the secured overnight financing rate administered by the Federal Reserve Bank of New York, upon the phase out of LIBOR as a reference rate.
Additionally, the Amended Facilities contain provisions for pricing adjustments in the event of a long-term ratings change based on the respective Facility’s ratings-based pricing grid, which includes the ratings by Fitch Ratings, Inc. (Fitch), Moody’s Investor Service’s (Moody’s) and Standard & Poor’s (S&P). The Amended Facilities do not contain clauses that would affect access to the Amended Facilities by reason of a ratings downgrade, nor do they have broad “material adverse change” clauses. In addition, the Amended Facilities contain provisions for potential annual pricing adjustments to the Eurodollar or Alternate Base Rate margin on draws and fees on undrawn commitments of up to +/-5 basis points and +/-1 basis point, respectively, based on performance against certain sustainability-linked metrics. The sustainability-linked metrics include achievement of renewable portfolio standards in excess of statutory requirements and increasing cumulative penetration of installed MWs of photovoltaic systems on residential rooftops.
The Amended Facilities also include updated terms and conditions customary for facilities of this type and contain customary conditions that must be met in order to draw on them, including compliance with covenants (such as covenants preventing HEI’s and Hawaiian Electric’s respective subsidiaries from entering into agreements that restrict the ability of such subsidiaries to pay dividends to, or to repay borrowings from, HEI or Hawaiian Electric, as applicable; and a covenant in Hawaiian Electric’s facility restricting Hawaiian Electric’s ability, as well as the ability of any of its subsidiaries, to guarantee additional indebtedness of the subsidiaries if such additional debt would cause the subsidiary’s “Consolidated Subsidiary Funded Debt to Capitalization Ratio” (as defined in the Hawaiian Electric Facility) to exceed 65%).
Under the HEI Facility, it is an event of default if HEI fails to maintain an unconsolidated “Capitalization Ratio” (funded debt) (as defined in the HEI Facility) of 50% or less or if HEI no longer owns Hawaiian Electric or ASB. Under the Hawaiian Electric Facility, it is an event of default if Hawaiian Electric fails to maintain a “Consolidated Capitalization Ratio” (equity) (as defined in the Hawaiian Electric Facility) of at least 35%, or if Hawaiian Electric is no longer owned by HEI.
Hawaiian Electric had a $75 million 364-day revolving credit agreement, withunder which 0 amount outstanding at March 31, 2021.amounts had been drawn. On April 19, 2021, the revolving credit agreement terminated and was not renewed.
45

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 6 · 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 ConsolidatedHawaiian Electric ConsolidatedHEI ConsolidatedHawaiian Electric Consolidated
(in thousands) (in thousands) Net unrealized gains (losses) on securities Unrealized gains (losses) on derivativesRetirement benefit plansAOCIAOCI-Retirement benefit plans (in thousands) Net unrealized gains (losses) on securities Unrealized gains (losses) on derivativesRetirement benefit plansAOCIAOCI-Retirement benefit plans
Balance, December 31, 2020Balance, December 31, 2020$19,986 $(3,363)$(17,887)$(1,264)$(2,919)Balance, December 31, 2020$19,986 $(3,363)$(17,887)$(1,264)$(2,919)
Current period other comprehensive income (loss)Current period other comprehensive income (loss)(45,777)1,562 199 (44,016)34 Current period other comprehensive income (loss)(28,801)861 396 (27,544)69 
Balance, March 31, 2021$(25,791)$(1,801)$(17,688)$(45,280)$(2,885)
Balance, June 30, 2021Balance, June 30, 2021$(8,815)$(2,502)$(17,491)$(28,808)$(2,850)
Balance, December 31, 2019Balance, December 31, 2019$2,481 $(1,613)$(20,907)$(20,039)$(1,279)Balance, December 31, 2019$2,481 $(1,613)$(20,907)$(20,039)$(1,279)
Current period other comprehensive income (loss)Current period other comprehensive income (loss)19,448 (1,784)548 18,212 26 Current period other comprehensive income (loss)18,783 (1,982)1,079 17,880 51 
Balance, March 31, 2020$21,929 $(3,397)$(20,359)$(1,827)$(1,253)
Balance, June 30, 2020Balance, June 30, 2020$21,264 $(3,595)$(19,828)$(2,159)$(1,228)

Reclassifications out of AOCI were as follows:
 Amount reclassified from AOCIAffected line item in the
 Statements of Income / Balance Sheets
Three months ended March 3120212020
(in thousands)
HEI consolidated
Net realized gains on securities included in net income$(387)$0 Gain on sale of investment securities, net
Retirement benefit plans:   
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost6,010 5,706 See Note 8 for additional details
Impact of D&Os of the PUC included in regulatory assets(5,811)(5,158)See Note 8 for additional details
Total reclassifications$(188)$548  
Hawaiian Electric consolidated
Retirement benefit plans:  
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost$5,845 $5,184 See Note 8 for additional details
Impact of D&Os of the PUC included in regulatory assets(5,811)(5,158)See Note 8 for additional details
Total reclassifications$34 $26  
 Amount reclassified from AOCIAffected line item in the
 Statements of Income / Balance Sheets
Three months ended June 30Six months ended June 30
2021202020212020
(in thousands)
HEI consolidated
Net realized gains on securities included in net income$0 $(1,638)$(387)$(1,638)Gain on sale of investment securities, net
Retirement benefit plans:     
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost6,008 5,690 12,018 11,396 See Note 8 for additional details
Impact of D&Os of the PUC included in regulatory assets(5,811)(5,159)(11,622)(10,317)See Note 8 for additional details
Total reclassifications$197 $(1,107)$9 $(559) 
Hawaiian Electric consolidated
Retirement benefit plans:   
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost$5,846 $5,184 $11,691 $10,368 See Note 8 for additional details
Impact of D&Os of the PUC included in regulatory assets(5,811)(5,159)(11,622)(10,317)See Note 8 for additional details
Total reclassifications$35 $25 $69 $51  

4046

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 7 · Revenues
Revenue from contracts with customers. The following tables disaggregate revenues by major source, timing of revenue recognition, and segment:
Three months ended June 30, 2021Six months ended June 30, 2021
(in thousands) Electric  utilityBankOtherTotalElectric  utilityBankOtherTotal
Revenues from contracts with customers
Electric energy sales - residential$196,318 $0 $0 $196,318 $377,557 $0 $0 $377,557 
Electric energy sales - commercial192,103 0 0 192,103 360,568 0 0 360,568 
Electric energy sales - large light and power201,536 0 0 201,536 378,351 0 0 378,351 
Electric energy sales - other2,212 0 0 2,212 4,691 0 0 4,691 
Bank fees0 11,569 0 11,569 0 22,947 0 22,947 
Other sales0 0 1,089 1,089 0 0 2,013 2,013 
Total revenues from contracts with customers592,169 11,569 1,089 604,827 1,121,167 22,947 2,013 1,146,127 
Revenues from other sources
Regulatory revenue$2,854 $0 $0 $2,854 $31,283 $0 $0 $31,283 
Bank interest and dividend income0 62,066 0 62,066 0 120,686 0 120,686 
Other bank noninterest income0 3,625 0 3,625 0 10,758 0 10,758 
Other6,856 0 29 6,885 14,293 0 56 14,349 
Total revenues from other sources9,710 65,691 29 75,430 45,576 131,444 56 177,076 
Total revenues$601,879 $77,260 $1,118 $680,257 $1,166,743 $154,391 $2,069 $1,323,203 
Timing of revenue recognition
Services/goods transferred at a point in time$0 $11,569 $0 $11,569 $0 $22,947 $0 $22,947 
Services/goods transferred over time592,169 0 1,089 593,258 1,121,167 0 2,013 1,123,180 
Total revenues from contracts with customers$592,169 $11,569 $1,089 $604,827 $1,121,167 $22,947 $2,013 $1,146,127 
Three months ended March 31, 2021Three months ended June 30, 2020Six months ended June 30, 2020
(in thousands) (in thousands) Electric utilityBankOtherTotal(in thousands) Electric  utilityBankOtherTotalElectric  utilityBankOtherTotal
Revenues from contracts with customersRevenues from contracts with customersRevenues from contracts with customers
Electric energy sales - residentialElectric energy sales - residential$181,239 $0 $0 $181,239 Electric energy sales - residential$187,590 $0 $0 $187,590 $377,856 $0 $0 $377,856 
Electric energy sales - commercialElectric energy sales - commercial168,465 0 0 168,465 Electric energy sales - commercial159,874 0 0 159,874 356,979 0 0 356,979 
Electric energy sales - large light and powerElectric energy sales - large light and power176,815 0 0 176,815 Electric energy sales - large light and power176,467 0 0 176,467 392,687 0 0 392,687 
Electric energy sales - otherElectric energy sales - other2,479 0 0 2,479 Electric energy sales - other1,779 0 0 1,779 5,237 0 0 5,237 
Bank feesBank fees0 11,378 0 11,378 Bank fees0 7,211 0 7,211 0 18,767 0 18,767 
Other sales0 0 924 924 
Total revenues from contracts with customersTotal revenues from contracts with customers528,998 11,378 924 541,300 Total revenues from contracts with customers525,710 7,211 0 532,921 1,132,759 18,767 0 1,151,526 
Revenues from other sourcesRevenues from other sourcesRevenues from other sources
Regulatory revenueRegulatory revenue$28,429 $0 $0 $28,429 Regulatory revenue2,826 0 0 2,826 (12,478)0 0 (12,478)
Bank interest and dividend incomeBank interest and dividend income0 58,620 0 58,620 Bank interest and dividend income0 59,829 0 59,829 0 124,804 0 124,804 
Other bank noninterest incomeOther bank noninterest income0 7,133 0 7,133 Other bank noninterest income0 7,674 0 7,674 0 10,881 0 10,881 
OtherOther7,437 0 27 7,464 Other5,679 0 16 5,695 11,376 0 22 11,398 
Total revenues from other sourcesTotal revenues from other sources35,866 65,753 27 101,646 Total revenues from other sources8,505 67,503 16 76,024 (1,102)135,685 22 134,605 
Total revenuesTotal revenues$564,864 $77,131 $951 $642,946 Total revenues$534,215 $74,714 $16 $608,945 $1,131,657 $154,452 $22 $1,286,131 
Timing of revenue recognitionTiming of revenue recognitionTiming of revenue recognition
Services/goods transferred at a point in timeServices/goods transferred at a point in time$0 $11,378 $0 $11,378 Services/goods transferred at a point in time$0 $7,211 $0 $7,211 $0 $18,767 $0 $18,767 
Services/goods transferred over timeServices/goods transferred over time528,998 0 924 529,922 Services/goods transferred over time525,710 0 0 525,710 1,132,759 0 0 1,132,759 
Total revenues from contracts with customersTotal revenues from contracts with customers$528,998 $11,378 $924 $541,300 Total revenues from contracts with customers$525,710 $7,211 $0 $532,921 $1,132,759 $18,767 $0 $1,151,526 

Three months ended March 31, 2020
(in thousands) Electric utilityBankOtherTotal
Revenues from contracts with customers
Electric energy sales - residential$190,266 $0 $0 $190,266 
Electric energy sales - commercial197,105 0 0 197,105 
Electric energy sales - large light and power216,220 0 0 216,220 
Electric energy sales - other3,458 0 0 3,458 
Bank fees0 11,556 0 11,556 
Total revenues from contracts with customers607,049 11,556 0 618,605 
Revenues from other sources
Regulatory revenue(15,304)0 0 (15,304)
Bank interest and dividend income0 64,975 0 64,975 
Other bank noninterest income0 3,207 0 3,207 
Other5,697 0 6 5,703 
Total revenues from other sources(9,607)68,182 6 58,581 
Total revenues$597,442 $79,738 $6 $677,186 
Timing of revenue recognition
Services/goods transferred at a point in time$0 $11,556 $0 $11,556 
Services/goods transferred over time607,049 0 0 607,049 
Total revenues from contracts with customers$607,049 $11,556 $0 $618,605 
There are no material contract assets or liabilities associated with revenues from contracts with customers existing at the beginning of the periodDecember 31, 2020 or as of March 31,June 30, 2021. Accounts receivable and unbilled revenues related to contracts with customers
47

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
represent an unconditional right to consideration since all performance obligations have been satisfied. These amounts are disclosed as accounts receivable and unbilled revenues, net on HEI’s condensed consolidated balance sheets and customer accounts receivable, net and accrued unbilled revenues, net on Hawaiian Electric’s condensed consolidated balance sheets.
41

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
As of March 31,June 30, 2021, 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 8 · Retirement benefits
Defined benefit pension and other postretirement benefit plans information.  For the first threesix months of 2021, the Company contributed $9$23 million ($923 million by the Utilities) to its pension and other postretirement benefit plans, compared to $17 million ($17 million by the Utilities) in the first threesix months of 2020. The Company’s current estimate of total contributions to its pension and other postretirement benefit plans in 2021 is $52 million ($51 million by the Utilities, $1 million by HEI and NaN by ASB), compared to $71 million ($70 million by the Utilities, $1 million by HEI and NaN by ASB) in 2020. In addition, the Company expects to pay directly $3 million ($1 million by the Utilities) of benefits in 2021, compared to $2 million ($1 million by the Utilities) paid in 2020.
The components of net periodic pension costs (NPPC) and net periodic benefit costs (NPBC) for HEI consolidated and Hawaiian Electric consolidated were as follows:
 Pension benefitsOther benefits
Three months ended March 312021202020212020
(in thousands)
HEI consolidated
Service cost$20,464 $18,363 $705 $631 
Interest cost18,801 20,163 1,569 1,855 
Expected return on plan assets(33,067)(28,466)(3,233)(3,038)
Amortization of net prior period (gain)/cost0 3 (383)(440)
Amortization of net actuarial losses1
1,556 8,057 254 50 
Net periodic pension/benefit cost (return)7,754 18,120 (1,088)(942)
Impact of PUC D&Os11,167 6,262 970 777 
Net periodic pension/benefit cost (adjusted for impact of PUC D&Os)$18,921 $24,382 $(118)$(165)
Hawaiian Electric consolidated
Service cost$19,994 $17,891 $699 $626 
Interest cost17,531 18,715 1,504 1,782 
Expected return on plan assets(31,368)(26,855)(3,182)(2,990)
Amortization of net prior period (gain)/cost0 2 (383)(440)
Amortization of net actuarial losses1
2,559 7,368 250 51 
Net periodic pension/benefit cost (return)8,716 17,121 (1,112)(971)
Impact of PUC D&Os11,167 6,262 970 777 
Net periodic pension/benefit cost (adjusted for impact of PUC D&Os)$19,883 $23,383 $(142)$(194)
Three months ended June 30Six months ended June 30
 Pension benefitsOther benefitsPension benefitsOther benefits
20212020202120202021202020212020
(in thousands)
HEI consolidated
Service cost$20,465 $18,362 $705 $631 $40,929 $36,725 $1,410 $1,262 
Interest cost18,800 20,164 1,569 1,856 37,601 40,327 3,138 3,711 
Expected return on plan assets(33,068)(28,465)(3,232)(3,039)(66,135)(56,931)(6,465)(6,077)
Amortization of net prior period (gain)/cost0 2 (384)(441)0 5 (767)(881)
Amortization of net actuarial losses1
8,431 8,058 44 51 9,987 16,115 298 101 
Net periodic pension/benefit cost (return)14,628 18,121 (1,298)(942)22,382 36,241 (2,386)(1,884)
Impact of PUC D&Os5,513 6,261 1,176 777 16,680 12,523 2,146 1,554 
Net periodic pension/benefit cost (adjusted for impact of PUC D&Os)$20,141 $24,382 $(122)$(165)$39,062 $48,764 $(240)$(330)
Hawaiian Electric consolidated
Service cost$19,993 $17,891 $698 $625 $39,987 $35,782 $1,397 $1,251 
Interest cost17,531 18,715 1,504 1,781 35,062 37,430 3,008 3,563 
Expected return on plan assets(31,367)(26,857)(3,182)(2,990)(62,735)(53,712)(6,364)(5,980)
Amortization of net prior period (gain)/cost0 3 (382)(439)0 5 (765)(879)
Amortization of net actuarial losses1
8,212 7,369 43 51 10,771 14,737 293 102 
Net periodic pension/benefit cost (return)14,369 17,121 (1,319)(972)23,085 34,242 (2,431)(1,943)
Impact of PUC D&Os5,513 6,261 1,176 777 16,680 12,523 2,146 1,554 
Net periodic pension/benefit cost (adjusted for impact of PUC D&Os)$19,882 $23,382 $(143)$(195)$39,765 $46,765 $(285)$(389)
1 ThreeSix months ended March 31,June 30, 2021 amounts include the one-time cumulative impact of the change in accounting principle for the plans’ fixed income securities from the calculated market-related value method to the fair value method, which was recorded in the first quarter of 2021.
48

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
HEI consolidated recorded retirement benefits expense of $11$23 million ($1223 million by the Utilities) in the first threesix months of 2021 and $15$31 million ($1429 million by the Utilities) in the first threesix months of 2020 and charged the remaining net periodic benefit cost primarily to electric utility plant.
Effective January 1, 2021, the Company adopted a change in accounting principle for the plans’ fixed income securities from the calculated market-related value method to the fair value method in the calculation of the expected return on plan assets component of NPPC and NPBC. The remaining plan assets continue to use the calculated market-related value methodology. The Company considers the fair value approach to be preferable for its fixed-income securities portfolio because it results in a current reflection of the changes in the value of plan assets in a way similar to the obligations it is intended to hedge. The Company evaluated the effect of this change in accounting principle and deemed it to be immaterial to the historical financial statements of the Company and Hawaiian Electric and, therefore, did not account for the change retrospectively and recorded the cumulative effects from the change in accounting principle in earnings for non-Utility businesses in the first quarter of 2021.
42

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Amounts related to the Utilities were reflected as adjustments to regulatory assets as appropriate, consistent with the expected regulatory treatment as described in the following paragraph.
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, 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 5 years beginning with the respective utility’s next rate case.
Defined contribution plans information.  For the first threesix months of 2021 and 2020, the Company’s expenses for its defined contribution plans under the Hawaiian Electric Industries Retirement Savings Plan (HEIRSP) and the ASB 401(k) Plan were $1.7$3.2 million and $1.8$3.7 million, respectively, and cash contributions were $1.8$3.2 million and $3.2$4.6 million, respectively. For the first threesix months of 2021 and 2020, the Utilities’ expenses and cash contributions for its defined contribution plan under the HEIRSP were $0.8$1.5 million and $0.7$1.4 million, respectively.

Note 9 · Share-based compensation
Under the 2010 Equity and Incentive Plan, as amended, HEI can issue shares of common stock as incentive compensation to selected employees in the form of stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares and other share-based and cash-based awards. The 2010 Equity and Incentive Plan (original EIP) was amended and restated effective March 1, 2014 (EIP) and an additional 1.5 million shares were added to the shares available for issuance under these programs.
As of March 31,June 30, 2021, approximately 2.9 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 0.90.8 million shares that could be issued upon the vesting of outstanding restricted stock units and the achievement of performance goals for awards outstanding under long-term incentive plans (assuming that such performance goals are achieved at maximum levels).
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. In June 2019, an additional 300,000 shares were made available for issuance under the 2011 Director Plan. As of March 31,June 30, 2021, there were 274,163244,843 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 March 31
(in millions)20212020
HEI consolidated
Share-based compensation expense 1
$2.6 $1.7 
Income tax benefit0.4 0.3 
Hawaiian Electric consolidated
Share-based compensation expense 1
1.1 0.8 
Income tax benefit0.3 0.1 
 Three months ended June 30Six months ended June 30
(in millions)2021202020212020
HEI consolidated
Share-based compensation expense 1
$2.9 $2.4 $5.5 $4.1 
Income tax benefit0.5 0.4 1.0 0.7 
Hawaiian Electric consolidated
Share-based compensation expense 1
0.9 0.4 2.0 1.2 
Income tax benefit0.2 0.1 0.4 0.2 
1    For the three and six months ended March 31,June 30, 2021 and 2020, the Company has not capitalized any share-based compensation.
49

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Stock awards. HEI granted HEI common stock to nonemployee directors under the 2011 Director Plan as follows:
Three months ended March 31Three months ended June 30Six months ended June 30
(dollars in thousands)20212020
(dollars in millions)(dollars in millions)2021202020212020
Shares grantedShares granted0 468 Shares granted29,320 35,632 29,320 36,100 
Fair valueFair value$0 $23 Fair value$1.2 $1.3 $1.2 $1.3 
Income tax benefitIncome tax benefit0 6 Income tax benefit0.3 0.3 0.3 0.3 
The number of shares issued to each nonemployee director of HEI, Hawaiian Electric and ASB is determined based on the closing price of HEI common stock on the grant date.
43

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Restricted stock units.  Information about HEI’s grants of restricted stock units was as follows:
Three months ended March 31Three months ended June 30Six months ended June 30
20212020 2021202020212020
Shares(1)Shares(1)Shares(1)Shares(1)Shares(1)Shares(1)
Outstanding, beginning of periodOutstanding, beginning of period193,939  $40.89 207,641  $35.36 Outstanding, beginning of period236,191 $37.91 203,441 $40.67 193,939  $40.89 207,641 $35.36 
GrantedGranted127,598 33.98 77,679 48.11 Granted4,894 44.61 916 37.90 132,492 34.37 78,595 47.99 
VestedVested(78,988)38.51 (77,719)34.19 Vested(292)38.77 0 0 (79,280)38.51 (77,719)34.19 
ForfeitedForfeited(6,358)42.20 (4,160)35.81 Forfeited(11,018)38.74 0 0 (17,376)40.01 (4,160)35.81 
Outstanding, end of periodOutstanding, end of period236,191  $37.91 203,441  $40.67 Outstanding, end of period229,775 $38.02 204,357  $40.65 229,775  $38.02 204,357 $40.65 
Total weighted-average grant-date fair value of shares granted (in millions)Total weighted-average grant-date fair value of shares granted (in millions)$4.3 $3.7 Total weighted-average grant-date fair value of shares granted (in millions)$0.2 $0 $4.6 $3.8 
(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 threesix months ended March 31,June 30, 2021 and 2020, total restricted stock units and related dividends that vested had a fair value of $3.0 million and $4.2 million, respectively, and the related tax benefits were $0.6 million and $0.7 million, respectively.
As of March 31,June 30, 2021, there was $8.3$7.3 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 2.62.4 years.
Long-term incentive plan payable in stock.  The 2019-2021, 2020-2022 and 2021-2023 long-term incentive plans (LTIP) provide for performance awards under the EIP of shares of HEI common stock based on the satisfaction of performance goals, including a market condition goal. The number of shares of HEI common stock that may be awarded is fixed on the date the grants are made, subject to the achievement of specified performance levels and calculated dividend equivalents. The potential payout varies from 0% to 200% of the number of target shares, depending on the achievement of the goals. The market condition goal is based on HEI’s total shareholder return (TSR) compared to the Edison Electric Institute Index over the relevant three-year period. The other performance condition goals relate to EPS growth, return on average common equity (ROACE), renewable portfolio standards, Hawaiian Electric’s net income growth, ASB’s efficiency ratio and strategic initiatives and 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 March 31Three months ended June 30Six months ended June 30
20212020 2021202020212020
Shares(1)Shares(1)Shares(1)Shares(1)Shares(1)Shares(1)
Outstanding, beginning of periodOutstanding, beginning of period89,222 $42.10 96,402 $39.62 Outstanding, beginning of period100,053 $42.89 90,616 $42.08 89,222 $42.10 96,402 $39.62 
GrantedGranted44,210 41.12 24,630 48.62 Granted1,533 41.12 0 0 45,743 41.12 24,630 48.62 
Vested (issued or unissued and cancelled)Vested (issued or unissued and cancelled)(32,355)38.20 (29,409)39.51 Vested (issued or unissued and cancelled)0 0 0 0 (32,355)38.20 (29,409)39.51 
ForfeitedForfeited(1,024)45.89 (1,007)41.72 Forfeited(10,427)42.82 0 0 (11,451)43.10 (1,007)41.72 
Outstanding, end of periodOutstanding, end of period100,053 $42.89 90,616  $42.08 Outstanding, end of period91,159 $42.87 90,616 $42.08 91,159 $42.87 90,616  $42.08 
Total weighted-average grant-date fair value of shares granted (in millions)Total weighted-average grant-date fair value of shares granted (in millions)$1.8 $1.2 Total weighted-average grant-date fair value of shares granted (in millions)$0.1 $0 $1.9 $1.2 
(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 for the period from the beginning of the performance period to the grant date and
50

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
estimated future stock volatility and dividends of HEI and its peers over the remaining three-year performance period. The expected stock volatility assumptions for HEI and its peer group were based on the three-year historic stock volatility,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 basisvalue of daily stock prices over the same three-year historical period.
44

reinvested dividends.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
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:
20212020
Risk-free interest rate0.19 %1.39 %
Expected life in years33
Expected volatility29.9 %13.1 %
Range of expected volatility for Peer Group25.6% to 102.9%13.6% to 95.4%
Grant date fair value (per share)$41.12$48.62
For the threesix months ended March 31,June 30, 2021 and 2020, total vested LTIP awards linked to TSR and related dividends had a fair value of $0.8 million and $2.6 million, respectively, and the related tax benefits were $0.2 million and $0.4 million, respectively.
As of March 31,June 30, 2021, there was $2.6$2.1 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 1.91.6 years.
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 March 31Three months ended June 30Six months ended June 30
202120202021202020212020
Shares(1)Shares(1) Shares(1)Shares (1)Shares(1)Shares(1)
Outstanding, beginning of periodOutstanding, beginning of period220,715 $41.03 403,768  $35.15 Outstanding, beginning of period335,702 $38.04 336,344  $39.64 220,715 $41.03 403,768  $35.15 
GrantedGranted176,844 33.98 98,522 48.10 Granted6,133 44.49 0 0 182,977 34.33 98,522 48.10 
VestedVested(43,155)34.12 (135,804) 33.48 Vested0 0 0  0 (43,155)34.12 (135,804) 33.48 
Increase above target (cancelled)Increase above target (cancelled)(14,604)43.90 (26,111) 34.13 Increase above target (cancelled)15,881 42.92 (38,821) 34.12 1,277 31.71 (64,932) 34.12 
ForfeitedForfeited(4,098)44.36 (4,031)39.67 Forfeited(41,711)38.27 0 0 (45,809)38.82 (4,031)39.67 
Outstanding, end of periodOutstanding, end of period335,702 $38.04 336,344  $39.64 Outstanding, end of period316,005 $38.38 297,523  $40.37 316,005 $38.38 297,523  $40.37 
Total weighted-average grant-date fair value of shares granted (at target performance levels) (in millions)Total weighted-average grant-date fair value of shares granted (at target performance levels) (in millions)$6.0 $4.7 Total weighted-average grant-date fair value of shares granted (at target performance levels) (in millions)$0.3 $0 $6.3 $4.7 
(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 threesix months ended March 31,June 30, 2021 and 2020, total vested LTIP awards linked to other performance conditions and related dividends had a fair value of $1.7 million and $7.6 million, respectively, and the related tax benefits were $0.4 million and $1.2 million, respectively.
As of March 31,June 30, 2021, there was $8.0$6.7 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 2.01.8 years.

Note 10 · Income taxes
The Company’s and the Utilities’ effective tax rates (combined federal and state income tax rates) were 19% and 20%each 21%, respectively, for the threesix months ended March 31,June 30, 2021. These rates differed from the combined statutory rates, due primarily to the Utilities’ amortization of excess deferred income taxes related to the provision in the Tax Act that lowered the federal income tax rate from 35% to 21%, the tax benefits derived from the low income housing tax credit investments and the non-taxability of the bank-owned life insurance income. The Company’s and the Utilities’ effective tax rates were 15%17% and 18%19%, respectively, for the threesix months ended March 31,June 30, 2020.
In August 2020, the Internal Revenue Service notified the Company that its 2017 and 2018 income tax returns would be examined. The Company was previously audited every year through 2011, at which time the IRS changed their internal policies regarding audit frequency. The Company has received several initial requests for general tax return information and has responded or is in the process of responding to such requests.

4551

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Note 11 · Cash flows
Three months ended March 3120212020
Six months ended June 30Six months ended June 3020212020
(in millions)(in millions)  (in millions)  
Supplemental disclosures of cash flow informationSupplemental disclosures of cash flow information  Supplemental disclosures of cash flow information  
HEI consolidatedHEI consolidatedHEI consolidated
Interest paid to non-affiliates, net of amounts capitalizedInterest paid to non-affiliates, net of amounts capitalized$15 $18 Interest paid to non-affiliates, net of amounts capitalized$51 $50 
Income taxes paid (including refundable credits)Income taxes paid (including refundable credits)0 0 Income taxes paid (including refundable credits)14 0 
Income taxes refunded (including refundable credits)0 0 
Hawaiian Electric consolidatedHawaiian Electric consolidatedHawaiian Electric consolidated
Interest paid to non-affiliatesInterest paid to non-affiliates9 9 Interest paid to non-affiliates37 32 
Income taxes paid (including refundable credits)Income taxes paid (including refundable credits)0 0 Income taxes paid (including refundable credits)20 0 
Income taxes refunded (including refundable credits)0 0 
Supplemental disclosures of noncash activitiesSupplemental disclosures of noncash activities  Supplemental disclosures of noncash activities  
HEI consolidatedHEI consolidatedHEI consolidated
Property, plant and equipment unpaid invoices and accruals for capital expenditures, balance, end of period (investing)28 32 
Property, plant and equipmentProperty, plant and equipment
Estimated fair value of noncash contributions in aid of construction (investing) Estimated fair value of noncash contributions in aid of construction (investing)1 3 
Unpaid invoices and accruals for capital expenditures, balance, end of period (investing)Unpaid invoices and accruals for capital expenditures, balance, end of period (investing)31 34 
Reduction of long-term debt from funds previously transferred for repayment (financing)Reduction of long-term debt from funds previously transferred for repayment (financing)0 82 Reduction of long-term debt from funds previously transferred for repayment (financing)0 82 
Right-of-use assets obtained in exchange for operating lease obligations (investing)Right-of-use assets obtained in exchange for operating lease obligations (investing)28 19 Right-of-use assets obtained in exchange for operating lease obligations (investing)38 20 
Common stock issued (gross) for director and executive/management compensation (financing)1
Common stock issued (gross) for director and executive/management compensation (financing)1
6 14 
Common stock issued (gross) for director and executive/management compensation (financing)1
7 16 
Obligations to fund low income housing investments (investing)Obligations to fund low income housing investments (investing)9 0 
Loans transferred from held for investment to held for sale (investing)Loans transferred from held for investment to held for sale (investing)62 0 
Hawaiian Electric consolidatedHawaiian Electric consolidatedHawaiian Electric consolidated
Electric utility property, plant and equipment unpaid invoices and accruals for capital expenditures, balance, end of period (investing)24 27 
Electric utility property, plant and equipmentElectric utility property, plant and equipment
Estimated fair value of noncash contributions in aid of construction (investing) Estimated fair value of noncash contributions in aid of construction (investing)1 3 
Unpaid invoices and accruals for capital expenditures, balance, end of period (investing)Unpaid invoices and accruals for capital expenditures, balance, end of period (investing)27 30 
Reduction of long-term debt from funds previously transferred for repayment (financing)Reduction of long-term debt from funds previously transferred for repayment (financing)0 82 Reduction of long-term debt from funds previously transferred for repayment (financing)0 82 
Right-of-use assets obtained in exchange for operating lease obligations (investing)Right-of-use assets obtained in exchange for operating lease obligations (investing)28 16 Right-of-use assets obtained in exchange for operating lease obligations (investing)38 16 
1 The amounts shown represent the market value of common stock issued for director and executive/management compensation and withheld to satisfy statutory tax liabilities.

Note 12 · Fair value measurements
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 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
52

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
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 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.
46

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
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, therefore, are classified within Level 2 of the valuation hierarchy.
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. Since the valuation is derived from model-based techniques, ASB includes loans held for investment within Level 3 of the valuation hierarchy.
Collateral dependent loans. Collateral dependent loans have been adjusted to fair value. When a loan is identified as collateral dependent, the Company measures the impairment using the current fair value of the collateral, less selling costs. Depending on the characteristics of a loan, the fair value of collateral is generally estimated by obtaining external appraisals, but in some cases, the value of the 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. If it is determined that the value of the collateral dependent loan is less than its recorded investment, the Company recognizes this impairment and 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 at fair value (less estimated costs to sell) and are generally based upon appraisals or independent market prices that are periodically updated subsequent to classification as real estate owned. Such adjustments typically result in a Level 3 classification of the inputs for determining fair value. ASB estimates the fair value of collateral-dependent loans and real estate owned using the sales comparison approach.
Mortgage servicing rights. 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. MSRs are evaluated for impairment at each reporting date. ASB's MSRs are stratified based on predominant risk characteristics of the underlying loans including loan type and note rate. For each stratum, fair value is calculated by discounting expected net income streams using discount rates that reflect industry pricing for similar assets. Expected net income streams are estimated based on industry assumptions regarding prepayment expectations and income and expenses associated with servicing residential mortgage loans for others. Impairment is recognized through a valuation allowance for each stratum when the carrying amount exceeds fair value, with any associated provision recorded as a component of loan servicing fees included in "Revenues - bank" in the consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable. ASB compares the fair value of MSRs to an estimated value calculated by an independent third-party. The third-party relies on both published and unpublished sources of market related assumptions and 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 FHLB advances of similar remaining maturities. Deposit liabilities are classified in Level 2 of the valuation hierarchy.
Other borrowings. For 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—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.
53

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Forward sales commitments. To be announced (TBA) mortgage-backed securities forward commitments are classified as Level 1, and consist of publicly-traded debt securities for which identical fair values can be obtained through quoted market prices in active exchange markets. The fair values of ASB’s best efforts and mandatory delivery loan sale commitments are determined using quoted prices in the market place that are observable and are classified as Level 2 measurements.
47

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
The following table presents the carrying or notional amount, fair value and placement in the fair value hierarchy of the Company’s financial instruments.
Estimated fair value
(in thousands)Carrying or notional amountQuoted prices in
active markets
for identical assets
 (Level 1)		Significant
 other observable
 inputs
 (Level 2)		Significant
unobservable
inputs
 (Level 3)		Total
March 31, 2021     
Financial assets     
HEI consolidated
Available-for-sale investment securities$2,305,257 $0 $2,289,830 $15,427 $2,305,257 
Held-to-maturity investment securities295,046 0 285,599 0 285,599 
Loans, net5,241,925 0 23,637 5,352,496 5,376,133 
Mortgage servicing rights10,685 0 0 13,659 13,659 
Derivative assets103,077 340 745 0 1,085 
Financial liabilities    
HEI consolidated
Deposit liabilities514,303 0 516,524 0 516,524 
Short-term borrowings—other than bank100,242 0 100,242 0 100,242 
Other bank borrowings102,685 0 102,684 0 102,684 
Long-term debt, net—other than bank2,229,738 0 2,492,539 0 2,492,539 
   Derivative liabilities32,739 0 2,834 0 2,834 
Hawaiian Electric consolidated
Long-term debt, net1,675,863 0 1,904,613 0 1,904,613 
December 31, 2020     
Financial assets     
HEI consolidated
Available-for-sale investment securities$1,970,417 $0 $1,943,232 $27,185 $1,970,417 
Held-to-maturity investment securities226,947 0 229,963 0 229,963 
Loans, net5,260,917 0 28,354 5,410,976 5,439,330 
Mortgage servicing rights10,020 0 0 10,705 10,705 
Derivative assets120,980 0 4,536 0 4,536 
Financial liabilities    
HEI consolidated
Deposit liabilities548,830 0 552,800 0 552,800 
Short-term borrowings—other than bank129,379 0 129,379 0 129,379 
Other bank borrowings89,670 0 89,669 0 89,669 
Long-term debt, net—other than bank2,119,129 0 2,487,790 0 2,487,790 
Derivative liabilities137,500 500 4,530 0 5,030 
Hawaiian Electric consolidated
Short-term borrowings49,979 0 49,979 0 49,979 
Long-term debt, net1,561,302 0 1,890,490 0 1,890,490 
Estimated fair value
(in thousands)Carrying or notional amountQuoted prices in
active markets
for identical assets
 (Level 1)		Significant
 other observable
 inputs
 (Level 2)		Significant
unobservable
inputs
 (Level 3)		Total
June 30, 2021     
Financial assets     
HEI consolidated
Available-for-sale investment securities$2,509,906 $0 $2,494,479 $15,427 $2,509,906 
Held-to-maturity investment securities375,655 0 374,141 0 374,141 
Loans, net5,157,084 0 50,884 5,233,001 5,283,885 
Mortgage servicing rights10,754 0 0 14,213 14,213 
Derivative assets30,465 0 511 0 511 
Financial liabilities    
HEI consolidated
Deposit liabilities484,357 0 485,862 0 485,862 
Short-term borrowings—other than bank95,748 0 95,748 0 95,748 
Other bank borrowings129,665 0 129,664 0 129,664 
Long-term debt, net—other than bank2,258,043 0 2,623,110 0 2,623,110 
  Derivative liabilities42,087 26 3,626 0 3,652 
Hawaiian Electric consolidated
Short-term borrowings37,999 0 37,999 0 37,999 
Long-term debt, net1,676,043 0 2,006,289 0 2,006,289 
December 31, 2020     
Financial assets     
HEI consolidated
Available-for-sale investment securities$1,970,417 $0 $1,943,232 $27,185 $1,970,417 
Held-to-maturity investment securities226,947 0 229,963 0 229,963 
Loans, net5,260,917 0 28,354 5,410,976 5,439,330 
Mortgage servicing rights10,020 0 0 10,705 10,705 
Derivative assets120,980 0 4,536 0 4,536 
Financial liabilities    
HEI consolidated
Deposit liabilities548,830 0 552,800 0 552,800 
Short-term borrowings—other than bank129,379 0 129,379 0 129,379 
Other bank borrowings89,670 0 89,669 0 89,669 
Long-term debt, net—other than bank2,119,129 0 2,487,790 0 2,487,790 
Derivative liabilities137,500 500 4,530 0 5,030 
Hawaiian Electric consolidated
Short-term borrowings49,979 0 49,979 0 49,979 
Long-term debt, net1,561,302 0 1,890,490 0 1,890,490 
4854

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:
March 31, 2021December 31, 2020June 30, 2021December 31, 2020
Fair value measurements usingFair value measurements using Fair value measurements usingFair value measurements using
(in thousands)(in thousands)Level 1Level 2Level 3Level 1Level 2Level 3(in thousands)Level 1Level 2Level 3Level 1Level 2Level 3
Available-for-sale investment securities (bank segment)Available-for-sale investment securities (bank segment)      Available-for-sale investment securities (bank segment)      
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agenciesMortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies$0 $2,201,352 $0 $0 $1,849,559 $0 Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies$0 $2,366,301 $0 $0 $1,849,559 $0 
U.S. Treasury and federal agency obligationsU.S. Treasury and federal agency obligations0 57,647 0 0 62,322 0 U.S. Treasury and federal agency obligations0 96,309 0 0 62,322 0 
Corporate bondsCorporate bonds0 30,831 0 0 31,351 0 Corporate bonds0 31,869 0 0 31,351 0 
Mortgage revenue bondsMortgage revenue bonds0 0 15,427 0 0 27,185 Mortgage revenue bonds0 0 15,427 0 0 27,185 
$0 $2,289,830 $15,427 $0 $1,943,232 $27,185  $0 $2,494,479 $15,427 $0 $1,943,232 $27,185 
Derivative assetsDerivative assets     Derivative assets     
Interest rate lock commitments (bank segment)1
Interest rate lock commitments (bank segment)1
$0 $456 $0 $0 $4,536 $0 
Interest rate lock commitments (bank segment)1
$0 $371 $0 $0 $4,536 $0 
Forward commitments (bank segment)1
Forward commitments (bank segment)1
340 0 0 0 0 0 
Forward commitments (bank segment)1
0 6 0 0 0 0 
Interest rate swap (Other segment)2
Interest rate swap (Other segment)2
0 289 0 0 0 0 
Interest rate swap (Other segment)2
0 134 0 0 0 0 
$340 $745 $0 $0 $4,536 $0  $0 $511 $0 $0 $4,536 $0 
Derivative liabilitiesDerivative liabilitiesDerivative liabilities
Interest rate lock commitments (bank segment)1
$0 $18 $0 $0 $0 $0 
Forward commitments (bank segment)1
Forward commitments (bank segment)1
0 0 0 500 0 0 
Forward commitments (bank segment)1
$26 $21 $0 $500 $0 $0 
Interest rate swap (Other segment)2
Interest rate swap (Other segment)2
0 2,816 0 0 4,530 0 
Interest rate swap (Other segment)2
0 3,605 0 0 4,530 0 
$0 $2,834 $0 $500 $4,530 $0 $26 $3,626 $0 $500 $4,530 $0 
1     Derivatives are carried at fair value in other assets or other liabilities in the balance sheets with changes in value included in mortgage banking income.
2     Derivatives are included in other assets and other liabilities in the balance sheets.
The changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:
Three months ended March 31
Mortgage revenue bonds20212020
(in thousands)
Beginning balance$27,185 $28,597 
Principal payments received(11,758)0 
Purchases0 129 
Unrealized gain (loss) included in other comprehensive income0 0 
Ending balance$15,427 $28,726 
Three months ended June 30Six months ended June 30
Mortgage revenue bonds2021202020212020
(in thousands)
Beginning balance$15,427 $28,726 $27,185 $28,597 
Principal payments received0 0 (11,758)0 
Purchases0 101 0 230 
Unrealized gain (loss) included in other comprehensive income0 0 0 0 
Ending balance$15,427 $28,827 $15,427 $28,827 
Mortgage revenue 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 March 31,June 30, 2021, the weighted average discount rate was 2.07%2.05%, which was derived by incorporating a credit spread over the one month LIBOR rate. Significant increases (decreases) in the weighted average discount rate could result in a significantly lower (higher) fair value measurement.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Fair value measurements on a nonrecurring basis.  Certain assets and liabilities are measured at fair value on a nonrecurring basis and therefore are not included in the tables above. These measurements primarily result from assets carried at the lower of cost or fair value or from impairment of individual assets. The carrying value of assets measured at fair value on a nonrecurring basis were as follows:
 Fair value measurements using  Fair value measurements using
(in thousands) (in thousands) BalanceLevel 1Level 2Level 3(in thousands) BalanceLevel 1Level 2Level 3
March 31, 2021
June 30, 2021June 30, 2021
LoansLoans$69 $0 $0 $69 Loans$204 $0 $0 $204 
Mortgage servicing rights61 0 0 61 
December 31, 2020December 31, 2020December 31, 2020
LoansLoans387 0 0 387 Loans387 0 0 387 
Mortgage servicing rightsMortgage servicing rights3,001 0 0 3,001 Mortgage servicing rights3,001 0 0 3,001 
For the threesix months ended March 31,June 30, 2021 and 2020, there were 0 adjustments to fair value for ASB’s loans held for sale.
The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis:
Significant unobservable
 input value (1)
($ in thousands)Fair valueValuation techniqueSignificant unobservable inputRangeWeighted
Average
March 31, 2021
Home equity lines of credit$69 Fair value of collateralAppraised value less selling costN/A (2)N/A (2)
Mortgage servicing rights61 Discounted cash flowPrepayment speed17% - 24%17 %
Discount rate9.3 %
December 31, 2020
Commercial loan$387 Fair value of collateralAppraised value less selling costN/A (2)N/A (2)
Mortgage servicing rights3,001 Discounted cash flowPrepayment speed15% - 22%22 %
Discount rate9.3 %
Significant unobservable
 input value (1)
($ in thousands)Fair valueValuation techniqueSignificant unobservable inputRangeWeighted
Average
June 30, 2021
Residential$125 Fair value of property or collateralAppraised value less selling costN/A (2)N/A (2)
Home equity lines of credit79 Fair value of collateralAppraised value less selling costN/A (2)N/A (2)
December 31, 2020
Commercial loan$387 Fair value of collateralAppraised value less selling costN/A (2)N/A (2)
Mortgage servicing rights3,001 Discounted cash flowPrepayment speed15% - 22%22 %
Discount rate9.3 %
(1) Represents percent of outstanding principal balance.
(2) N/A - Not applicable. There is one asset in each fair value measurement type.
Significant increases (decreases) in any of those inputs in isolation would result in significantly higher (lower) fair value measurements.
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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 2020 Form 10-K and should be read in conjunction with such discussion and the 2020 annual consolidated financial statements of HEI and Hawaiian Electric and notes thereto included in HEI’s and Hawaiian Electric’s 2020 Form 10-K, as well as the quarterly (as of and for the threesix months ended March 31,June 30, 2021) condensed consolidated financial statements and notes thereto included in this Form 10-Q.
HEI consolidated
Recent developments—COVID-19.
In 2020,Economic conditions in Hawaii have improved significantly from the start of the year and continue to improve, with daily passenger count for July 2021 achieving 89% of the passenger counts for the same month in 2019. Hawaii vaccinations have increased at a rapid pace, with approximately 60.3% of the state’s population fully vaccinated as of August 1, 2021. New COVID-19 cases in Hawaii remained at a relatively low level and continued trending down at the end of the second quarter. However, starting in mid July, as the Delta variant became more prevalent, case counts have started to increase with approximately 349 average daily new cases (7-day moving average) as of August 1, 2021.
Starting on July 8, 2021, vaccinated travelers will no longer need to quarantine or take a COVID-19 pretest if they present proof of vaccination. As a result, the Company made significant progress onexpects that the Hawaii economy will continue to improve as tourism numbers increase. In the second quarter of 2021, kWh sales remained below pre-pandemic levels, but were 8.1% higher than the same period in 2020 due to increased economic activity following the loosening of restrictions and an increase in tourism. 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 3 of the Condensed Consolidated Financial Statements for a numberdiscussion of strategic initiatives despitedecoupling.
At the ongoing impactBank, improved credit quality from a strengthening Hawaii economy resulted in credit upgrades within the commercial real estate and commercial loan portfolios and lower net charge-offs which allowed ASB to record a $12.2 million negative provision for credit losses in the second quarter of COVID-19 on the community, customers, and employees, including advancing the state’s renewable energy transition through Hawaii’s largest-ever renewable energy and storage procurements, preparing for and implementing the new PBR framework to facilitate the renewable energy transition and align the regulatory framework with customer interests and policy goals, and accelerating the Bank’s digital Anytime, Anywhere Banking model.2021.
In 2021, whileWhile economic conditions have improved, the Company’s top priorityCompany remains unchanged, which is to ensurefocused on the continued safety and well-being of customers, employees, their families and the community. The Company’s mandatory work-from-home policy remains in effect through July 30,October 1, 2021 for certain employees and this policy has not impaired the Company’s ability to maintain effective internal controls over financial reporting. For personnel that cannot perform their work remotely, the Company has maintained safety protocols and policies to keep employees safe, while at the same time ensuring the reliability and resilience of its operations.
New COVID-19 cases in Hawaii have remained at a relatively low level, approximately 77 average daily new cases in the last seven days per 100,000 residents as of April 27, 2021, and new cases have been on a downtrend since early April. Hawaii vaccinations have increased at a rapid pace, with approximately 37% of the state’s population fully vaccinated as of April 27, 2021. On April 19, the City & County of Honolulu opened vaccinations to all persons age 16 and older, which is expected to further accelerate the pace and proportion of the population vaccinated.
In light of the ongoing global COVID-19 vaccination effort and the gradual reopening of economies, the Company expects that the Hawaii economy will begin to improve at an increasing pace. However, in the first quarter of 2021, kWh sales continue to be impacted and decreased 4.8% compared to the first quarter of 2020 as the demand for electricity continues to remain lower than pre-pandemic levels. While the decrease in kWh sales does not affect Utility revenues due to decoupling, it may increase the price per kWh paid by customers. See “Current Decoupling” in Note 3 of the Condensed Consolidated Financial Statements for a discussion of decoupling. At the Bank, lower net charge offs, improved credit quality as a result of an overall strengthening of the Hawaii economy, and credit upgrades within the commercial loan portfolio resulted in a $8.4 million provision reversal in the first quarter of 2021 to reduce the allowance for credit losses. For further discussion of the impact of the COVID-19 pandemic on our subsidiaries see “Recent Developments—COVID-19” in the Electric Utility and Bank sections below. There has been no material impact on the “Other” segment and Pacific Current as a result of the COVID-19 pandemic as the primary businesses of Pacific Current are supported by PPAs that provide for contractual cash flows with credit-worthy counterparties.
For a discussion regarding the impact of the economic conditions caused by the pandemic on the Company’s liquidity and capital resources, see discussion under “Financial Condition–Liquidity and capital resources,” contained in each of the “HEI Consolidated,” “Electric utility” and “Bank” sections of this MD&A.
Environmental, Social & Governance.
At HEI, environmental, social and governance (ESG) principles and sustainability have long been fundamental values embedded within all aspects of the Company’s activities. With all of its operations isolated in the middle of the Pacific Ocean, the Company’s long-term health, and ability to deliver sustainable value for all stakeholders—including shareholders—is inextricably linked to the well-being of its employees, communities, economy, and environment. That is why the Company sees its mission of being a catalyst for a better Hawaii as advancing the Company’s long-term financial performance and sustainability. The Company has focused on ensuring ESG considerations are appropriately integrated into its governance structures, strategies and risk management. This includes:
•Integration of Board oversight of important ESG matters into its existing governance structures and processes. This includes full Board review of ESG-related strategies, Audit & Risk Committee oversight of ESG risks, Compensation Committee responsibility for ESG-related compensation matters and Nominating & Corporate Governance Committee responsibility for human capital management and for ensuring an appropriate board governance framework is in place with respect to ESG.
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•Robust ESG expertise among board members, including directors with direct experience in renewable energy, climate change policy and strategy, environmental management and sustainable investing.
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•Expanded ESG goals as part of HEI and utilityUtility executive incentive compensation.
•ESG considerations explicitly woven into strategic planning efforts and enterprise risk management processes.
The Company is committed to transparency and providing information to allow customers, community leaders, investors and other stakeholders understand how the Company’s strategies and operations advance ESG objectives and contribute to long-term value creation.
The Company issued its first ESG report in September 2020. The report encompassed ESG policies, principles and results reported during 2019 across the Company’s two primary operating subsidiaries, Hawaiian Electric and ASB, and was aligned with Sustainability Accounting Standards Board (SASB) guidance—using the electric utilities standard for Hawaiian Electric, and the commercial banks, commercial finance, and mortgage finance standards for ASB. On April 22, 2021, the Company issued its second ESG report. This report continues to include SASB disclosures for Hawaiian Electric and ASB and incorporates disclosures regarding risks and opportunities related to climate change, as well as associated risk management and governance processes, based on recommendations from the Task Force on Climate-related Financial Disclosures. It also outlines key impacts for the Company under two climate scenarios, including a scenario targeted to limit global temperature rise to 2 degrees Celsius or lower. The Company’s ESG reports can be found at www.hei.com/esg.

RESULTS OF OPERATIONS
Three months ended June 30%
(in thousands)20212020changePrimary reason(s)*
Revenues$680,257 $608,945 12 Primarily increase for the electric utility segment
Operating income101,856 71,556 42 Primarily increase for bank segment
Net income for common stock63,872 48,887 31 Primarily increase due to higher net income at bank segment. See below for effective tax rate explanation.

Three months ended March 31%Six months ended June 30%
(in thousands)(in thousands)20212020changePrimary reason(s)*(in thousands)20212020changePrimary reason(s)*
RevenuesRevenues$642,946 $677,186 (5)Decrease for the electric utility and bank segmentsRevenues$1,323,203 $1,286,131 3 Primarily increase for the electric utility segment
Operating incomeOperating income98,031 59,702 64 Increase for the electric utility and bank segments, partly offset by higher operating losses at the other segmentOperating income199,887 131,258 52 Increase for the electric utility and bank segments, partly offset by higher operating losses at the other segment
Net income for common stockNet income for common stock64,358 33,420 93 Increase due to higher net income at the electric utility and bank segments, partly offset by higher net loss at the other segment. See below for effective tax rate explanationNet income for common stock128,230 82,307 56 Increase due to higher net income at the electric utility and bank segments, partly offset by higher net loss at the other segment. See below for effective tax rate explanation.
*     Also, see segment discussions which follow.

The Company’s effective tax rates for the second quarters of 2021 and 2020 were 22% and 18%, respectively. The Company’s effective tax rates for the first threesix months of 2021 and 2020 were 19%21% and 15%17%, respectively. The effective tax rates were higher for the threesix months ended March 31,June 30, 2021 compared to the same period in 2020 due primarily to higheran increase in income before taxes in 2021, which reduces the rate impact of certain tax items, lower amortization in 2021 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 and a decrease in excess tax benefits related to vesting of share-based awards in 2020.2021. These increases were partially offset by higher nontaxable bank owned life insurance income in 2021. The effective tax rate was higher for the second quarter of 2021 compared to the same period in 2020 due primarily to an increase in income before taxes, which reduces the rate impact of certain tax items, and lower amortization in 2021 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.
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), Department of Health of the State of Hawaii , 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).
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The CARES Act was passed by Congress and signed into law on March 27, 2020. The economic relief package totals more than $2 trillion and provides direct economic support to businesses and individuals. On December 27, 2020, the President signed into law the $900 billion economic stimulus package that provides, among others, direct payments to qualifying individuals, extended unemployment benefits, and additional small business aid. On March 11, 2021, the President signed into law the $1.9 trillion coronavirus relief package. The plan will send direct payments of up to $1,400 to most Americans. The bill will also extend a $300 per week unemployment insurance boost until September 6 and expand the child tax credit for a year. It will also put nearly $20 billion into COVID-19 vaccinations, $25 billion into rental and utility assistance, and $350 billion into state, local and tribal relief. Hawaii has received a significant amount of funds through these various federal assistance programs that will help attenuate the impact to Hawaii’s economy.
In September 2020, the City and County of Honolulu announced a framework for reducing the spread of COVID-19 on Oahu, which tracks metrics that dictate the extent of restrictions on businesses and activities. There arewere initially four tiers with Tier 1 being the most restrictive. The minimum amount of time spent in each tier is four weeks. In order to move to the next higher tier, the last two weeks of a tier must meet the higher tier’s criteria. If a lower tier’s average daily case count is realized for two weeks in a row, the county will move back to the lower tier for a minimum of four weeks. On February 25, 2021, the county of Honolulu moved from Tier 2 to Tier 3, which allows greater density for business and other social activities. Since that time,
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case counts have increased modestly suchOn June 11, 2021, the county of Honolulu moved from Tier 3 to Tier 4, with fewer restrictions and flexibility for businesses. A new Tier 5 was also announced, which requires that the 7-day average new case counts have fallen between 50-100,vaccination rate exceed 60% in order to move into this tier. At a 70% vaccination rate, all restrictions would be lifted. On July 8, 2021, the county of Honolulu moved into Tier 5, which is consistent with the Tier 2 level, but the governor and mayor agreed to remain in Tier 3 for the next four weeks as vaccinations are more widely administered.further loosened existing restrictions. As of April 27,August 1, 2021, approximately 37%60.3% of the state’s population have been fully vaccinated.vaccinated with Honolulu County’s rate at 62%.
See “Recent Developments—COVID-19” in the “Electric utility” and “Bank” sections below for further discussion of the economic impact caused by the pandemic.
Hawaii’s tourism industry, a significant driver of Hawaii’s economy, suffered dramatically with a 73.8% reduction in total visitor arrivals in 2020 compared with 2019. Starting October 15, 2020, the state launched its Safe Travels Program that allows travelers to avoid the mandatory 14-day quarantine if they test negative for COVID-19 within 72 hours of departure. Effective July 8, 2021, domestic visitors can now bypass the mandatory quarantine or COVID-19 test by providing proof of vaccination. Since the launch of the program,Safe Travels Program, the average daily passenger arrivals have graduallysteadily improved, but still remain below pre-pandemic levels. For the firstsecond quarter of 2021, average daily passenger counts were 56.2% lower2,569.7% higher than the comparable period in the prior year, which included pre-pandemic travel activity, and averaged 11,018 passengers per day.but still 26.9% below 2019. However, with the ongoing vaccination efforts across the nation and the implementation of the Safe Travels Program, average daily passenger counts have steadily increased throughout the quarter to an average of 23,393 passengers per day, with MarchJune average daily passenger counts 117%303% above January counts and acounts. A new 2021 year-to-date high of 22,91335,435 daily visitor arrivals was achieved on April 3,August 1, 2021. The recovery in passenger counts thus far has been driven by domestic travelers, with international travelers remaining at low levels due to higher restrictions for international travelers, depending on country of origin. In June, domestic passenger counts were up 3.6% compared to June 2019 pre-COVID levels, while international passenger counts were down 93.3% compared to 2019 pre-COVID levels.
Due to the effects of the measures to contain the COVID-19 pandemic, Hawaii’s seasonally adjusted unemployment rate in MarchJune 2021 was 9.0%7.7%, which was substantially higherlower compared to the MarchJune 2020 rate of 2.1%14.1%. The national unemployment rate in MarchJune 2021 was 6.0%5.9% compared to 4.4%11.1% in MarchJune 2020. Hawaii’s unemployment rate is expected to graduallycontinue to improve now that the job search requirement has been reinstated in order for claimants to receive unemployment benefits, restrictions on travel have been reduced significantly and vaccine distribution has progressed.vaccination rates are approaching State of Hawaii targets that would further lift business restrictions.
Hawaii real estate activity through MarchJune 2021, as indicated by Oahu’s home resale market, drove an increase in the median sales price of 5.8%6.4% for condominiums and 17.3%21% for single familysingle-family homes compared to the same period in 2020.2020, with the median single-family home price reaching a record $979,000. The number of closed sales was up 32.5%70.7% for condominiums and up 11.9%32.9% for single familysingle-family residential homes for the first threesix months of 2021 compared to the same period in 2020.
Hawaii’s petroleum product prices reflect supply and demand in the Asia-Pacific region and the price of crude oil in international markets. The price of crude oil gradually increased during the 4th quarter of last year and the trend has continued during the first twofive months of this year.
At its March 17,June 16, 2021 meeting, the Federal Open Market Committee (FOMC) decided to maintain the federal funds rate target range of 0%-0.25%. The FOMC plans to continue to maintain an accommodative stance of monetary policy to achieve maximum employment and inflation at the rate of 2 percent over the long run. The Federal Reserve stated that it will increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace to sustain smooth market functioning and help foster accommodative financial conditions, thereby supporting the flow of credit to households and businesses.
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The most recent interim forecast by UHERO, which was issued on March 5,May 14, 2021, forecasts full year 2021 real GDP growth of 3.7%4.0%, increase in total visitor arrivals of 81.8%135.9%, decrease in real personal income of -1.1%-0.6%, and an unemployment rate of 7.1%7.3%. This forecast reflects an accelerationimprovement of the pace of the recovery of the HawaiiHawaii’s economy as compared to the prior forecast but aas the U.S. visitor market outperforms expectations with increases in vaccinations and broader reopening. However, the international market continues to be much slower to return. A full economic recovery is still forecasted to be several years out.

The Company expects that 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 net revenues or income from continuing operations in 2021.
“Other” segment.
 Three months ended March 31
(in thousands)20212020Primary reason(s)
Revenues$951 $6 Increase in other sales at Pacific Current subsidiaries.
Operating loss(6,379)(3,659)
The operating income for the first three months of 2021 from Pacific Current1 was comparable to the same period in 2020. Corporate expenses for the first three months of 2021 was $2.5 million higher than the same period in 2020, primarily due to higher charitable donations and incentive compensation.
Net loss(8,556)(6,246)The net loss for the first three months of 2021 was higher than the net loss for the first three months of 2020 due to the same factors cited for the change in operating loss.
 Three months ended June 30Six months ended June 30
(in thousands)2021202020212020Primary reason(s)
Revenues$1,118 $16 $2,069 $22 Increase in other sales at Pacific Current subsidiaries.
Operating loss(5,634)(4,738)(12,013)(8,397)
The second quarters of 2021 and 2020 include $0.6 million and $0.9 million, respectively, of operating income from Pacific Current1. Second quarter 2021 corporate expense was $0.7 million higher, primarily due to higher charitable contribution expense related to an obligation to make matching contributions under a settlement agreement with the former President and Chief Executive Officer of the Bank. The first six months of 2021 and 2020 include $1.3 million and $1.8 million, respectively, of operating income from Pacific Current1. Corporate expenses for the first six months of 2021 was $3.1 million higher than the same period in 2020, primarily due to higher incentive compensation, higher charitable contribution expense related to an obligation to make matching contributions under a settlement agreement with the former President and Chief Executive Officer of the Bank and higher charitable donations, due to timing of contributions.
Net loss(8,313)(7,456)(16,869)(13,702)The net loss for the second quarter and first six months of 2021 was higher than the net loss for the second quarter and first six months of 2020 due to 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.

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The “other” business segment loss includes results of the 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 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;campuses, Alenuihaha Developments, LLC, which owns a collection of renewable energy assets, and Ka‘ie‘ie Waho Company, LLC, which owns a 6 MW solar photovoltaic system that provides renewable energy to Kauai Island Utility Cooperative; as well as eliminations of intercompany transactions.

FINANCIAL CONDITION
Liquidity and capital resources.  As of March 31,June 30, 2021, there was no balance on HEI’s revolving credit facility or Hawaiian Electric’s revolving credit facilitiesfacility and the available committed capacity under the facilities was $150$175 million and $275$200 million, respectively. On April 19, 2021, Hawaiian Electric’s $75 million 364-day revolving credit agreement terminated and was not renewed. At the end of the quarter, HEI and Hawaiian Electric had approximately $100$58 million and nil$38 million of commercial paper outstanding, respectively. As of March 31,June 30, 2021, ASB’s unused FHLB borrowing capacity was approximately $2.0 billion and ASB had unpledged investment securities of $2.0 billion.$2.3 billion that were available to be used as collateral for additional borrowing capacity.
The Company expects that its liquidity will continue to be moderately impacted at the Utilities due to COVID-19. For the Utilities, the highelevated level of unemployment in the state and the moratorium on customer disconnections (which moratorium is currently in place throughended on May 31, 2021) are expected to resulthave resulted in higher accounts receivable balances and bad debt expense and write-offs.may result in higher write-offs in the future. Additionally, lower kWh sales generally result in delayed timing of cash flows, resulting in higher working capital requirements (see “Recent“Recent Developments—COVID-19” in the Electric utility section below). At ASB, liquidity remains at satisfactory levels largely due to U.S. economic stimulus programs implemented as a result of COVID-19 that led to a
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substantial increase in customer deposits. ASB’s cash and cash equivalents was $224$221 million as of March 31,June 30, 2021,, compared to $293 million as of December 31, 2020. ASB remains well above the “well capitalized” level under the FDIC Improvement Act prompt correction action capital category, and while the economic outlook has improved and is expected to continue to improve, there continues to beare still COVID-19 related business restrictions that remain in place that could create ongoing uncertainty regarding COVID-19’s impact on loan performance and the allowance for credit losses (see “Recent Developments — COVID-19” in the Bank section below).
On JanuaryMay 14, 2021, HEI and Hawaiian Electric each entered into a separate agreement with a syndicate of nine financial institutions (the HEI Facility and Hawaiian Electric Facility, respectively, and together, the Utilities received $115Facilities), to amend and restate their respective previously existing unsecured revolving credit agreements. The HEI Facility was increased to $175 million of proceeds using a delayed draw feature under a private placement executed on October 29, 2020from $150 million and usedits term was extended to May 14, 2026. The $200 million Hawaiian Electric Facility has an initial term that expires May 13, 2022, but its term will extend to May 14, 2026 upon approval by the funds to finance capital expenditures and reimburse funds used forPUC during the payment of capital expenditures.
On January 28, 2021, HEI received $46 million of proceeds using a delayed draw feature under a private placement executed on November 17, 2020. The proceeds were used to repay the remaining balance of $15 million on HEI’s $65 million 364-dayinitial term, loan, with the remainder used to pay down commercial paper balances and prefund maturing debt. The second tranche of $29 million was drawn on April 16, 2021 and was used to pay down HEI’s commercial paper balances.which approval is currently being requested.
As of March 31,June 30, 2021 and December 31, 2020, the total amount of available borrowing capacity (net of commercial paper outstanding) under the Company’s committed lines of credit was approximately $325$279 million and $360 million, respectively.
The Company believes that its ability to generate cash, both internally from electric utility and banking operations and externally from issuances of equity and debt securities, as well as 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 contributions and other cash requirements. However, the COVID-19 pandemic is an evolving situation, and the Company cannot predict the extent or duration of the outbreak, the future effects that it will have on the global, national or local economy, including the impact 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. See Item 1A. “Risk Factors” in Part II for further discussion of risks and uncertainties.
The consolidated capital structure of HEI (excluding deposit liabilities and other bank borrowings) was as follows:
(dollars in millions)March 31, 2021December 31, 2020
Short-term borrowings—other than bank$100 2 %$129 3 %
Long-term debt, net—other than bank2,230 48 2,119 46 
Preferred stock of subsidiaries34 1 34 1 
Common stock equity2,321 49 2,338 50 
 $4,685 100 %$4,620 100 %
(dollars in millions)June 30, 2021December 31, 2020
Short-term borrowings—other than bank$96 2 %$129 3 %
Long-term debt, net—other than bank2,258 47 2,119 46 
Preferred stock of subsidiaries34 1 34 1 
Common stock equity2,367 50 2,338 50 
 $4,755 100 %$4,620 100 %

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HEI’s commercial paper borrowings and line of credit facility were as follows:
 Average balanceBalance
(in millions) Three months ended March 31, 2021March 31, 2021December 31, 2020
Commercial paper$47 $100 $65 
Line of credit draws— — — 
Undrawn capacity under HEI’s line of credit facility150 150 
 Average balanceBalance
(in millions) Six months ended June 30, 2021June 30, 2021December 31, 2020
Commercial paper$52 $58 $65 
Line of credit draws— — — 
Undrawn capacity under HEI’s line of credit facility175 150 
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 threesix months of 2021 was $100$102 million.
On March 17, 2021, Standard & Poor’s (S&P)S&P revised HEI’s outlook to stable from positive and affirmed the “BBB-” issuer credit rating and “A-3” short-term and commercial paper ratings. On April 20, 2021, Moody’s Investor Service’s (Moody’s) upgraded HEI’s short-term rating for commercial paper to “P-2” from “P-3” and revised the outlook to stable from positive. On June 25, 2021, Fitch affirmed HEI’s “BBB” long-term issuer default rating, “F3” short-term issuer default rating and stable outlook.
HEI has a $150$175 million line of credit facility with no amounts outstanding at March 31,June 30, 2021. See Note 5 of the Condensed Consolidated Financial Statements.
There were no new issuances of common stock through the HEI Dividend Reinvestment and Stock Purchase Plan (DRIP), HEIRSP or the ASB 401(k) Plan in the threesix months ended March 31,June 30, 2021 and 2020 and HEI satisfied the share purchase requirements of the DRIP, HEIRSP and ASB 401(k) Plan through open market purchases of its common stock.
For the first threesix months of 2021, net cash provided by operating activities of HEI consolidated was $42$118 million. Net cash used by investing activities for the same period was $518$771 million, primarily due to capital expenditures, ASB’s purchases of
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available-for-sale and held-to maturity investment securities, partly offset by ASB’s receipt of investment security repayments from investment securities,and maturities, proceeds from the sale of investment securities, and net decrease in loans and sale of residential loans. Net cash provided by financing activities during this period was $409$553 million as a result of several factors, including net increases in ASB’s deposit liabilities and other bank borrowings, the issuances of long-term debt and net increases in short-term borrowings, partly offset by repayment of short-term and long-term debt and payment of common stock dividends. During the first threesix months of 2021, Hawaiian Electric and ASB (through ASB Hawaii) paid cash dividends to HEI of $28$56 million and $5$28 million, respectively.
Dividends.  The payout ratios for the first threesix months of 2021 and full year 2020 were 58% and 64%73%, respectively. On February 9, 2021, the HEI Board of Directors approved a 1 cent increase in the quarterly dividend from $0.33 per share to $0.34 per share, starting with the dividend in the first quarter of 2021. HEI currently expects to maintain its dividend at its present level; however, 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, and current and expected future economic conditions, including impacts from the COVID-19 pandemic.pandemic, and capital investment alternatives.
MATERIAL ESTIMATES AND CRITICAL ACCOUNTING POLICIESFINANCIAL CONDITION
In preparing financial statements, management is required to make estimatesLiquidity and assumptions that affect the reported amountscapital resources.  As of assets and liabilities, the disclosure of contingent assets and liabilitiesJune 30, 2021, there was no balance on HEI’s revolving credit facility or Hawaiian Electric’s revolving credit facility and the reported amounts of revenuesavailable committed capacity under the facilities was $175 million and expenses. Actual results could differ significantly from those estimates.
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$200 million, respectively. On April 19, 2021, Hawaiian Electric’s $75 million 364-day revolving credit agreement terminated 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 42 to 44, 58 to 59, and 72 to 74 of HEI’s MD&A included in Part II, Item 7 of HEI’s 2020 Form 10-K.
Following are discussions of the results of operations, liquidity and capital resources of the electric utility and bank segments.
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Electric utility
Recent developments—COVID-19
See also Recent developments—COVID-19 in HEI’s MD&A.
Economic conditions in Hawaii have begun to improve in 2021 as vaccination efforts advance and businesses are allowed to operate with fewer restrictions. Statewide daily passenger counts have improved dramatically, reaching a year-to-date high of 22,913 passengers per day on April 3, 2021, but still 28% below the comparable Saturday in 2019.was not renewed. At the end of March, statewide unemployment improvedthe quarter, HEI and Hawaiian Electric had approximately $58 million and $38 million of commercial paper outstanding, respectively. As of June 30, 2021, ASB’s unused FHLB borrowing capacity was approximately $2.0 billion and ASB had unpledged investment securities of $2.3 billion that were available to 9% from 10.3%be used as collateral for additional borrowing capacity.
The Company expects that its liquidity will continue to be moderately impacted at the end of the year. While economic activity has increased, the demand for electricity remains lower than pre-pandemic levels. In the first quarter of 2021, kWh sales were down 4.8% compared with the same quarter in 2020. The Utilities expect kWh sales to gradually improve throughout 2021 as the COVID-19 vaccine is more widely distributed and administered, which would allow the economy in Hawaii to fully reopen.
While the Utilities’ electric energy revenues have not been significantly impacted due to COVID-19. For the decoupling mechanism, which allows recovery ofUtilities, the difference between PUC approved target revenues and recorded adjusted revenues regardless of theelevated level of kWh sales, the timing of customer collections would be delayed (or accelerated) if the level of kWh sales decreases below (or increases above) the estimated kWh sales. See “Current Decoupling” in Note 3 of the Condensed Consolidated Financial Statements for a discussion of decoupling. Annually, the Utilities submit a decoupling filing to the PUC, which requests recovery by the utility (or refund to customers) of the difference between recorded adjusted revenues and target revenues under the RBA. The difference is collected or refunded through an adjustment to customer ratesunemployment in the following year based on estimated sales, starting on June 1st of that following year, which has an impact on the timing of the Utilities’ cash flow. Additionally, although the Utilities’ decoupling mechanism allows for collection under the RBA, the RBA balance accrues interest only at the short-term debt rate from the last rate case (2.5% for Hawaiian Electric, 3.75% for Hawaii Electric Lightstate and 3.0% for Maui Electric). As of March 31, 2021, the RBA balance related to decoupling revenues was approximately $25.9 million, compared to $7.6 million as of December 31, 2020. The billed accounts receivable balances, net of allowance for doubtful accounts, of $142 million and as of March 31, 2021 is 4.2% lower than the billed accounts receivable balances as of December 31, 2020, primarily driven by an improvement in economic conditions from reopening, application of available assistance from various government and community programs, including the Hawaii Utility Bill Assistance Program, which was launched in the first quarter of 2021 and provided funding to Hawaiian Electric customers and other utility companies. The past due accounts receivable balance has decreased by $8 million or 15% since December 31, 2020 with a corresponding decrease in the number of accounts past due by approximately 10% for the same period. While the moratorium on customer disconnections is currently in place through(which ended on May 31, 2021, efforts are ongoing to continue working with customers on payment plans2021) have resulted in higher accounts receivable balances and other bill assistance for customers through funding from non-profit organizations, as well as statebad debt expense and county relief programs. To addressmay result in higher write-offs in the financing requirement related to thefuture. Additionally, lower kWh sales generally result in delayed timing of cash flows, collected under the decoupling mechanism through the RBA and the modest slowing or reductionresulting in accounts receivable collections from customers, the Utilities have completed a number of steps in 2020 to enhance their liquidity position. See “Financial Condition—Liquidity andhigher working capital resources” for additional information.requirements (see “Recent Developments
The Utilities provide an essential service to the State of Hawaii, and have continued to operate to protect the health and safety of employees and customers and to ensure system reliability, and have been following the Governor’s directive that the Utilities take necessary measures to ensure they can operate—COVID-19” in the normal course. The Utilities have also implemented certain aspects of their business continuity plans, which includes the activation of its Incident Management Team to closely manage the response to the pandemic and have implemented practices related to employee and facilities hygiene in order to ensure the reliability and resilience of their operations.
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. As of March 31, 2021, these costs, which have been deferred and recorded as a regulatory asset, totaled approximately $22.2 million (see also discussion under Item 1A. “Risk Factors” and “Regulatory assets for COVID-19 related costs” in Note 3 of the Condensed Consolidated Financial Statements)Electric utility section below). Looking forward, while the distribution and administration of the COVID vaccine is expected to hasten the reopening of the Hawaii economy, the prolonged impact of COVID-19 could adversely affect the ability of the Utilities’ contractors, suppliers, IPPs, and other business partners to perform or fulfill their obligations, or require modifications to existing contracts, which could adversely affect the Utilities’ business, increase expenses, and impact the Utilities’ ability to achieve their RPS goals. Additionally, while the state’s aggressive response to the pandemic has dramatically reduced the spread of the coronavirus, the measures taken have had a severe economic impact on the state’s businesses and residents, which may influence the PUC’s actions regarding future rate increases. See “Item 1A. Risk Factors” in Part II for additional discussion of risks.
For a discussion regarding the impact of the economic conditions caused by the COVID-19 pandemic on the Utilities’At ASB, liquidity and capital resources, see discussion under “Financial Condition–Liquidity and capital resources.”
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RESULTS OF OPERATIONS
Three months ended March 31Increase 
20212020(decrease)(dollars in millions, except per barrel amounts)
$565 $597 $(33)
Revenues. Net decrease largely due to:
$(51)
lower fuel oil prices and lower kWh generated1
7 higher revenues from annual RAM adjustments
6 increase related solely to a change in the timing for revenue recognition within the year, which eliminates seasonality in recognizing target revenues and results in recognizing revenues evenly throughout the year with target revenues recognized on an annual basis remaining unchanged
2 
higher PPAC revenue2
2 lower ERP system implementation benefits to be passed on to customers in future rates
1 
higher kWh purchased2
127 173 (46)
Fuel oil expense1. Decrease largely due to lower fuel oil prices and lower kWh generated
142 140 2 
Purchased power expense1 ,2. Net increase largely due to higher kWh purchased and higher minimum charges
115 128 (13)
Operation and maintenance expenses. Net decrease largely due to:
(3)lower labor due to lower staffing and reduction in overtime
(2)higher bad debt expense in the first quarter of 2020 related to the economic impact of COVID-19 pandemic on customers (PUC’s approval of deferral to regulatory asset started in the second quarter of 2020)
(2)fewer generating facility overhauls due to timing but to be performed later in 2021
(2)lower pension service cost due to reset of pension cost included in rates as part of Hawaiian Electric final rate case decision
(2)lower outside service costs
(1)increase in Pearl Harbor environmental reserves in 2020
(1)lower medical premium costs due to lower staffing
111 113 (2)
Other expenses. Decrease due to lower revenue taxes offset in part by higher depreciation expense in 2021 for plant investment in 2020
69 44 25 
Operating income. Increase due to lower operation and maintenance expenses coupled with higher electric rates, offset in part by higher depreciation expense
55 30 25 
Income before income taxes. Increase due to lower operation and maintenance expense, higher electric rates, and lower pension non-service costs, offset by higher interest expense related to new long term debt issued in May 2020 and January 2021 and higher depreciation expense
43 24 19 
Net income for common stock. Increase due to lower operating expenses, coupled with higher electric rates
1,909 2,006 (97)
Kilowatthour sales (millions)3
$63.87 $80.78 $(16.91)Average fuel oil cost per barrel
468,745 465,787 2,958 Customer accounts (end of period)
1The rate schedules of the electric utilities currently contain 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 when compared to the same periods last yearremains at satisfactory levels largely due to the effectsU.S. economic stimulus programs implemented as a result of the COVID-19 pandemic. The reduction to visitor arrivals due to the Safe Travels requirements significantly impacted the tourism industry. This combined with restrictions on business and activities,that led to high unemployment, and shuttered many businesses and hotels. As restrictions are eased, vaccination rates increase and more visitors arrive, sales are expected to slowly rebound but remain lower than pre-pandemic levels.

The Utilities’ effective tax rates for the first three months of 2021 and 2020 were at 20% and 18%, respectively. The effective tax rate was higher for the three months ended March 31, 2021 compared to the same period in 2020 due primarily to higher excess tax benefits related to vesting of share-based awards in 2020.
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Hawaiian Electric’s consolidated ROACE was 9.0% and 7.4% for the twelve months ended March 31, 2021 and March 31, 2020, respectively.
The net book value (cost less accumulated depreciation) of utility property, plant and equipment (PPE) as of March 31, 2021 amounted to $4.7 billion, of which approximately 27% related to generation PPE, 64% related to transmission and distribution PPE, and 9% related to other PPE. Approximately 9% 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 modern, resilient, 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 enable the creation of smart, sustainable, resilient communities and achieve 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” under “Commitments and contingencies” in Note 3 of the Condensed Consolidated Financial Statements.
Transition to renewable energy. The Utilities are fully committed to a 100 percent renewable energy future for Hawaii and are partnering with the State of Hawaii in achieving their Renewable Portfolio Standard goal of 100% renewable energy by 2045. Hawaii’s RPS law requires electric utilities to meet an RPS of 30%, 40%, 70% and 100% by December 31, 2020, 2030, 2040 and 2045, respectively.
The Utilities have made significant progress on the path to clean energy and have been successful in adding significant amounts of renewable energy resources to their electric systems and exceeded the 2015 RPS goal two years early. The Utilities’ RPS for 2020 was 34.5%, which was in excess of the statutory goal of 30%. The Utilities will continue to actively procure additional renewable energy post-2020 and expect to meet or exceed the next statutory RPS goal of 40% in advance of the 2030 compliance year. (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 electricity sales in 2020, a 1% shortfall in meeting the 2030 RPS requirement of 40% would translate into a penalty of approximately $1.6 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.
The Utilities are fully aligned with, and supportive of, state policy to achieve a 100% renewable energy future and have made significant progress in its transformation. 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 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 is an environmental and social cost 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 100% renewable energy 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 declined (with the exception of 2019 and the first quarter of 2020), as privately-owned distributed energy resources have been added to the grid and energy efficiency measures have been put into place. Other regulatory mechanisms reduce regulatory lag, such as the rate adjustment mechanism to provide revenues for escalation in certain O&M expenses and rate base changes between rate cases, and the major project interim recovery mechanism, which allow the Utilities to recover and earn on certain approved major capital projects placed into service in between rate cases. Certain mechanisms were replaced or modified under the new PBR framework. See “Regulatory proceedings” under “Commitments and contingencies” and “Current Decoupling” in Note 3 of the Condensed Consolidated Financial Statements.
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Integrated Grid Planning. Achieving 100% renewable energy will require modernizing the grid through coordinated energy system planning in partnership with local communities and stakeholders. To accomplish this, the Utilities filed their Integrated Grid Planning (IGP) Report with the PUC on March 1, 2018, which provides an innovative systems approach to energy planning intended to yield the most cost-effective renewable energy pathways that incorporates customer and stakeholder input.
In March 2019, the PUC accepted the Utilities’ IGP Work plan submitted on December 14, 2018, which describes the timing and scope of major activities that will occur in the IGP process. The IGP 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. In March 2020, the Utilities launched a broad public engagement program, which consisted of a combination of in-person and online engagement. This provided customers opportunities to connect with the IGP team. The Utilities submitted an updated IGP work plan to the PUC in January 2021, marking the significant progress made through the stakeholder engagement phase of the IGP process. The Utilities will use the stakeholder feedback and input as it enters the next phase of the process which includes the development of long-range integrated grid plans and the acquisition of new 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.
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 allowance for funds used during construction, through the REIP Surcharge. The Utilities placed the DR Management System in service in the first quarter of 2019. On October 30, 2019, the Utilities filed the final cost report, reflecting total project costs of $3.7 million. On February 27, 2020, the PUC approved the Utilities’ request to recover deferred and other related costs of the DR Management System through the REIP Surcharge effective March 1, 2020 until such costs are included in determining base rates. On June 26, 2020, the Utilities submitted an updated REIP rate effective August 1, 2020 to the PUC.
On January 25, 2018, the PUC approved the Utilities’ revised DR Portfolio tariff structure. The PUC supported the approach of working with aggregators to implement the DR portfolio. In 2019, the Utilities signed a multi-year Grid Services Purchase Agreement (GSPA) with a third party aggregator. These contracts pay service providers to aggregate grid-supporting capabilities from customer-sited Distributed Energy Resources. The first of these five-year contracts has been executed (PUC approval obtained on August 9, 2019) and is expected to deliver not only benefits through efficient grid operations, but also avoided fuel costs over that 5-year period. The Utilities selected the next set of aggregators in the first quarter of 2020, commenced GSPA contract negotiations, and filed two executed contracts on July 9, 2020. This complements the Utilities’ transformation and supports customer choice. The GSPA contracts were approved by the PUC on December 31, 2020.
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 distributed energy resources 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. The Utilities have begun work to implement the Grid Modernization Strategy Phase 1, which received PUC approval on March 25, 2019. The estimated cost for this initial phase is approximately $86 million and is expected to be incurred over five years. As of March 31, 2021, approximately $18 million has been incurred to date under Phase 1. The Utilities submitted a proportional advanced meter opt-out deployment filing on September 30, 2020 in an effort toward broader and faster deployment, which was approved by the PUC on March 4, 2021.
The Utilities filed an application with the PUC on September 30, 2019 for an Advanced Distribution Management System (ADMS) as part of the second phase of their Grid Modernization Strategy implementation. However, on December 30, 2019, the PUC suspended the Utilities’ application for the Advanced Distribution Management System pending the Utilities’ filing of a supplemental application for the broad deployment of field devices. This supplement and update to the Grid Mod Phase 2 field devices application was filed on March 31, 2021. The estimated cost for the implementation over five years of the ADMS and field devices, which includes capital, deferred and O&M costs, is $105 million. A PUC order resuming the proceeding is pending.
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
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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, totals 8 MW of solar photovoltaic (PV) only with one credit rate for each island, closed on April 9, 2020.
By PUC order, CBRE Phase 2 commenced on April 9, 2020 with the goal to develop a robust CBRE market with competitive pricing anticipating that clean energy projects and programs, such as CBRE, can meaningfully contribute to the State’s recovery from the COVID-19 emergency. CBRE Phase 2 capacity is substantially larger than Phase 1 and allows up to 235 MW across all Hawaiian Electric service territories in two tranches. The capacities are allocated by island and allow for small (under 250 kW) and large system sizes to encourage a variety of system sizes. In addition to the first-come, first-served process offered in Phase 1, the majority of the 235 MW will be awarded to projects selected through a competitive process. To provide opportunities for low- to moderate-income (LMI) customers to participate in the program, separate project proposals may be submitted specifically targeting LMI customers.
Eight RFPs were required by order: one each for Oahu, Maui, Hawaii Island, Molokai, and Lanai, and LMI-specific RFPs for Oahu, Maui, and Hawaii Island. Draft RFPs for the three LMI RFPs and the RFPs for Molokai, and Lanai were filed on July 9, 2020, along with a revised tariff and associated contract models. LMI projects do not have a size cap nor do they decrease the 235 MW capacity available to other projects. In addition to its administrative role, the Utilities and their affiliates are eligible to participate in the solicitations, with the exception of the LMI-specific RFPs, where the PUC will only consider a utility self-build option if there are no successful competitive bids for an LMI project on one island or more. The Utilities will also have opportunities to earn based on shared savings mechanisms for specific solicitations. Comments were received during and after a Technical Conference hosted by the PUC on July 28, 2020. Proposed final drafts of the LMI RFPs, Molokai and Lanai RFPs tariff, and contracts were filed on September 8, 2020.
For Lanai, the Utilities proposed to combine the previously issued Variable Renewable Dispatchable Generation Paired with Energy Storage RFP and the CBRE RFP to optimize the benefits of procuring renewable energy, spurring development and increasing the likelihood of success of the CBRE Program on Lanai. As proposed, the Lanai CBRE RFP allows the Utilities to continue collaborating with the majority landowner, Pulama Lanai, who has designated a new larger predetermined site to facilitate expeditious development of a renewable energy project that meets the objectives of both RFPs, while reducing the cost of a project by leveraging economies of scale and coordinating interconnection to the grid. On February 10, 2021, Pulama Lanai filed a letter requesting that the Final RFP be issued for Lanai, or, in the alternative, that separate proposals be allowed for CBRE and non-CBRE portions. On February 17, 2021, the Utilities filed comments in response requesting the PUC’s support of the combined RFP.
Drafts of the remaining RFPs on Oahu, Maui, and Hawaii Island were filed on October 9, 2020. A technical conference was held on October 28, 2020 and proposed final drafts were filed on December 1, 2020.
For small CBRE projects less than 250 kW in size, the Utilities are planning to accept projects over a four-month period on a first-come, first served basis as soon as the PUC approves the Utilities’ final tariff and contracts, filed on September 8, 2020. The PUC reserved 30 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. If applications exceed the program capacity for that island, then a reverse auction process called Competitive Credit Rate Procurement will be triggered to allocate project capacity and determine the credit rate. The Utilities have developed a CBRE Portal where customers can subscribe to a project once the Subscriber Organization has added their project to the portal.
In January 2021, the PUC directed the Utilities to collaborate with the parties to develop recommended improvements to the interconnection process and certain other elements of the CBRE program within sixty days, or by March 30, 2021. Prior to this Order, the Utilities were already working on interconnection improvements and proposed several ways to potentially improve the time and cost of interconnection during the development of the CBRE Phase 2 tariff and RFPs. As directed by the Order, the Utilities increased their focus and attention on this area and worked with the parties, including the CBRE Independent Observer, to make the interconnection process more transparent, predictable and standardized, including interconnection costs, timelines and requirements in order to reduce costs and accelerate schedules. In addition, the Utilities researched interconnection solutions in other jurisdictions, and worked with the parties to identify additional improvements. The Utilities solicited from the parties a list of recommended improvements, and consolidated and adopted nearly all the near-term and continuous improvement recommendations from the parties. The Utilities filed these recommendations and associated updates to the previously filed RFPs, tariff, and contracts on March 30, 2021. These documents are pending review and approval by the PUC.
Microgrid services tariff proceeding. In July 2018, the PUC opened a proceeding to investigate establishment of a microgrid services tariff, pursuant to Act 200 of 2018. There are currently five intervenors in the docket, although initially there were eight. In August 2019, the PUC issued an order focusing for the remainder of the docket is to facilitate the ability of
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microgridssubstantial increase in customer deposits. ASB’s cash and cash equivalents was $221 million as of June 30, 2021, compared to disconnect$293 million as of December 31, 2020. ASB remains well above the “well capitalized” level under the FDIC Improvement Act prompt correction action capital category, and while the economic outlook has improved and is expected to continue to improve, there are still COVID-19 related business restrictions that remain in place that could create ongoing uncertainty regarding COVID-19’s impact on loan performance and the allowance for credit losses (see “Recent Developments — COVID-19” in the Bank section below).
On May 14, 2021, HEI and Hawaiian Electric each entered into a separate agreement with a syndicate of nine financial institutions (the HEI Facility and Hawaiian Electric Facility, respectively, and together, the Facilities), to amend and restate their respective previously existing unsecured revolving credit agreements. The HEI Facility was increased to $175 million from $150 million and its term was extended to May 14, 2026. The $200 million Hawaiian Electric Facility has an initial term that expires May 13, 2022, but its term will extend to May 14, 2026 upon approval by the gridPUC during the initial term, which approval is currently being requested.
As of June 30, 2021 and provide backup powerDecember 31, 2020, the total amount of available borrowing capacity (net of commercial paper outstanding) under the Company’s committed lines of credit was approximately $279 million and $360 million, respectively.
The Company believes that its ability to customersgenerate cash, both internally from electric utility and critical energy uses during contingency events.banking operations and externally from issuances of equity and debt securities, as well as 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 contributions and other cash requirements. However, the COVID-19 pandemic is an evolving situation, and the Company cannot predict the extent or duration of the outbreak, the future effects that it will have on the global, national or local economy, including the impact 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.
Two Working GroupsThe consolidated capital structure of HEI (excluding deposit liabilities and other bank borrowings) was as follows:
(dollars in millions)June 30, 2021December 31, 2020
Short-term borrowings—other than bank$96 2 %$129 3 %
Long-term debt, net—other than bank2,258 47 2,119 46 
Preferred stock of subsidiaries34 1 34 1 
Common stock equity2,367 50 2,338 50 
 $4,755 100 %$4,620 100 %
HEI’s commercial paper borrowings and line of credit facility were formed: (1) a Market Facilitation Working Group to recommend draft tariff language for the Microgrid Services Tariff; and (2) an Interconnection Standards Working Group to develop a new section of Rule 14H specific to interconnection and islanding/reconnection of microgrids. The Utilities filed a Draft Microgrid Services Tariff and updated language for various distributed energy resources Rules on March 30, 2020.as follows:
 Average balanceBalance
(in millions) Six months ended June 30, 2021June 30, 2021December 31, 2020
Commercial paper$52 $58 $65 
Line of credit draws— — — 
Undrawn capacity under HEI’s line of credit facility175 150 
Note: Parties toThis 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 docket filed comments on and proposed revisions to the Draft Tariff on April 27, 2020.first six months of 2021 was $102 million.
On November 30, 2020, the PUC held a technical conference to present its proposed redlines to Utilities’ Draft Microgrid Services Tariff and related documents. On February 1, 2021, the Working Group filed its Draft Microgrid Tariff. Members of the Working Group separately filed their positions on areas of disagreements and later commented on other parties’ positions on areas of disagreements on February 10, 2021 and FebruaryMarch 17, 2021, respectively. This matter is pendingS&P revised HEI’s outlook to stable from positive and affirmed the “BBB-” issuer credit rating and “A-3” short-term and commercial paper ratings. On April 20, 2021, Moody’s upgraded HEI’s short-term rating for commercial paper to “P-2” from “P-3” and revised the outlook to stable from positive. On June 25, 2021, Fitch affirmed HEI’s “BBB” long-term issuer default rating, “F3” short-term issuer default rating and stable outlook.
HEI has a PUC decision and or guidance on how to proceed.
Decoupling. $175 million line of credit facility with no amounts outstanding at June 30, 2021. See "Current Decoupling" in Note 35 of the Condensed Consolidated Financial Statements for a discussionStatements.
There were no new issuances of decoupling.
As part of decoupling,common stock through the Utilities also track their rate-making ROACEs as calculated underHEI Dividend Reinvestment and Stock Purchase Plan (DRIP), HEIRSP or 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&OASB 401(k) Plan in the PBR proceeding modifiedsix months ended June 30, 2021 and 2020 and HEI satisfied the earnings sharing mechanism to a symmetric arrangement. Effective with annual earnings for 2021, the earnings sharing will be triggered for actual ROACE outside of a 300 basis points dead band above and below a target ROE of 9.5%, which is the current authorized ROE for eachshare purchase requirements of the Utilities. Earnings sharing credits or recoveries will be included inDRIP, HEIRSP and ASB 401(k) Plan through open market purchases of its common stock.
For the annual decoupling filingfirst six months of 2021, net cash provided by operating activities of HEI consolidated was $118 million. Net cash used by investing activities for the following year. Results for 2020, 2019 and 2018 did not trigger the earnings sharing mechanism for the Utilities.
Regulated returns. Actual and PUC-allowed returns, as of March 31, 2021, were as follows:
%Rate-making Return on rate base (RORB)*ROACE**Rate-making ROACE***
Twelve months ended 
March 31, 2021
Hawaiian ElectricHawaii Electric LightMaui ElectricHawaiian ElectricHawaii Electric LightMaui ElectricHawaiian ElectricHawaii Electric LightMaui Electric
Utility returns7.65 7.27 6.48 9.24 9.05 7.65 10.20 9.80 8.04 
PUC-allowed returns7.37 7.52 7.43 9.50 9.50 9.50 9.50 9.50 9.50 
Difference0.28 (0.25)(0.95)(0.26)(0.45)(1.85)0.70 0.30 (1.46)
*      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 factors contributing to the difference between PUC-allowed ROACEs and the ROACEs actually achieved include the exclusion of certain expenses from rates (for example, incentive compensation and charitable contributions), the recognition of annual RAM revenues on June 1 annually rather than on January 1, and return on capital additions since the last rate case in excess of indexed escalations. For Hawaiian Electric and Hawaii Electric Light, the twelve months ended March 31, 2021 rate-making ROACEs reflect higher earningssame period was $771 million, primarily due to timing differences in the first quartercapital expenditures, ASB’s purchases of 2021, including overhaul expenses, and a change in the timing of the recognition of target revenues relative to 2020.
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Most recent rate proceedings.available-for-sale and held-to maturity investment securities, partly offset by ASB’s Asreceipt of March 31, 2021, the status of ongoing rate case for each utility was as follows:
Test year
(dollars in millions)		DateAmount% over 
rates in 
effect		ROACE
(%)		RORB
(%)		Rate
 base		Common
equity
%		Stipulated agreement 
reached with
Consumer Advocate
Hawaiian Electric        
2020 1
Request8/21/19$77.6 4.1 10.50 7.97 $2,477 57.15 Yes
Final Decision and Order10/22/200.00.09.507.37NA57.15
Hawaii Electric Light        
2019 2
Request12/14/18$13.4 3.4 10.50 8.30 $537 56.91 Yes
Interim Decision and Order11/13/190.00.09.507.5253456.83
Final Decision and Order7/28/200.00.09.507.5253456.83
Note:  The “Request” date reflects the application filing date for the rate proceeding. The date of “Interim Decisioninvestment security repayments and Order” or “Final Decision and Order” reflects the issuance date of the PUC order.
1 A final D&O issued on October 22, 2020 ordered final rates for the 2020 test year to remain at current effective rates, which provides for no increase to base rates. Hawaiian Electric’s proposed RBA provision tariff and ECRC tariff submitted on November 6, 2020 were approved by the PUC on December 11, 2020. The proposed RBA provision tariff and ECRC tariff took effect on January 1, 2021.
2 A final D&O issued on July 28, 2020 ordered final rates for the 2019 test year to remain at current effective rates, such that there is a zero increase in rates. The proposed final tariffs and PIM tariffs took effect on November 1, 2020, and the ECRC tariff became effective on January 1, 2021.
See also “Most recent rate proceedings” in Note 3 of the Condensed Consolidated Financial Statements.
On December 23, 2020, the PBR D&O was issued, establishing a new PBR Framework. The PBR Framework implemented a five-year multi-year rate period (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.
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 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 August 2020, the project was energized and commissioning of all wind turbines was completed. However, the project was paused due to a conductor deficiency. Hawaiian Electric reconductored the 46kV circuit and in December 2020, the project reached commercial operation.
NPM received its Incidental Take Permitmaturities, proceeds from the Departmentsale of Fishinvestment securities, net decrease in loans and Wildlife Service on September 7, 2018. Keep the North Shore Country (KNSC) has appealedsale of residential loans. Net cash provided by financing activities during this decision and the case has been transferred to the Hawaii Supreme Court. On June 17, 2020, KNSC filed a Motion for Stay Upon Appeal. On August 10, 2020, KNSC’s Motion for Stay Upon Appealperiod was denied. KNSC and Kahuku Community Association (KCA) have also petitioned to appeal NPM’s Conditional Use Permits. On August 6, 2020, the Zoning Board of Appeals (ZBA) granted NPM’s Motions to Dismiss the Appeal Petitions of KNSC and KCA.
Life of the Land (LOL) filed a Motion for Relief to argue the PUC’s approval for NPM PPA was invalid and should be revised. Hawaiian Electric and the Consumer Advocate filed an opposition to this motion for relief. A hearing on the motion for relief was held on November 22, 2019. On April 16, 2020, the PUC issued an order denying LOL’s Motion for Relief. On April 27, 2020, LOL filed a Notice of Appeal of the PUC’s order with the Supreme Court of the State of Hawaii. Hawaiian Electric filed its Answering Brief with the Supreme Court of the State of Hawaii on November 12, 2020. Oral argument was held on May 7, 2021.
•On December 31, 2019, Hawaii Electric Light and PGV entered into an Amended and Restated Power Purchase Agreement (ARPPA), subject to approval by the PUC. The 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. The PUC suspended the docket pending the completion of a supplemental environmental review. On April 12, 2021, Hawaii Electric Light filed a motion for reconsideration and clarification in the proceeding.
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Tariffed renewable resources.
•As of March 31, 2021, there were approximately 523 MW, 111 MW and 125 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 March 31, 2021, an estimated 31% of single family homes on the islands of Oahu, Hawaii and Maui have installed private rooftop solar systems, and approximately 19% of the Utilities’ total customers have solar systems.   
•The Utilities began accepting energy from feed-in tariff projects in 2011. As of March 31, 2021, there were 43 MW, 2 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 July 2018, the PUC approved Hawaiian Electric’s three-year biodiesel supply contract with Pacific Biodiesel Technologies, LLC (PBT) to supply 2$553 million to 4 million gallons of biodiesel at Hawaiian Electric’s Schofield Generating Station and the Honolulu International Airport Emergency Power Facility (HIA Facility) and any other generating unit on Oahu, as necessary. The PBT contract became effective on November 1, 2018 and has been extended for one year through December 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 2022.
•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 2022, and will continue with no volume purchase requirements.
Requests for renewable proposals, expressions of interest, and information.
•Under a request for proposal process governed by the PUC and monitored by independent observers, in February 2018, the Utilities issued 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. As of March 31, 2021, summarized information for a total of 8 PPAs is as follows:
UtilitiesNumber of contractsTotal photovoltaic size (MW)BESS Size (MW/MWh)Guaranteed commercial operation datesContract term (years)Total projected annual payment (in millions)
Hawaiian Electric4139.5139.5/5589/30/21 & 12/31/2120 & 25$30.9 
Hawaii Electric Light26060/2407/20/21 & 6/30/222514.1 
Maui Electric27575/3007/20/21 & 6/30/222517.6 
Total8274.5274.5/1,098$62.6 
The Utilities have received PUC approvals to recover the total projected annual payment of $62.6 million for the eight PPAs through the PPAC to the extent such costs are not included in base rates.
•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. This procurement plan sought approximately 900 MW of renewable energy, including 594 MW on Oahu, 135 MW on Maui and a range between 32 to 203 MW on Hawaii Island. This second phase, as approved by the PUC, was open to all renewable and storage resources, including efforts to add more renewable generation, renewable plus storage, standalone storage and grid services. The scope of these RFPs has been expanded to accelerate renewable energy procurement beyond the remainder of the 2022 targets identified in Stage 1 to include the energy requirement associated with the planned retirement of the Kahului Power Plant on Maui and the upcoming expiration of the agreement for the AES Hawaii facility on Oahu. For the Grid Services RFP, the targets had been expanded in alignment with the Renewable RFPs Utility proposals were submitted on November 4, 2019. Proposals from third parties for these RFPs were submitted on November 5, 2019. Final awards for the renewable projects were made on May 8, 2020. Final awards for the grid services projects were made starting in January 2020. On Oahu, seven solar-plus-storage projects and one standalone storage project totaling approximately 281 MW of generation and 1.8 GWh of storage were selected. On Maui Island, three solar-plus-storage projects and one standalone storage project totaling approximately 100 MW of generation and 560 MWh of storage were selected. On Hawaii Island, two solar-plus-storage projects and one standalone storage project totaling approximately 72 MW of generation and 492 MWh of storage were selected. Two Utility Self-Build projects were among those selected; a 40-MW, 160-MWh standalone energy storage system on Maui and a 12-MW,
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12-MWh storage system on Hawaii Island. Since selection, three renewable plus storage projects have voluntarily withdrawn from the process for various reasons, including change in circumstances for the developer and a misunderstanding of contract requirements. To date, the Utilities have filed 10 PPAs, 2 grid services purchase agreements (GSPA) and 2 applications for commitments of funds for capital expenditures for approval of the utility self-build projects with the PUC.
A summary of the 10 PPAs that were filed with the PUC, is as follows:
UtilitiesNumber of contractsTotal photovoltaic size (MW)BESS Size (MW/MWh)Guaranteed commercial operation datesContract term (years)Total projected annual payment (in millions)
Hawaiian Electric5232232/1,0555/31/22, 5/17/23, 10/30/23, 12/29/23 & 12/31/2320 & 25$62.0 
Hawaiian Electric1*N/A185/5656/1/222024.0 
Hawaii Electric Light16060/2409/30/232515.5 
Maui Electric3100100/4004/30/23 & 12/29/232528.2 
Total10392577/2,260$129.7 

* See further discussion under “Review of Interconnection Process and Kapolei Energy Storage Power Purchase Agreement” below.
As of March 31, 2021, the PUC approved four solar-plus-storage PPAs for a total of 217 MW. On April 14, 2021, the PUC approved another solar-plus-storage PPA adding 40 MW. The total projected annual payment of $68 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:
UtilitiesFast Frequency Response - 1
(MW)		Fast Frequency Response - 2
(MW)		Capacity -
Load Build
(MW)		Capacity -
Load Reduction
(MW)
Hawaiian Electric—26.714.519.4
Hawaii Electric Light6.0—3.24.0
Maui Electric6.1—1.94.7
Total12.126.719.628.1

A summary of the utility self-build projects that are pending PUC approval is as follows:
UtilitiesNumber of contractsBESS Size (MW/MWh)Guaranteed commercial operation dates
Hawaii Electric Light112/1212/30/22
Maui Electric140/1604/28/23
Total252/172

•On November 27, 2019, the Utilities issued RFPs for renewable generation paired with energy storage on the islands of Lanai and Molokai. The Utilities were seeking PV paired with storage or small wind (specified as 100 kW turbines or smaller) on Molokai and PV paired with storage on Lanai. Proposals for the Molokai RFP were received on February 14, 2020. The Lanai RFP was temporarily postponed, while the Utilities reevaluated the system needs. The Utilities filed an update to the Lanai RFP on March 10, 2020. In light of a PUC order issued on April 9, 2020 in the CBRE docket, the Utilities proposed in their July 9, 2020 filing to combine the previously issued Lanai RFP with the CBRE RFP described in the order to optimize the benefits of procuring renewable energy, spurring development and increasing the likelihood of success of the CBRE program on Lanai. The proposed combined Lanai RFP is before the PUC for approval. On October 15, 2020, the Utilities selected one project from the Molokai RFP for a total of 4.5 MW of solar and 24 MWh of storage. The developer, however, declined to accept the award. The Utilities are currently evaluating next steps.
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
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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 guaranteed commercial operation dates (GCOD) 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. The full text of the Order, Motion for Reconsideration and request for a Stay of the Order can be found on the PUC website at dms.puc.hawaii.gov/dms (Docket No. 2021-0024).
•Also in April 2021, the PUC approved the Kapolei Energy Storage (KES) PPA (one of the PPAs as a result of several factors, including net increases in ASB’s deposit liabilities and other bank borrowings, the Stage 2 Renewable RFP process) (KES Decisionissuances of long-term debt and Order)net increases in short-term borrowings, partly offset by repayment of short-term and long-term debt and payment of common stock dividends. During the first six months of 2021, Hawaiian Electric and ASB (through ASB Hawaii) paid cash dividends to HEI of $56 million and $28 million, respectively.
Dividends.  The payout ratios for the first six months of 2021 and full year 2020 were 58% and 73%, subjectrespectively. On February 9, 2021, the HEI Board of Directors approved a 1 cent increase in the quarterly dividend from $0.33 per share to nine$0.34 per share, starting with the dividend in the first quarter of 2021. HEI currently expects to maintain its dividend at its present level; however, 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, including impacts from 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 projectsCOVID-19 pandemic, 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. The undepreciated amount of the six generating units at the retirement dates noted in the KES Decision and Order is currently estimated to be approximately $55 million, and excludes certain asset retirement obligation costs, which are not determinable at this time. Hawaiian Electric plans to file a Motion for Reconsideration and Stay of the Decision and Order due to potentially significant financial and operational impacts. Depending on the PUC’s ruling on that motion, Hawaiian Electric would have the option of proceeding with the Decision and Order as may be amended, filing an appeal, or considering declaring the contract with KES null and void. The full text of the KES Decision and Order and, when filed, the Motion for Reconsideration and Stay with respect thereto, can be found on the PUC website at dms.puc.hawaii.gov/dms (Docket No. 2020-0136).alternatives.
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 3 of the Condensed Consolidated Financial Statements.
Fuel contracts. The fuel contract entered into in January 2019, by the Utilities and PAR Hawaii Refining, LLC (PAR Hawaii), for the Utilities’ low sulfur fuel oil (LSFO), high sulfur fuel oil (HSFO), No. 2 diesel, and ultra-low sulfur diesel (ULSD) requirements was approved by the PUC, and became effective on April 28, 2019 and terminates on December 31, 2022. This contract is a requirement contract with no minimum purchases. If PAR Hawaii is unable to provide LSFO, HSFO, diesel and/or ULSD the contract allows the Utilities to purchase LSFO, HSFO, diesel and/or ULSD from another supplier. The contract will automatically renew upon the conclusion of the original term for successive terms of 1 year beginning on January 1, 2023 unless a party gives written termination notice at least 120 days before the beginning of an extension. The costs incurred under the contract with PAR Hawaii are recovered in the Utilities’ respective ECRCs.
On June 9, 2020, the Utilities and PAR Hawaii entered into a First Amendment to the fuel contract. The First Amendment amends only the pricing to create a two-tiered structure based on volume, with all tier-1 LSFO up to the tier-1 maximum to be purchased exclusively from PAR Hawaii at the established pricing, and purchases in excess of that volume (tier-2) either from PAR Hawaii at the established pricing, or from an alternative supplier. On August 4, 2020, the PUC approved the First Amendment, which has an effective date of July 15, 2020, on an interim basis. The PUC’s approval order allows the recovery of such costs associated with the First Amendment through the ECRC to the extent that the costs are not recovered in base rates. The PUC intends to review whether the First Amendment is reasonable and in the public interest in the final decision, but it will not subject the recovery of the costs between the interim decision and the final decision to retroactive disallowances.
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FINANCIAL CONDITION
Liquidity and capital resources.As of March 31, 2021, there were no amounts outstanding on Hawaiian Electric’s revolving credit facilities and no commercial paper borrowings by the Utilities.
On January 14, 2021, the Utilities received $115 million of proceeds using a delayed draw feature under a private placement executed on October 29, 2020. The proceeds were used to finance capital expenditures and reimburse funds used for the payment of capital expenditures.
The Utilities believe that their ability to generate cash, both internally from operations and externally from issuances of equity and debt securities, as well as bank borrowings, is adequate to maintain sufficient liquidity to fund their contractual obligations and commercial commitments, their forecasted capital expenditures and investments, their expected retirement benefit plan contributions and other cash requirements. However, the COVID-19 pandemic is an evolving situation, and the Utilities cannot predict the extent or duration of the outbreak, the future effects that it will have on the global, national or local economy, including the impacts on the Utilities’ ability, as well as the cost, to access additional capital, or the future impacts on the Utilities’ financial position, results of operations, and cash flows. See Item 1A. “Risk Factors” in Part II for further discussion of risks and uncertainties.
Hawaiian Electric’s consolidated capital structure was as follows:
(dollars in millions)March 31, 2021December 31, 2020
Short-term borrowings$— — %$50 1 %
Long-term debt, net1,676 43 1,561 41 
Preferred stock34 1 34 1 
Common stock equity2,157 56 2,142 57 
$3,867 100 %$3,787 100 %
Information about Hawaiian Electric’s commercial paper borrowings, borrowings from HEI and line of credit facility were as follows:
 Average balanceBalance
(in millions)Three months ended March 31, 2021March 31, 2021December 31, 2020
Short-term borrowings1
   
Commercial paper$— $— $— 
Borrowings from HEI— — — 
Line of credit draws— — — 
Undrawn capacity under line of credit facilities— 275 275 
1   The maximum amount of external short-term borrowings by Hawaiian Electric during the first three months of 2021 was approximately $50 million. As of March 31, 2021, Hawaii Electric Light and Maui Electric had no short-term borrowings from Hawaiian Electric. In addition to the short-term borrowings above, on January 15, 2021, Hawaiian Electric paid off and terminated the $50 million term loan facility dated as of May 19, 2020.
Hawaiian Electric has a $200 million line of credit facility and a $75 million 364-day revolving credit facility with no amounts outstanding at March 31, 2021. On April 19, 2021, Hawaiian Electric’s $75 million 364-day revolving credit agreement terminated and was not renewed. See Note 5 of the Condensed Consolidated Financial Statements.
Bank loans. On January 15, 2021, Hawaiian Electric paid off and terminated the $50 million term loan credit agreement dated as of May 19, 2020.
Credit ratings. On March 17, 2021, S&P upgraded Hawaiian Electric’s issuer credit rating to “BBB” from “BBB-”, upgraded the short-term and commercial paper ratings to “A-2” from “A-3” and revised the outlook to stable from positive. The rating upgrade was primarily based on Hawaiian Electric’s strong financial measures, strength of the cumulative value of the regulatory protections, and S&P’s assessment of its stand-alone credit profile as sufficient to rate Hawaiian Electric higher than HEI.
On April 20, 2021, Moody’s upgraded Hawaiian Electric’s senior unsecured rating and issuer rating to “Baa1” from “Baa2” and revised the outlook to stable from positive. The rating upgrade reflects Hawaiian Electric's considerable progress in adding renewable resources to its energy supply mix and the improving regulatory relationship with the PUC.
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
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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 May 24, 2019, the PUC approved the Utilities’ request to issue SPRBs in the amounts of up to $70 million, $2.5 million and $7.5 million for Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively, prior to June 30, 2020, to finance the Utilities’ capital improvement programs. Pursuant to this approval, on October 10, 2019, the DBF issued, at par, Series 2019 SPRBs in the aggregate principal amount of $80 million with a maturity of October 1, 2049. As of March 31, 2021, Hawaiian Electric had $12 million of undrawn funds remaining with the trustee. Hawaii Electric Light and Maui Electric had no undrawn funds as of March 31, 2021.
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 Utilities’ request to issue SPRBs (up to $100 million, $35 million and $45 million for Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively) through 2022, with the proceeds to be used to finance the Utilities’ multi-project capital improvement programs. The PUC also 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.
Taxable debt. On January 31, 2019, the Utilities received PUC approval (January 2019 Approval) to issue the remaining authorized amounts under the PUC approval received in April 2018 (April 2018 Approval) in 2019 through 2020 (Hawaiian Electric up to $205 million and Hawaii Electric Light up to $15 million of taxable debt), as well as a supplemental increase to authorize the issuance of additional taxable debt 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, and to refinance the Utilities’ 2004 junior subordinated deferrable interest debentures (QUIDS) prior to maturity. In addition, the January 2019 Approval authorized the Utilities to extend the period to issue additional taxable debt from December 31, 2021 to December 31, 2022. The new total “up to” amounts of taxable debt requested to be issued through December 31, 2022 are $410 million, $150 million and $130 million for Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively.
As of March 31, 2021, Hawaiian Electric, Hawaii Electric Light, and Maui Electric have $135 million, $85 million, and $45 million, respectively, of remaining taxable debt to issue prior to December 31, 2022. See summary table below.
(in millions)Hawaiian ElectricHawaii Electric LightMaui Electric
Total “up to” amounts of taxable debt authorized through 2022$410 $150 $130 
Less:
Taxable debt authorized and issued in 2018 under April 2018 Approval75 15 10 
Taxable debt issuance to refinance the 2004 QUIDS in 201930 10 10 
Taxable debt issuance in May 2020110 10 40 
Taxable debt executed in October 2020, but issued on January 14, 202160 30 25 
Remaining authorized amounts$135 $85 $45 

Equity. In October 2018, the Utilities received PUC approval for the supplemental increase to issue and sell additional common stock in the amounts of up to $280 million for Hawaiian Electric and up to $100 million each for Hawaii Electric Light and Maui Electric, with the new total “up to” amounts of $430 million for Hawaiian Electric and $110 million each for Hawaii Electric Light and Maui Electric, and to extend the period authorized by the PUC to issue and sell common stock from December 31, 2021 to December 31, 2022. As of March 31, 2021, Hawaiian Electric, Hawaii Electric Light, and Maui Electric have $275.8 million, $102.5 million, and $87.8, respectively, of remaining common stock to issue prior to December 31, 2022. See summary table below.
(in millions)Hawaiian ElectricHawaii Electric LightMaui Electric
Total “up to” amounts of common stock authorized to issue and sell through 2021$150.0 $10.0 $10.0 
Supplemental increase authorized280.0 100.0 100.0 
Total “up to” amounts of common stock authorized to issue and sell through 2022430.0 110.0 110.0 
Common stock authorized and issued in 2017, 2018, 2019 and 2020154.2 7.5 22.2 
Remaining authorized amounts$275.8 $102.5 $87.8 

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Cash flows. The following table reflects the changes in cash flows for the three months ended March 31, 2021 compared to the three months ended March 31, 2020:
Three months ended March 31
(in thousands)20212020Change
Net cash provided by operating activities$31,961 $39,141 $(7,180)
Net cash used in investing activities(68,498)(116,431)47,933 
Net cash provided by financing activities36,460 78,707 (42,247)

Net cash provided by operating activities. The decrease in net cash provided by operating activities was primarily driven by an increase in fuel oil stock due to less consumption.
Net cash used in investing activities. The decrease in net cash used in investing activities was primarily driven by a decrease in capital expenditures related to construction activities.
Net cash provided by financing activities. The decrease in net cash provided by financing activities was primarily driven by repayment of short-term debt.
Forecast capital expenditures. For the three-year period 2021 through 2023, the Utilities forecast up to $1.2 billion of net capital expenditures, which could change over time based upon external factors such as the timing and scope of environmental regulations and/or 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, to pay down commercial paper or other short-term borrowings, as well as to fund any unanticipated expenditures not included in the 2021 to 2023 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).
Management periodically reviews capital expenditure estimates and the timing of construction projects. These estimates may change significantly as a result of many considerations, including changes in economic conditions, changes in forecasts of kWh sales and peak load, the availability of purchased power and changes in expectations concerning the construction and ownership of future generation units, the availability of generating sites and transmission and distribution corridors, the need for fuel infrastructure investments, the ability to obtain adequate and timely rate increases, escalation in construction costs, the effects of opposition to proposed construction projects and requirements of environmental and other regulatory and permitting authorities.
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Bank
Recent Developments—COVID-19
See also Recent developments—COVID-19 in HEI’s MD&A.
In the first quarter of 2021, economic conditions in Hawaii began to improve following the rollout of stimulus programs and the loosening of business restrictions, both of which boosted economic activity. Continued efforts to vaccinate a high proportion of the population quickly and the potential implementation of a “vaccine passport” is expected to further accelerate the economic recovery. With increased optimism regarding an acceleration of an economic recovery, long-term rates increased during the quarter. However, interest rates across the curve remain at relatively low levels, and continue to negatively impact net interest margin as new loan origination rates remain below existing portfolio yields. In the first quarter of 2021, the bank’s net interest margin was 2.95% compared to 3.12% and 3.72% for the quarters ended December 31, 2020 and March 31, 2020, respectively.
In response to COVID-19, ASB made short-term loan modifications to borrowers who were generally payment current at the time of relief. As of March 31, 2021, approximately $9 million of loans remained in their active deferral period. For the loans that have completed their short-term payment deferral period, approximately $17 million of loans required further assistance through repayment modifications and ASB reflected these loans as troubled debt restructured loans as of March 31, 2021. Approximately $13 million of loans were not able to resume their contractual payments and were considered delinquent as of March 31, 2021. As a result of an overall strengthening of the Hawaii economy and a corresponding improvement in the credit outlook in the first quarter of 2021, as reflected in upgrades in the commercial loan portfolio and overall lower net charge offs, ASB recorded an $8.4 million recovery of the provision for credit losses to reduce the allowance for credit losses. The provision for credit losses in future quarters will be dependent on future economic conditions and changes to borrower credit quality at that time.
In 2020, ASB temporarily closed 15 of its 49 branches and reduced banking hours at the branches that remained open in an effort to reduce social gathering and protect employees and customers. The bank has since reopened five of the branches that were temporarily closed and permanently closed eight branches. The reduction in ASB’s branch network should not have a significant impact to the bank’s customers as there are other branches nearby and other channels such as online and mobile banking. ASB continues to evaluate its branch network to determine whether further changes may be appropriate given its customers’ use of other banking channels.
ASB’s senior management team continues to meet on a regular basis to manage the response to the pandemic and discuss key focus areas such as the safety of the bank’s employees and customers as well as any impacts to the operations of the bank. Senior management also continues to meet regularly with ASB’s board of directors to keep them apprised of the impacts of the COVID-19 pandemic.
The CARES Act was signed into law on March 27, 2020. The CARES Act provided over $2 trillion in economic assistance for American workers, families, and small businesses, and job preservation for American industries. The PPP was established under the CARES Act and implemented by the United States Small Business Administration (SBA) to provide a direct incentive for small businesses to keep their workers on the payroll as a result of the COVID-19 crisis. The Paycheck Protection Program Flexibility Act was signed into law on June 5, 2020 and the Economic Aid Act was signed into law on December 27, 2020, which amended some of the prior rules and guidelines of the CARES Act. The Economic Aid Act established a second round of PPP, reopening the PPP for first-time borrowers and allowing for a second draw for businesses that meet more restrictive eligibility criteria to target businesses hardest hit by the pandemic. Loans issued through the PPP are 100% federally guaranteed and have a maturity of 2-5 years, depending on when the loan was made, at a fixed interest rate of 1%. Loan payments will be deferred until the earlier of (a) the date that the forgiven amount is remitted to the lender by the SBA; or (b) 10 months from the date the covered period ends. The SBA will forgive all loan amounts to a particular small business if such small business is compliant with the terms and conditions of the PPP. Small businesses had the earlier of 24 weeks from disbursement of the loan or December 31, 2020 to incur allowable expenses such as payroll costs, interest on mortgages, rent and utility expenses that would be covered by the loan forgiveness rules, with 60% of the loan forgiveness needing to be for payroll costs. There is a partial forgiveness if less than 60% of the loan disbursement was spent on payroll costs. Employers had until December 31, 2020 to restore their workforce. Lenders processed and approved the PPP loans under delegated authority of the SBA. As an existing SBA certified lender, ASB worked with a number of small businesses, both customers and non-customers, to complete the loan application forms so that these businesses could participate in the program. During the first round of PPP, the Bank secured more than $370 million in PPP loans for approximately 4,100 small businesses that supported over 40,000 jobs, ASB received processing fees totaling approximately $13 million and started recognizing these fees over the life of the loans. The Bank is participating in the second round of PPP which opened for submission by banks on January 19, 2021. As of April 7, 2021, ASB secured more than $160 million for approximately 2,000 small businesses that supported more than 18,000 jobs.
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Other provisions of the CARES Act provides that a financial institution may elect to suspend the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and any related impairment for accounting purposes. 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.
 Three months ended March 31Increase 
(in millions)20212020(decrease)Primary reason(s)
Interest income$59 $65 $(6)
Average loan portfolio yields 57 basis points lower—impacted by the continued low interest rate environment as adjustable rate loans have repriced lower during the past year and new loan production yields continue to originate below their portfolio yields.
Average loan portfolio balances increased $207 million - commercial and commercial real estate loan portfolio balances increased by $275 million and $211 million, respectively. Home equity lines of credit and consumer loan portfolios decreased $162 million and $91 million, respectively - strategic decision to reduce production of these loans in the current economic environment.
Average investment securities portfolio balance increased $983 million—excess liquidity from strong deposit growth invested in agency securities.
Average investment securities yields 119 basis points lower—impacted by the continued low interest rate environment as the amortization of premiums on investment securities have increased with faster prepayment assumptions and new investment security purchase yields continue to be lower than the investment security portfolio yields.
Noninterest income19 15 4 
Higher mortgage banking income due to higher residential loan sale volume.
Higher bank-owned life insurance income primarily due to proceeds from a death claim and higher fair market value adjustment on bank owned life insurance assets.
Less: gain on sale of investment securities, net(1)— (1)Gain on sale of investment securities, net, 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 investment securities, net in the condensed consolidated statements of income, and accordingly, is reflected after operating income as a separate line item and excluded from Revenues.
Revenues77 80 (3)The decrease in revenues for the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to lower interest income, partly offset by higher noninterest income.
Interest expense1 4 (3)
Lower interest expense on deposits—lower term certificate balances due to runoff of government term certificates and lower deposit yields as a result of the continued low interest rate environment.
Average core deposit balances increased $1.4 billion; average term certificate balances decreased $230 million.
Average deposit yields decreased from 15 basis points to 8 basis points.
Lower interest expense on other borrowings—primarily due to lower repurchase agreement yields as a result of the continued low interest rate environment.
Provision for credit losses(8)10 (18)
Negative provision for credit losses reflects improvement in economic outlook, strong credit results including lower net charge-offs and credit upgrades in commercial real estate and commercial loan portfolios.
Negative provision for credit losses also due to lower personal unsecured loan portfolio balances which had higher credit loss rates.
Delinquency rates have decreased—from 0.48% at March 31, 2020 to 0.43% at March 31, 2021.
Net charge-off to average loans have decreased—from 0.44% at March 31, 2020 to 0.18% at March 31, 2021 due to lower personal unsecured loan portfolio net charge-offs.
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 Three months ended March 31Increase 
(in millions)20212020(decrease)Primary reason(s)
Noninterest expense48 46 2 
Higher compensation and benefits expenses—increase in incentive compensation payout for commission based employees.
One-time adjustment for change in accounting for ASB retirement plan.
Expenses41 60 (19)The decrease in expenses for the three months ended March 31, 2021 compared to the same period in 2020 was due to lower provision for credit losses and lower interest expense, partly offset by higher noninterest expenses.
Operating income36 19 17 The increase in operating income for the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to lower provision for credit losses, lower interest expense and higher noninterest income, partly offset by lower interest income and higher noninterest expenses.
Gain on sale of investment securities, net1 — 1 
Net income30 16 14 Net income for the three months ended March 31, 2021 was higher than the same period in 2020 due to higher operating income, partly offset by higher income tax expense.
ASB’s return on average assets, return on average equity and net interest margin were as follows:
Three months ended March 31
(%)20212020
Return on average assets1.40 0.87 
Return on average equity16.04 9.15 
Net interest margin2.95 3.72 

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Three months ended March 31
20212020
(dollars in thousands)Average
balance		Interest
income/
expense		Yield/
rate (%)		Average
balance
Interest
 income/
expense
Yield/
rate (%)
Assets:      
Interest-earning deposits$47,080 $12 0.10 $26,654 $92 1.36 
FHLB stock9,929 81 3.29 9,375 78 3.37 
Investment securities
Taxable2,352,570 8,366 1.42 1,388,466 9,019 2.60 
Non-taxable47,599 271 2.28 28,683 305 4.20 
Total investment securities2,400,169 8,637 1.44 1,417,149 9,324 2.63 
Loans   
Residential 1-4 family2,149,788 19,588 3.64 2,178,480 21,922 4.03 
Commercial real estate1,108,851 9,005 3.26 898,162 9,509 4.21 
Home equity line of credit937,942 7,265 3.14 1,099,694 9,220 3.37 
Residential land16,457 210 5.11 14,050 197 5.60 
Commercial962,198 8,912 3.73 687,303 6,730 3.91 
Consumer158,930 4,987 12.72 249,917 7,989 12.86 
Total loans 1,2
5,334,166 49,967 3.77 5,127,606 55,567 4.34 
Total interest-earning assets 3
7,791,344 58,697 3.03 6,580,784 65,061 3.96 
Allowance for credit losses(101,712)  (72,501)  
Noninterest-earning assets766,844   722,233   
Total assets$8,456,476   $7,230,516   
Liabilities and shareholder’s equity:      
Savings$2,901,661 $191 0.03 $2,395,751 $540 0.09 
Interest-bearing checking1,180,049 57 0.02 1,049,010 230 0.09 
Money market178,275 37 0.09 147,776 250 0.68 
Time certificates540,461 1,177 0.88 770,350 2,567 1.34 
Total interest-bearing deposits4,800,446 1,462 0.12 4,362,887 3,587 0.33 
Advances from Federal Home Loan Bank30,126 23 0.30 23,195 90 1.56 
Securities sold under agreements to repurchase and federal funds purchased75,332 4 0.02 96,013 223 0.93 
Total interest-bearing liabilities4,905,904 1,489 0.12 4,482,095 3,900 0.35 
Noninterest bearing liabilities:      
Deposits2,645,636   1,914,774   
Other168,067   144,609   
Shareholder’s equity736,869   689,038   
Total liabilities and shareholder’s equity$8,456,476   $7,230,516   
Net interest income $57,208   $61,161  
Net interest margin (%) 4
  2.95   3.72 

1   Includes loans held for sale, at lower of cost or fair value.
2   Includes recognition of net deferred loan fees of $2.8 million and nil for the three months ended March 31, 2021 and 2020, respectively,
together with interest accrued prior to suspension of interest accrual on nonaccrual loans. Includes nonaccrual loans.
3   For the three months ended March 31, 2021 and 2020, 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. In 2020, the Federal Open Market Committee lowered its federal funds rate target range to 0% - 0.25% in response to the financial crisis caused by the COVID-19 pandemic, which resulted in a decrease in ASB’s net interest income and net interest margin. A prolonged low interest rate environment may continue to negatively impact ASB’s net interest income and net interest margin.
Loans and mortgage-backed securities are ASB’s primary earning assets.
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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 4 of the Condensed Consolidated Financial Statements for the composition of ASB’s loans.
Home equity— key credit statistics. The 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 March 31, 2021, approximately 21% 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 57% of ASB’s HELOC loan portfolio is in a first lien position.
Attention had been given by regulators and rating agencies to the potential for increased exposure to credit losses associated with HELOCs that were originated during the period of rapid home price appreciation between 2003 and 2007 as they have reached 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 ASB’s 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 HELOC portfolio.
Loan portfolio risk elements.  See Note 4 of the Condensed Consolidated Financial Statements.
Investment securities.  ASB’s investment portfolio was comprised as follows:
 March 31, 2021December 31, 2020
(dollars in thousands)Balance% of totalBalance% of total
U.S. Treasury and federal agency obligations$57,647 2 %$62,322 3 %
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies2,496,398 96 2,076,506 95 
Corporate bonds30,831 1 31,351 1 
Mortgage revenue bonds15,427 1 27,185 1 
Total investment securities$2,600,303 100 %$2,197,364 100 %
Currently, ASB’s investment portfolio consists of 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 of the U.S. government. The increase in the investment securities portfolio was primarily due to the purchase of securities with excess liquidity.
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. While deposits have increased by $358 million year-to-date, in part due to PPP loan proceeds and consumer economic impact payments from the CARES Act stimulus program, deposit retention and sustained 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, securities sold under agreements to repurchase and federal funds purchased continue to be additional sources of funds. As of March 31, 2021 and December 31, 2020, ASB’s costing liabilities consisted of 99% deposits and 1% other borrowings. The weighted average cost of deposits for the first three months of 2021 and 2020 was 0.08% and 0.23%, respectively.
Federal Home Loan Bank of Des Moines. As of March 31, 2021 and December 31, 2020, ASB had no advances outstanding at the FHLB of Des Moines. As of March 31, 2021, the unused borrowing capacity with the FHLB of Des Moines was $2.0 billion. The FHLB of Des Moines continues to be an important source 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
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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 March 31, 2021, ASB had an unrealized loss, net of taxes, on available-for-sale investment securities (including securities pledged for repurchase agreements) in AOCI of $25.8 million compared to an unrealized gain, net of taxes, of $20.0 million as of December 31, 2020. See “Item 3. Quantitative and qualitative disclosures about market risk” for a discussion of ASB’s interest rate risk sensitivity.
During the first three months of 2021, ASB recorded a negative provision for credit losses of $7.0 million in the allowance for credit losses primarily due to improvement in the economic outlook, strong credit results including lower net charge-offs and credit upgrades in commercial real estate and commercial loan portfolios and due to lower personal unsecured loan portfolio balances which had higher credit loss rates. During the first three months of 2020, ASB recorded a provision for credit losses of $9.9 million in the allowance for credit losses primarily due to increased loss reserves for the consumer loan portfolio, increased loss rates for the commercial and commercial real estate portfolios and reserves for forecasted deterioration due to the COVID-19 pandemic.
 Three months ended March 31
Year ended
December 31, 2020
(in thousands)20212020
Allowance for credit losses$101,201 $53,355 $53,355 
Impact of adopting ASU No. 2016-13— 19,441 19,441 
Provision for credit losses(7,035)9,901 49,811 
Less: net charge-offs2,373 5,613 21,406 
Allowance for credit losses, end of period$91,793 $77,084 $101,201 
Ratio of net charge-offs during the period to average loans outstanding (annualized)0.18 %0.44 %0.40 %
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 three months ended March 31, 2021 and 2020, ASB recorded a recovery in the provision for credit losses for unfunded commitments of $1.4 million and a provision for credit losses for unfunded commitments of $0.5 million, respectively. As of March 31, 2021 and December 31, 2020, the reserve for unfunded loan commitments was $2.9 million and $3.8 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.”
Changes to Community Bank Leverage Ratio. In April 2020, the federal bank regulatory agencies issued two interim final rules to implement Section 4012 of the CARES Act, which requires the agencies to temporarily lower the community bank leverage ratio to 8 percent. The two rules modify the community bank leverage ratio framework so that:
•Beginning in the second quarter of 2020 and until the end of the year, a banking organization that has a leverage ratio of 8 percent or greater and meets certain other criteria may elect to use the community bank leverage ratio framework; and
•Community banking organizations will have until January 1, 2022 before the community bank leverage ratio requirement is re-established at greater than 9 percent.
Under the interim final rules, the community bank leverage ratio was 8 percent beginning in the second quarter of 2020 and for the remainder of calendar year 2020, 8.5 percent for calendar year 2021, and 9 percent thereafter. The interim final rules also maintain a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 1 percent below the applicable community bank leverage ratio.
As of March 31, 2021, the bank was in compliance with all of the minimum capital requirements under OCC regulations, and was categorized as “well capitalized” under the regulatory framework for prompt corrective action. Beginning in the second quarter of 2020, ASB adopted the community bank leverage ratio framework, which allowed it to report only on the community bank leverage ratio, but does not change minimum capital requirements under OCC regulations. At March 31, 2021, ASB’s leverage fell below the 8.5 percent requirement to qualify for abbreviated reporting under the community bank leverage framework for 2021. The bank will begin reporting its risk-based capital ratios if the community bank leverage ratio does not meet the 2021 requirement after the two-quarter grace period.
Covered Savings Associations. On May 24, 2019, the OCC issued a final rule to allow federal savings associations with total consolidated assets of $20 billion or less, as reported by the association to the OCC on its call report as of December 31, 2017, to elect to operate as covered savings associations. A covered savings association generally has the same rights and
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privileges as a national bank that has its main office situated in the same location as the home office of the covered savings association, with some exceptions. It is subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations that apply to a national bank, with some exceptions, and must comply with certain rules and regulations applicable to the powers and investments of a national bank. A covered savings association is not required to comply with the lending and investment limits in HOLA and is not required to be a qualified thrift lender under HOLA. Finally, a covered savings association is not permitted to retain or engage in any subsidiaries, assets, or activities that are not permissible for a national bank. ASB has initiated a preliminary examination of the benefits and disadvantages of such an election with the preservation of being held by a unitary thrift holding company in mind. On April 1, 2021, the general counsel of the Board of Governors of the Federal Reserve System issued an opinion letter to another institution regarding the preservation of the unitary thrift holding company status. ASB is now undertaking a review of that letter. The bank has not reached a decision on the election.

FINANCIAL CONDITION
Liquidity and capital resources.  As of June 30, 2021, there was no balance on HEI’s revolving credit facility or Hawaiian Electric’s revolving credit facility and the available committed capacity under the facilities was $175 million and $200 million, respectively. On April 19, 2021, Hawaiian Electric’s $75 million 364-day revolving credit agreement terminated and was not renewed. At the end of the quarter, HEI and Hawaiian Electric had approximately $58 million and $38 million of commercial paper outstanding, respectively. As of June 30, 2021, ASB’s unused FHLB borrowing capacity was approximately $2.0 billion and ASB had unpledged investment securities of $2.3 billion that were available to be used as collateral for additional borrowing capacity.
(dollars in millions)March 31, 2021December 31, 2020% change
Total assets$8,718 $8,397 4 
Investment securities2,600 2,197 18 
Loans held for investment, net5,218 5,233 — 
Deposit liabilities7,745 7,387 5 
Other bank borrowings103 90 15 
The Company expects that its liquidity will continue to be moderately impacted at the Utilities due to COVID-19. For the Utilities, the elevated level of unemployment in the state and the moratorium on customer disconnections (which ended on May 31, 2021) have resulted in higher accounts receivable balances and bad debt expense and may result in higher write-offs in the future. Additionally, lower kWh sales generally result in delayed timing of cash flows, resulting in higher working capital requirements (see “Recent Developments—COVID-19” in the Electric utility section below). At ASB, liquidity remains at satisfactory levels largely due to U.S. economic stimulus programs implemented as a result of COVID-19 that led to a
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substantial increase in customer deposits. ASB’s cash and cash equivalents was $221 million as of June 30, 2021, compared to $293 million as of December 31, 2020. ASB remains well above the “well capitalized” level under the FDIC Improvement Act prompt correction action capital category, and while the economic outlook has improved and is expected to continue to improve, there are still COVID-19 related business restrictions that remain in place that could create ongoing uncertainty regarding COVID-19’s impact on loan performance and the allowance for credit losses (see “Recent Developments — COVID-19” in the Bank section below).
On May 14, 2021, HEI and Hawaiian Electric each entered into a separate agreement with a syndicate of nine financial institutions (the HEI Facility and Hawaiian Electric Facility, respectively, and together, the Facilities), to amend and restate their respective previously existing unsecured revolving credit agreements. The HEI Facility was increased to $175 million from $150 million and its term was extended to May 14, 2026. The $200 million Hawaiian Electric Facility has an initial term that expires May 13, 2022, but its term will extend to May 14, 2026 upon approval by the PUC during the initial term, which approval is currently being requested.
As of June 30, 2021 and December 31, 2020, the total amount of available borrowing capacity (net of commercial paper outstanding) under the Company’s committed lines of credit was approximately $279 million and $360 million, respectively.
The Company believes that its ability to generate cash, both internally from electric utility and banking operations and externally from issuances of equity and debt securities, as well as 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 contributions and other cash requirements. However, the COVID-19 pandemic is an evolving situation, and the Company cannot predict the extent or duration of the outbreak, the future effects that it will have on the global, national or local economy, including the impact 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)June 30, 2021December 31, 2020
Short-term borrowings—other than bank$96 2 %$129 3 %
Long-term debt, net—other than bank2,258 47 2,119 46 
Preferred stock of subsidiaries34 1 34 1 
Common stock equity2,367 50 2,338 50 
 $4,755 100 %$4,620 100 %
HEI’s commercial paper borrowings and line of credit facility were as follows:
 Average balanceBalance
(in millions) Six months ended June 30, 2021June 30, 2021December 31, 2020
Commercial paper$52 $58 $65 
Line of credit draws— — — 
Undrawn capacity under HEI’s line of credit facility175 150 
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 six months of 2021 was $102 million.
On March 17, 2021, S&P revised HEI’s outlook to stable from positive and affirmed the “BBB-” issuer credit rating and “A-3” short-term and commercial paper ratings. On April 20, 2021, Moody’s upgraded HEI’s short-term rating for commercial paper to “P-2” from “P-3” and revised the outlook to stable from positive. On June 25, 2021, Fitch affirmed HEI’s “BBB” long-term issuer default rating, “F3” short-term issuer default rating and stable outlook.
HEI has a $175 million line of credit facility with no amounts outstanding at June 30, 2021. See Note 5 of the Condensed Consolidated Financial Statements.
There were no new issuances of common stock through the HEI Dividend Reinvestment and Stock Purchase Plan (DRIP), HEIRSP or the ASB 401(k) Plan in the six months ended June 30, 2021 and 2020 and HEI satisfied the share purchase requirements of the DRIP, HEIRSP and ASB 401(k) Plan through open market purchases of its common stock.
For the first six months of 2021, net cash provided by operating activities of HEI consolidated was $118 million. Net cash used by investing activities for the same period was $771 million, primarily due to capital expenditures, ASB’s purchases of
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available-for-sale and held-to maturity investment securities, partly offset by ASB’sreceipt of investment security repayments and maturities, proceeds from the sale of investment securities, net decrease in loans and sale of residential loans. Net cash provided by financing activities during this period was $553 million as a result of several factors, including net increases in ASB’s deposit liabilities and other bank borrowings, the issuances of long-term debt and net increases in short-term borrowings, partly offset by repayment of short-term and long-term debt and payment of common stock dividends. During the first six months of 2021, Hawaiian Electric and ASB (through ASB Hawaii) paid cash dividends to HEI of $56 million and $28 million, respectively.
Dividends.  The payout ratios for the first six months of 2021 and full year 2020 were 58% and 73%, respectively. On February 9, 2021, the HEI Board of Directors approved a 1 cent increase in the quarterly dividend from $0.33 per share to $0.34 per share, starting with the dividend in the first quarter of 2021. HEI currently expects to maintain its dividend at its present level; however, 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, including impacts from the COVID-19 pandemic, and capital investment alternatives.
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.
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 42 to 44, 58 to 59, and 72 to 74 of HEI’s MD&A included in Part II, Item 7 of HEI’s 2020 Form 10-K.
Following are discussions of the results of operations, liquidity and capital resources of the electric utility and bank segments.
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Electric utility
Recent developments—COVID-19
See also Recent developments—COVID-19 in HEI’s MD&A.
Economic conditions in Hawaii improved in the first half of 2021 as vaccination rates increased and businesses were allowed to operate with fewer restrictions. Statewide daily passenger counts have improved dramatically, reaching a year-to-date high of 35,435 passengers per day on August 1, 2021, which was nearly 94.5% of the level achieved adjusted to be on the same weekday in 2019. At the end of June, statewide unemployment was 7.7%, which improved from 10.3% at the end of 2020. With the increase in economic activity, the demand for electricity has increased from 2020 levels, however, sales remain below the kWh sales levels achieved for the same period in 2019. In the second quarter of 2021, kWh sales were up 8.1% compared with the same quarter in 2020, however, they were 4.4% below the same quarter in 2019. The Utilities expect kWh sales to continue to improve throughout 2021 as the COVID-19 vaccination target are approached, allowing remaining government restrictions to be lifted.
While the Utilities’ electric energy revenues have not been significantly impacted due to the decoupling mechanism, which allows recovery of the difference between PUC approved target revenues and recorded adjusted revenues regardless of the level of kWh sales, the timing of customer collections would be delayed (or accelerated) if the level of kWh sales decreases below (or increases above) the estimated kWh sales. See “Decoupling” in Note 3 of the Condensed Consolidated Financial Statements for a discussion of decoupling. Annually, the Utilities submit a decoupling filing to the PUC, which requests recovery by the utility (or refund to customers) of the difference between recorded adjusted revenues and target revenues under the RBA. The difference is collected or refunded through an adjustment to customer rates in the following year based on estimated sales, starting on June 1st of that following year, which has an impact on the timing of the Utilities’ cash flow. Additionally, although the Utilities’ decoupling mechanism allows for collection under the RBA, the RBA balance accrues interest only at the short-term debt rate from the last rate case (2.5% for Hawaiian Electric, 3.75% for Hawaii Electric Light and 3.0% for Maui Electric). As of June 30, 2021, the RBA balance was approximately $35.6 million, compared to $7.6 million as of December 31, 2020. While the billed accounts receivable balance, net of allowance for doubtful accounts, of $152 million, as of June 30, 2021, is 3.1% higher than the billed accounts receivable balance as of December 31, 2020, due in part to higher fuel prices resulting in higher bills, the past due accounts receivable balance has decreased by $4 million or 7% since December 31, 2020 with a corresponding decrease in the number of accounts past due by approximately 8% for the same period. The decrease was primarily driven by an improvement in economic conditions with fewer restrictions, increased vaccination rates, and continued application of available assistance from various government and community programs, including the Hawaii Utility Bill Assistance Program, which was launched in the first quarter of 2021 and provided funding to Hawaiian Electric customers and other utility companies. While the moratorium on customer disconnections ended on May 31, 2021, efforts are ongoing to continue working with customers on payment plans and other bill assistance for customers through funding from non-profit organizations, as well as state and county relief programs. The Utilities are prepared to address the financing requirement related to the delayed timing of cash flows collected under the decoupling mechanism through the RBA and the modest slowing or reduction in accounts receivable collections from customers. See “Financial Condition—Liquidity and capital resources” for additional information.
The Utilities provide an essential service to the State of Hawaii, and have continued to operate to protect the health and safety of employees and customers and to ensure system reliability, and have been following the Governor’s directive that the Utilities take necessary measures to ensure they can operate in the normal course. The Utilities have also implemented certain aspects of their business continuity plans, which includes the activation of its Incident Management Team to closely manage the response to the pandemic and have implemented practices related to employee and facilities hygiene in order to ensure the reliability and resilience of their operations.
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. As of June 30, 2021, these costs, which have been deferred and recorded as a regulatory asset, totaled approximately $25.6 million (see also discussion under Item 1A. “Risk Factors” and “Regulatory assets for COVID-19 related costs” in Note 3 of the Condensed Consolidated Financial Statements). The Utilities have approval to defer COVID-19 related costs through June 30, 2021, and a decision on the Utilities’ request to extend the deferral period through December 31, 2021 is pending. The Utilities will be seeking recovery of the deferred costs in a separate proceeding. Looking forward, while the distribution and administration of the COVID vaccine has allowed for reduced restrictions and a partial reopening of the Hawaii economy, a worsening of COVID-19 case counts or a prolonged period of current COVID-19 restrictions could adversely affect the ability of the Utilities’ contractors, suppliers, IPPs, and other business partners to perform or fulfill their obligations, or require modifications to existing contracts, which could adversely affect the Utilities’ business, increase expenses, and impact the Utilities’ ability to achieve their RPS goals. Additionally, while the state’s aggressive response to the pandemic has dramatically reduced the spread of the coronavirus,
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the measures taken have had a severe economic impact on the state’s businesses and residents, which may influence the PUC’s actions regarding future rate increases. See “Item 1A. Risk Factors” in Part II for additional discussion of risks.
For a discussion regarding the impact of the economic conditions caused by the COVID-19 pandemic on the Utilities’ liquidity and capital resources, see discussion under “Financial Condition–Liquidity and capital resources.”
RESULTS OF OPERATIONS
Three months ended June 30Increase
20212020(decrease)(dollars in millions, except per barrel amounts)
$602 $534 $68 
Revenues. Net increase largely due to:
$29 
higher fuel oil prices and higher kWh generated1
25 
higher purchased power energy prices and higher kWh purchased2
5 higher revenues from 2020 RAM adjustments
4 increase related solely to a change in the timing for revenue recognition within the year, which eliminates seasonality in recognizing target revenues and results in recognizing revenues evenly throughout the year with target revenues recognized on an annual basis remaining unchanged
3 
higher PPAC revenue2
2 lower ERP system implementation benefits to be passed on to the customers in future rates
139 112 27 
Fuel oil expense1. Increase largely due to higher fuel oil prices and higher kWh generated
162 137 25 
Purchased power expense1, 2. Increase largely due to higher purchased power energy prices, higher kWh purchased, and higher capacity and non-fuel O&M charges
118 110 8 
Operation and maintenance expenses. Net increase largely due to:
6 more generating facility overhauls and maintenance work performed
2 lower bad debt expense in the second quarter of 2020 due to retrospective adjustment to defer bad debt expense related to COVID-19 to regulatory asset for first quarter of 2020
1 expense due to decommissioning of combined heat and power unit on Lanai
1 ERP system costs amortization, which started for Hawaiian Electric in November 2020
1 increase in Pearl Harbor environmental reserves
(2)lower labor due to lower staffing and reduction in overtime
(1)lower pension service cost due to reset of pension cost included in rates as part of Hawaiian Electric final rate case decision
114 107 7 
Other expenses. Increase due to higher revenue taxes, coupled with higher depreciation expense in 2021 for plant investments in 2020
68 68 — 
Operating income. higher RAM revenues, offset by higher operation and maintenance expenses and higher depreciation expense
54 53 1 
Income before income taxes. Increase due to higher RAM revenues and lower pension non-service costs, offset in part by higher operation and maintenance expense and higher depreciation expense
42 42 — 
Net income for common stock. higher RAM revenues, offset by higher operating expense. See below for effective tax rate explanation
2,026 1,874 152 
Kilowatthour sales (millions)3
$73.58 $63.12 $10.46 Average fuel oil cost per barrel
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Six months ended June 30Increase 
20212020(decrease)(dollars in millions, except per barrel amounts)
$1,167 $1,132 $35 
Revenues. Net increase largely due to:
$25 
higher purchased power energy prices and higher kWh purchased2
12 higher revenues from 2020 RAM adjustments
9 increase related solely to a change in the timing for revenue recognition within the year, which eliminates seasonality in recognizing target revenues and results in recognizing revenues evenly throughout the year with target revenues recognized on an annual basis remaining unchanged
5 lower ERP system implementation benefits to be passed on to the customers in future rates
5 
higher PPAC revenue2
(21)
lower fuel oil prices and lower kWh generated1
267 286 (19)
Fuel oil expense1. Decrease largely due to lower fuel oil prices and lower kWh generated
305 277 28 
Purchased power expense1 ,2. Increase largely due to higher purchased power energy prices, higher kWh purchased and higher capacity and non-fuel O&M charges
233 238 (5)
Operation and maintenance expenses. Net decrease largely due to:
(5)lower labor due to lower staffing and reduction in overtime
(4)lower outside service costs
(3)lower pension service cost due to reset of pension cost included in rates as part of Hawaiian Electric final rate case decision
4 more generating facility overhauls and maintenance work performed
2 ERP system costs amortization, which started for Hawaiian Electric in November 2020
1 expense due to decommissioning of combined heat and power unit on Lanai
226 220 6 
Other expenses. Increase due to higher revenue taxes, coupled with higher depreciation expense in 2021 for plant investment in 2020
137 112 25 
Operating income. Increase due to lower operation and maintenance expenses coupled with higher RAM revenues, offset in part by higher depreciation expense
109 83 26 
Income before income taxes. Increase due to lower operation and maintenance expense, higher RAM revenues and lower pension non-service costs, partially offset by higher interest expense related to new long term debt issued in May 2020 and January 2021 and higher depreciation expense
85 66 19 
Net income for common stock. Increase due to lower operating expenses, coupled with higher RAM revenues. See below for effective tax rate explanation
3,935 3,880 55 
Kilowatthour sales (millions)3
$68.59 $72.77 $(4.18)Average fuel oil cost per barrel
469,378 465,953 3,425 Customer accounts (end of period)
1The rate schedules of the electric utilities currently contain 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 in 2021 were higher when compared to the same periods last year largely due to recovery from the initial impacts of the COVID-19 pandemic. An increase in visitor arrivals due to changes in the Safe Travels requirements allowed travelers to bypass the 10-day quarantine by taking a COVID test or showing proof of vaccination for domestic travelers, led to a recovery in the tourism industry. This combined with easing of restrictions on business activities and increased vaccinations, led to improving unemployment and broader reopening. As restrictions ease, vaccination rates reach State of Hawaii targets and more visitors arrive, sales are expected to slowly rebound but remain lower than pre-pandemic levels.

The Utilities’ effective tax rate for each of the second quarters of 2021 and 2020 was 21% and 19%, respectively. The Utilities’ effective tax rates for the first six months of 2021 and 2020 were at 21% and 19%, respectively. The effective tax rate was higher for the six months ended June 30, 2021 compared to the same period in 2020 due primarily to an increase in
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income before taxes in 2021, lower amortization in 2021 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 and a decrease in excess tax benefits related to vesting of share-based awards in 2021. The effective tax rate was higher for the second quarter of 2021 compared to the same period in 2020 due primarily to lower amortization in 2021 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 8.9% and 7.9% for the twelve months ended June 30, 2021 and June 30, 2020, respectively.
The net book value (cost less accumulated depreciation) of utility property, plant and equipment (PPE) as of June 30, 2021 amounted to $4.8 billion, of which approximately 26% related to generation PPE, 65% related to transmission and distribution PPE, and 9% related to other PPE. Approximately 9% 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 modern, resilient, 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 enable the creation of smart, sustainable, resilient communities and achieve 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” under “Commitments and contingencies” in Note 3 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. The Utilities believe that a holistic approach to decarbonization is needed, and that such a strategy requires achieving the Utilities’ renewable energy commitments, facilitating and promoting beneficial electrification, and deploying carbon removal and offsets among other levers to reduce statewide emissions. 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 have made significant progress on the path to clean energy and have been successful in adding significant amounts of renewable energy resources to their electric systems and exceeded the 2015 RPS goal two years early. The Utilities’ RPS for 2020 was 34.5%, which exceeded the statutory goal of 30%. The Utilities will continue to actively procure additional renewable energy post-2020 and expect to meet or exceed the next statutory RPS goal of 40% in advance of the 2030 compliance year. (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 electricity sales in 2020, a 1% shortfall in meeting the 2030 RPS requirement of 40% would translate into a penalty of approximately $1.6 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.
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.
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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 declined (with the exception of 2019 and the first quarter of 2020), as privately-owned distributed energy resources have been added to the grid and energy efficiency measures have been put into place. Other regulatory mechanisms reduce regulatory lag, such as the rate adjustment mechanism to provide revenues for escalation in certain O&M expenses and rate base changes between rate cases, and the major project interim recovery mechanism, which allow the Utilities to recover and earn on certain approved major capital projects placed into service in between rate cases. Certain mechanisms were replaced or modified under the new PBR framework. See “Regulatory proceedings” under “Commitments and contingencies” and “Decoupling” in Note 3 of the Condensed Consolidated Financial Statements.
Integrated Grid Planning. Achieving high levels of renewable energy will require modernizing the grid through coordinated energy system planning in partnership with local communities and stakeholders. To accomplish this, the Utilities filed their Integrated Grid Planning (IGP) Report with the PUC on March 1, 2018, which provides an innovative systems approach to energy planning intended to yield the most cost-effective renewable energy pathways that incorporates customer and stakeholder input.
In March 2019, the PUC accepted the Utilities’ IGP Work plan submitted on December 14, 2018, which describes the timing and scope of major activities that will occur in the IGP process. The IGP 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. In March 2020, the Utilities launched a broad public engagement program, which consisted of a combination of in-person and online engagement. This provided customers opportunities to connect with the IGP team. The Utilities submitted an updated IGP work plan to the PUC in January 2021, marking the significant progress made through the stakeholder engagement phase of the IGP process. The Utilities will use the stakeholder feedback and input as it enters the next phase of the process which includes the development of long-range integrated grid plans and the acquisition of new 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 60MW of grid services with focus on capacity reduction similarly in response to the potential reserve shortfall from the AES coal plant retirement scheduled on September 1, 2022. The Utilities filed a final draft on June 25, 2021, and are awaiting PUC approval to proceed with the RFP.
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. The PUC approved EDRP for 50MW on Oahu with an incentive budget not to exceed $34 million, which will be recovered via a surcharge cost recovery mechanism over a 10-year amortization. The Utilities’ implementation plan was approved by the PUC on June 30, 2021, and the Utilities subsequently filed the updated EDRP tariffs on July 1, 2021.
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 distributed energy resources 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. The Utilities are implementing Phase 1 of their Grid Modernization Strategy, which received PUC approval on March 25, 2019. The estimated cost for this initial phase is approximately $86 million and is expected to be incurred over five years. As of June 30, 2021, approximately $24 million has been incurred to date under Phase 1. The Utilities are now deploying advanced meters faster and more broadly under the proportional advanced meter deployment plan, which was approved by the PUC on March 3, 2021.
The Utilities filed an application with the PUC on September 30, 2019 for an Advanced Distribution Management System (ADMS) as part of the second phase of their Grid Modernization Strategy implementation. However, on December 30, 2019, the PUC suspended the Utilities’ application for the Advanced Distribution Management System pending the Utilities’ filing of a supplemental application for the broad deployment of field devices. This supplement and update to the
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Grid Mod Phase 2 field devices application was filed on March 31, 2021. The estimated cost for the implementation over five years of the ADMS and field devices, which includes capital, deferred and O&M costs, is $105 million. A PUC order was issued on April 27, 2021, unsuspending and resuming consideration of the Phase 2 Application.
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, totals 8 MW of solar photovoltaic (PV) only with one credit rate for each island, closed on April 9, 2020.
The second phase, which commenced on April 9, 2020, allows up to 235 MW across all Hawaiian Electric service territories in two tranches for small (under 250 kW) 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, separate project proposals may be submitted specifically targeting LMI customers.
Eight RFPs were required by order: one each for Oahu, Maui, Hawaii Island, Molokai, and Lanai, and LMI-specific RFPs for Oahu, Maui, and Hawaii Island. Draft RFPs for the three LMI RFPs and the RFPs for Molokai, and Lanai were filed on July 9, 2020, along with a revised tariff and associated contract models. LMI projects do not have a size cap nor do they decrease the 235 MW capacity available to other projects. Proposed final drafts of the LMI RFPs, Molokai and Lanai RFPs tariff, and contracts were filed on September 8, 2020.
For Lanai, the Utilities proposed to combine the previously issued Variable Renewable Dispatchable Generation Paired with Energy Storage RFP and the CBRE RFP to optimize the benefits of procuring renewable energy, spurring development and increasing 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.
Proposed final drafts of the remaining RFPs on Oahu, Maui, and Hawaii Island were filed on December 1, 2020.
For small CBRE projects less than 250 kW in size, the Utilities are planning to accept projects over a four-month period on a first-come, first served basis as soon as the PUC approves the Utilities’ final tariff and contracts, filed on September 8, 2020. The PUC reserved 30 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. If applications exceed the program capacity for that island, then a reverse auction process called Competitive Credit Rate Procurement will be triggered to allocate project capacity and determine the credit rate. The Utilities have developed a CBRE Portal where customers can subscribe to a project once the Subscriber Organization has added their project to the portal.
The Utilities have been working on interconnection improvements and proposed several ways to potentially improve the time and cost of interconnection during the development of the CBRE Phase 2 tariff and RFPs. Additionally, the Utilities increased their focus and attention on this area and worked with the parties, including the CBRE Independent Observer, to make the interconnection process more transparent, predictable and standardized, including interconnection costs, timelines and requirements in order to reduce costs and accelerate schedules. In addition, the Utilities researched interconnection solutions in other jurisdictions, and worked with the parties to identify additional improvements. The Utilities solicited from the parties a list of recommended improvements, and consolidated and adopted nearly all the near-term and continuous improvement recommendations from the parties. The Utilities filed these recommendations and associated updates to the previously filed RFPs, tariff, and contracts on March 30, 2021. These documents are pending review and approval by the PUC.
Microgrid services tariff proceeding. In July 2018, the PUC opened a proceeding to investigate establishment of a microgrid services tariff, pursuant to Act 200 of 2018. There are currently five intervenors in the docket, although initially there were eight. In August 2019, the PUC issued an order, focusing for the remainder of the docket, to facilitate the ability of microgrids to disconnect from the grid and provide backup power to customers and critical energy uses during contingency events.
Two Working Groups were formed: (1) a Market Facilitation Working Group to recommend draft tariff language for the Microgrid Services Tariff; and (2) an Interconnection Standards Working Group to develop a new section of Rule 14H specific to interconnection and islanding/reconnection of microgrids. The Utilities filed a Draft Microgrid Services Tariff and updated language for various distributed energy resources Rules on March 30, 2020.Parties to the docket filed comments on and proposed revisions to the Draft Tariff on April 27, 2020.
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On November 30, 2020, the PUC held a technical conference to present its proposed redlines to Utilities’ Draft Microgrid Services Tariff and related documents. On February 1, 2021, the Working Group filed its Draft Microgrid Tariff. Members of the Working Group separately filed their positions on areas of disagreements and later commented on other parties’ positions on areas of disagreements on February 10, 2021 and February 17, 2021, respectively.
On May 17, 2021, the PUC issued an order, directing the Utilities to submit the Microgrid Services Tariff and appendices consistent with the revisions provided by the PUC. Furthermore, the PUC stated it intends to issue a separate order to govern the next phase of the Microgrid Tariff proceeding. On May 27, 2021, the Utilities filed the Microgrid Service Tariff.
Decoupling. See "Decoupling" in Note 3 of the Condensed Consolidated Financial Statements for a discussion of decoupling.
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. 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 actual ROACE outside of a 300 basis points dead band above and below a target ROE of 9.5%, which is the current authorized ROE for each of the Utilities. Earnings sharing credits or recoveries will be included in the annual decoupling filing for the following year. Results for 2020, 2019 and 2018 did not trigger the earnings sharing mechanism for the Utilities.
Regulated returns. Actual and PUC-allowed returns, as of June 30, 2021, were as follows:
%Rate-making Return on rate base (RORB)*ROACE**Rate-making ROACE***
Twelve months ended 
June 30, 2021
Hawaiian ElectricHawaii Electric LightMaui ElectricHawaiian ElectricHawaii Electric LightMaui ElectricHawaiian ElectricHawaii Electric LightMaui Electric
Utility returns7.73 6.95 6.16 9.36 8.47 7.12 10.32 9.26 7.70 
PUC-allowed returns7.37 7.52 7.43 9.50 9.50 9.50 9.50 9.50 9.50 
Difference0.36 (0.57)(1.27)(0.14)(1.03)(2.38)0.82 (0.24)(1.80)
*      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 factors contributing to the difference between PUC-allowed ROACEs and the ROACEs actually achieved include the exclusion of certain expenses from rates (for example, incentive compensation and charitable contributions), the recognition of annual RAM revenues on June 1 annually rather than on January 1, and return on capital additions since the last rate case in excess of indexed escalations. For Hawaiian Electric, the twelve months ended June 30, 2021 rate-making ROACE reflects higher earnings due to timing differences, that are expected to reverse during the second half of 2021, including lower overhaul expenses in the twelve months ended June 30, 2021, and a change in the timing of recognition of target revenues for the first and second quarter of 2021 relative to 2020, with the revenues recognized on an annual basis remaining unchanged.
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Most recent rate proceedings.  As of June 30, 2021, the status of ongoing rate case for each utility was as follows:
Test year
(dollars in millions)		DateAmount% over 
rates in 
effect		ROACE
(%)		RORB
(%)		Rate
 base		Common
equity
%		Stipulated agreement 
reached with
Consumer Advocate
Hawaiian Electric        
2020 1
Request8/21/19$77.6 4.1 10.50 7.97 $2,477 57.15 Yes
Final Decision and Order10/22/200.00.09.507.37NA57.15
Hawaii Electric Light        
2019 2
Request12/14/18$13.4 3.4 10.50 8.30 $537 56.91 Yes
Interim Decision and Order11/13/190.00.09.507.5253456.83
Final Decision and Order7/28/200.00.09.507.5253456.83
Note:  The “Request” date reflects the application filing date for the rate proceeding. The date of “Interim Decision and Order” or “Final Decision and Order” reflects the issuance date of the PUC order.
1 A final D&O issued on October 22, 2020 ordered final rates for the 2020 test year to remain at current effective rates, which provides for no increase to base rates. Hawaiian Electric’s proposed RBA provision tariff and ECRC tariff submitted on November 6, 2020 were approved by the PUC on December 11, 2020. The proposed RBA provision tariff and ECRC tariff took effect on January 1, 2021.
2 A final D&O issued on July 28, 2020 ordered final rates for the 2019 test year to remain at current effective rates, such that there is a zero increase in rates. The proposed final tariffs and PIM tariffs took effect on November 1, 2020, and the ECRC tariff became effective on January 1, 2021.
See also “Most recent rate proceedings” in Note 3 of the Condensed Consolidated Financial Statements.
On December 23, 2020, the PBR D&O was issued, establishing a new PBR Framework. The PBR Framework implemented a five-year multi-year rate period (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.
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 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 August 2020, the project was energized and commissioning of all wind turbines was completed. However, the project was paused due to a conductor deficiency. Hawaiian Electric reconductored the 46kV circuit and in December 2020, the project reached commercial operation.
NPM received its Incidental Take Permit from the Department of Fish and Wildlife Service on September 7, 2018. Keep the North Shore Country (KNSC) has appealed this decision and the case has been transferred to the Hawaii Supreme Court. On June 17, 2020, KNSC filed a Motion for Stay Upon Appeal. On August 10, 2020, KNSC’s Motion for Stay Upon Appeal was denied. KNSC and Kahuku Community Association (KCA) have also petitioned to appeal NPM’s Conditional Use Permits. On August 6, 2020, the Zoning Board of Appeals (ZBA) granted NPM’s Motions to Dismiss the Appeal Petitions of KNSC and KCA.
Life of the Land (LOL) filed a Motion for Relief to argue the PUC’s approval for NPM PPA was invalid and should be revised. Hawaiian Electric and the Consumer Advocate filed an opposition to this motion for relief. A hearing on the motion for relief was held on November 22, 2019. On April 16, 2020, the PUC issued an order denying LOL’s Motion for Relief. On April 27, 2020, LOL filed a Notice of Appeal of the PUC’s order with the Supreme Court of the State of Hawaii. In June 2021, the Supreme Court denied LOL’s appeal.
On December 31, 2019, Hawaii Electric Light and PGV entered into an Amended and Restated Power Purchase Agreement (ARPPA), subject to approval by the PUC. The 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. The PUC suspended the docket pending the completion of a supplemental environmental review under the Hawaii Environmental Policy Act (HEPA). On April 12, 2021, Hawaii Electric Light filed a motion for reconsideration and clarification in the proceeding. On June 4,
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2021, the PUC lifted the docket suspension for the limited purpose of soliciting the Department of Land and Natural Resources (DLNR) and the County of Hawaii’s (County) position on the environment review. In June and July 2021, the DLNR and the County responded to the PUC indicating their respective agencies do not have discretionary approval over the project and are not in a position to conduct an environmental review under HEPA.
Tariffed renewable resources.
•As of June 30, 2021, there were approximately 532 MW, 114 MW and 129 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 June 30, 2021, an estimated 31% of single family homes on the islands of Oahu, Hawaii and Maui have installed private rooftop solar systems, and approximately 19% of the Utilities’ total customers have solar systems.   
•The Utilities began accepting energy from feed-in tariff projects in 2011. As of June 30, 2021, there were 43 MW, 2 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 July 2018, the PUC approved Hawaiian Electric’s three-year biodiesel supply contract with Pacific Biodiesel Technologies, LLC (PBT) to supply 2 million to 4 million gallons of biodiesel at Hawaiian Electric’s Schofield Generating Station and the Honolulu International Airport Emergency Power Facility (HIA Facility) and any other generating unit on Oahu, as necessary. The PBT contract became effective on November 1, 2018 and has been extended for one year through December 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 2022. On June 30, 2021, the Utilities issued an RFP for all fuels, including biodiesel, for supply commencing January 1, 2023.
•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 2022, and will continue with no volume purchase requirements.
Requests for renewable proposals, expressions of interest, and information.
•Under a request for proposal process governed by the PUC and monitored by independent observers, in February 2018, the Utilities issued 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. As of June 30, 2021, summarized information for a total of 8 PPAs is as follows:
UtilitiesNumber of contractsTotal photovoltaic size (MW)BESS Size (MW/MWh)Guaranteed commercial operation datesContract term (years)Total projected annual payment (in millions)
Hawaiian Electric4139.5139.5/5589/7/23 & 8/31/2320 & 25$30.9 
Hawaii Electric Light26060/24011/3/22 & 12/2/222514.1 
Maui Electric27575/3004/28/23 & 10/27/232517.6 
Total8274.5274.5/1,098$62.6 
The Utilities have received PUC approvals to recover the total projected annual payment of $62.6 million for the eight PPAs through the PPAC to the extent such costs are not included in base rates.
•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. Final awards for the renewable projects were made on May 8, 2020. Final awards for the grid services projects were made starting in January 2020. On Oahu, seven solar-plus-storage projects and one standalone storage project totaling approximately 281 MW of generation and 1.8 GWh of storage were selected. On Maui, three solar-plus-storage projects and one standalone storage project totaling approximately 100 MW of generation and 560 MWh of storage were selected. On Hawaii Island, two solar-plus-storage projects and one standalone storage project totaling approximately 72 MW of generation and 492 MWh of storage were selected. Two Utility Self-Build projects were among those selected; a 40-MW, 160-MWh standalone energy storage system on Maui and a 12-MW, 12-MWh storage system on Hawaii Island. Since selection, three renewable plus storage projects have voluntarily withdrawn from the process for
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various reasons, including change in circumstances for the developer and a misunderstanding of contract requirements. To date, the Utilities have filed 10 PPAs, 2 grid services purchase agreements (GSPA) and 2 applications for commitments of funds for capital expenditures for approval of the utility self-build projects with the PUC.
A summary of the 10 PPAs that were filed with the PUC, is as follows:
UtilitiesNumber of contractsTotal photovoltaic size (MW)BESS Size (MW/MWh)Guaranteed commercial operation datesContract term (years)Total projected annual payment (in millions)
Hawaiian Electric5232232/1,0555/17/23, 7/1/23, 10/30/23, 12/29/23 & 12/31/2320 & 25$62.0 
Hawaiian Electric1*N/A185/56512/30/222024.0 
Hawaii Electric Light16060/2409/30/232515.5 
Maui Electric3100100/4004/30/23 & 12/31/232528.2 
Total10392577/2,260$129.7 
* See further discussion under “Review of Interconnection Process and Kapolei Energy Storage Power Purchase Agreement” below.
As of June 30, 2021, the PUC approved five solar-plus-storage PPAs for a total of 257 MW. The total projected annual payment of $68 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:
UtilitiesFast Frequency Response - 1
(MW)		Fast Frequency Response - 2
(MW)		Capacity -
Load Build
(MW)		Capacity -
Load Reduction
(MW)
Hawaiian Electric—26.714.519.4
Hawaii Electric Light6.0—3.24.0
Maui Electric6.1—1.94.7
Total12.126.719.628.1
A summary of the utility self-build projects that are pending PUC approval is as follows:
UtilitiesNumber of contractsBESS Size (MW/MWh)Guaranteed commercial operation dates
Hawaii Electric Light112/1212/30/22
Maui Electric140/1604/28/23
Total252/172
•On November 27, 2019, the Utilities issued RFPs for renewable generation paired with energy storage on the islands of Lanai and Molokai. The Utilities were seeking PV paired with storage or small wind (specified as 100 kW turbines or smaller) on Molokai and PV paired with storage on Lanai. Proposals for the Molokai RFP were received on February 14, 2020. In light of a PUC order issued on April 9, 2020 in the CBRE docket, the Utilities proposed in their July 9, 2020 filing to combine the previously issued Lanai RFP with the CBRE RFP described in the order to optimize the benefits of procuring renewable energy, spurring development and increasing the likelihood of success of the CBRE program on Lanai. On May 21, 2021, the PUC approved the proposed combined Lanai RFP. On June 17, 2021, the PUC issued an order suspending the June 21, 2021 deadline for the Utilities to file the Lanai RFP in response to the Utilities comments filed on June 2, 2021 requesting clarity around the CBRE tariff. The PUC’s order noted further guidance would be forth coming. On October 15, 2020, the Utilities selected one project from the Molokai RFP for a total of 4.5 MW of solar and 24 MWh of storage. The developer, however, declined to accept the award. On March 29, 2021, the Utilities filed a proposed plan for Molokai in response to PUC’s direction to revise and re-submit the Molokai RFP. On June 29, 2021, the PUC held a status conference to discuss the Utilities’ plan and concerns from stakeholders.
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
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taking to address projected extensions of guaranteed commercial operation dates (GCOD) 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 full text of the Order, Motion for Reconsideration and request for a Stay of the Order, and clarification Order can be found on the PUC website at dms.puc.hawaii.gov/dms (Docket No. 2021-0024).
•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 dms.puc.hawaii.gov/dms (Docket No. 2020-0136).
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 3 of the Condensed Consolidated Financial Statements.
Fuel contracts. The fuel contract entered into in January 2019, by the Utilities and PAR Hawaii Refining, LLC (PAR Hawaii), for the Utilities’ low sulfur fuel oil (LSFO), high sulfur fuel oil (HSFO), No. 2 diesel, and ultra-low sulfur diesel (ULSD) requirements was approved by the PUC, and became effective on April 28, 2019 and terminates on December 31, 2022. This contract is a requirement contract with no minimum purchases. If PAR Hawaii is unable to provide LSFO, HSFO, diesel and/or ULSD the contract allows the Utilities to purchase LSFO, HSFO, diesel and/or ULSD from another supplier. On June 30, 2021, the Utilities issued two RFPs for all fuels for supply commencing January 1, 2023. The costs incurred under the contract with PAR Hawaii are recovered in the Utilities’ respective ECRCs.
On June 9, 2020, the Utilities and PAR Hawaii entered into a First Amendment to the fuel contract. The First Amendment amends only the LSFO pricing to create a two-tiered structure based on volume, with all tier-1 LSFO up to the tier-1 maximum to be purchased exclusively from PAR Hawaii at the established pricing, and purchases in excess of that volume (tier-2) either from PAR Hawaii at the established pricing, or from an alternative supplier. On August 4, 2020, the PUC approved the First Amendment, which has an effective date of July 15, 2020, on an interim basis. The PUC’s approval order allows the recovery of such costs associated with the First Amendment through the ECRC to the extent that the costs
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are not recovered in base rates. The PUC intends to review whether the First Amendment is reasonable and in the public interest in the final decision, but it will not subject the recovery of the costs between the interim decision and the final decision to retroactive disallowances.
FINANCIAL CONDITION
Liquidity and capital resources.As of June 30, 2021, there was no outstanding balance on Hawaiian Electric’s revolving credit facility and $38 million of commercial paper borrowings outstanding by the Utilities.
On January 14, 2021, the Utilities received $115 million of proceeds using a delayed draw feature under a private placement executed on October 29, 2020. The proceeds were used to finance capital expenditures and reimburse funds used for the payment of capital expenditures.
The Utilities believe that their ability to generate cash, both internally from operations and externally from issuances of equity and debt securities, as well as bank borrowings, is adequate to maintain sufficient liquidity to fund their contractual obligations and commercial commitments, their forecasted capital expenditures and investments, their expected retirement benefit plan contributions and other cash requirements. However, the COVID-19 pandemic is an evolving situation, and the Utilities cannot predict the extent or duration of the outbreak, the future effects that it will have on the global, national or local economy, including the impacts on the Utilities’ ability, as well as the cost, to access additional capital, or the future impacts on the Utilities’ financial position, results of operations, and cash flows.
Hawaiian Electric’s consolidated capital structure was as follows:
(dollars in millions)June 30, 2021December 31, 2020
Short-term borrowings$38 1 %$50 1 %
Long-term debt, net1,676 43 1,561 41 
Preferred stock34 1 34 1 
Common stock equity2,171 55 2,142 57 
$3,919 100 %$3,787 100 %

Information about Hawaiian Electric’s commercial paper borrowings, borrowings from HEI and line of credit facility were as follows:
 Average balanceBalance
(in millions)Six months ended June 30, 2021June 30, 2021December 31, 2020
Short-term borrowings1
   
Commercial paper$4 $38 $— 
Borrowings from HEI— — — 
Line of credit draws— — — 
Undrawn capacity under line of credit facility/facilities— 200 275 
1   The maximum amount of external short-term borrowings by Hawaiian Electric during the first six months of 2021 was approximately $50 million. As of June 30, 2021, Hawaii Electric Light and Maui Electric had short-term borrowings from Hawaiian Electric of $3.1 million and $0.7 million, respectively. In addition to the short-term borrowings above, on January 15, 2021, Hawaiian Electric paid off and terminated the $50 million term loan facility dated as of May 19, 2020.
Credit agreement. Hawaiian Electric has a $200 million line of credit facility with no amount outstanding at June 30, 2021. On June 25, 2021, Hawaiian Electric requested PUC approval of its third amended and restated revolving unsecured syndicated credit facility agreement, including approving extending its term to May 14, 2026 from May 13, 2022. See Note 5 of the Condensed Consolidated Financial Statements.
Credit ratings. On March 17, 2021, S&P upgraded Hawaiian Electric’s issuer credit rating to “BBB” from “BBB-”, upgraded the short-term and commercial paper ratings to “A-2” from “A-3” and revised the outlook to stable from positive. The rating upgrade was primarily based on Hawaiian Electric’s strong financial measures, strength of the cumulative value of the regulatory protections, and S&P’s assessment of its stand-alone credit profile as sufficient to rate Hawaiian Electric higher than HEI.
On April 20, 2021, Moody’s upgraded Hawaiian Electric’s senior unsecured rating and issuer rating to “Baa1” from “Baa2” and revised the outlook to stable from positive. The rating upgrade reflects Hawaiian Electric's considerable progress in adding renewable resources to its energy supply mix and the improving regulatory relationship with the PUC. On June 25,
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2021, Fitch affirmed Hawaiian Electric’s “BBB+” long-term issuer default rating, “F2” short-term issuer default rating and stable outlook.
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 May 24, 2019, the PUC approved the Utilities’ request to issue SPRBs in the amounts of up to $70 million, $2.5 million and $7.5 million for Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively, prior to June 30, 2020, to finance the Utilities’ capital improvement programs. Pursuant to this approval, on October 10, 2019, the DBF issued, at par, Series 2019 SPRBs in the aggregate principal amount of $80 million with a maturity of October 1, 2049. As of June 30, 2021, Hawaiian Electric had $9 million of undrawn funds remaining with the trustee. Hawaii Electric Light and Maui Electric had no undrawn funds as of June 30, 2021.
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 Utilities’ request to issue SPRBs (up to $100 million, $35 million and $45 million for Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively) through 2022, with the proceeds to be used to finance the Utilities’ multi-project capital improvement programs. The PUC also 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.
Taxable debt. On January 31, 2019, the Utilities received PUC approval (January 2019 Approval) to issue the remaining authorized amounts under the PUC approval received in April 2018 (April 2018 Approval) in 2019 through 2020 (Hawaiian Electric up to $205 million and Hawaii Electric Light up to $15 million of taxable debt), as well as a supplemental increase to authorize the issuance of additional taxable debt 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, and to refinance the Utilities’ 2004 junior subordinated deferrable interest debentures (QUIDS) prior to maturity. In addition, the January 2019 Approval authorized the Utilities to extend the period to issue additional taxable debt from December 31, 2021 to December 31, 2022. The new total “up to” amounts of taxable debt requested to be issued through December 31, 2022 are $410 million, $150 million and $130 million for Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively.
As of June 30, 2021, Hawaiian Electric, Hawaii Electric Light, and Maui Electric have $135 million, $85 million, and $45 million, respectively, of remaining taxable debt to issue prior to December 31, 2022. See summary table below.
(in millions)Hawaiian ElectricHawaii Electric LightMaui Electric
Total “up to” amounts of taxable debt authorized through 2022$410 $150 $130 
Less:
Taxable debt authorized and issued in 2018 under April 2018 Approval75 15 10 
Taxable debt issuance to refinance the 2004 QUIDS in 201930 10 10 
Taxable debt issuance in May 2020110 10 40 
Taxable debt executed in October 2020, but issued on January 14, 202160 30 25 
Remaining authorized amounts$135 $85 $45 
Equity. In October 2018, the Utilities received PUC approval for the supplemental increase to issue and sell additional common stock in the amounts of up to $280 million for Hawaiian Electric and up to $100 million each for Hawaii Electric Light and Maui Electric, with the new total “up to” amounts of $430 million for Hawaiian Electric and $110 million each for Hawaii Electric Light and Maui Electric, and to extend the period authorized by the PUC to issue and sell common stock from December 31, 2021 to December 31, 2022. As of June 30, 2021, Hawaiian Electric, Hawaii Electric Light, and Maui Electric have $275.8 million, $102.5 million, and $87.8, respectively, of remaining common stock to issue prior to December
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31, 2022. See summary table below.
(in millions)Hawaiian ElectricHawaii Electric LightMaui Electric
Total “up to” amounts of common stock authorized to issue and sell through 2021$150.0 $10.0 $10.0 
Supplemental increase authorized280.0 100.0 100.0 
Total “up to” amounts of common stock authorized to issue and sell through 2022430.0 110.0 110.0 
Common stock authorized and issued in 2017, 2018, 2019 and 2020154.2 7.5 22.2 
Remaining authorized amounts$275.8 $102.5 $87.8 

Cash flows. The following table reflects the changes in cash flows for the six months ended June 30, 2021 compared to the six months ended June 30, 2020:
Six months ended June 30
(in thousands)20212020Change
Net cash provided by operating activities$57,453 $181,468 $(124,015)
Net cash used in investing activities(133,355)(181,091)47,736 
Net cash provided by financing activities45,210 51,100 (5,890)

Net cash provided by operating activities. The decrease in net cash provided by operating activities was primarily driven by an increase in fuel oil stock due to less consumption.
Net cash used in investing activities. The decrease in net cash used in investing activities was primarily driven by a decrease in capital expenditures related to construction activities.
Net cash provided by financing activities. The decrease in net cash provided by financing activities was primarily driven by lower net cash from long-term and short-term debts, offset by higher proceeds from short-term borrowings.
Forecast capital expenditures. For the three-year period 2021 through 2023, the Utilities forecast up to $1.2 billion of net capital expenditures, which could change over time based upon external factors such as the timing and scope of environmental regulations and/or 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, to pay down commercial paper or other short-term borrowings, as well as to fund any unanticipated expenditures not included in the 2021 to 2023 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).
Management periodically reviews capital expenditure estimates and the timing of construction projects. These estimates may change significantly as a result of many considerations, including changes in economic conditions, changes in forecasts of kWh sales and peak load, the availability of purchased power and changes in expectations concerning the construction and ownership of future generation units, the availability of generating sites and transmission and distribution corridors, the need for fuel infrastructure investments, the ability to obtain adequate and timely rate increases, escalation in construction costs, the effects of opposition to proposed construction projects and requirements of environmental and other regulatory and permitting authorities.
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Bank
Recent Developments—COVID-19
See also Recent developments—COVID-19 in HEI’s MD&A.
In the first half of 2021, economic conditions in Hawaii continued to improve following the rollout of stimulus programs and the loosening of business restrictions, both of which boosted economic activity. Continued efforts to vaccinate a high proportion of the population and the recent implementation of a “vaccine passport” in early July is expected to further accelerate the economic recovery. With increased optimism regarding an acceleration of an economic recovery, long-term rates increased sharply during the first quarter, but moderated in the second quarter. However, interest rates across the curve remain at relatively low levels, and continue to negatively impact net interest margin as new loan origination rates remain below existing portfolio yields. In the second quarter of 2021, the bank’s net interest margin was 2.98% compared to 2.95% and 3.21% for the quarters ended March 31, 2021 and June 30, 2020, respectively.
In response to COVID-19, ASB made short-term loan modifications to borrowers who were generally payment current at the time of relief. As of June 30, 2021, approximately $2 million of loans remained in their active deferral period. For the loans that have completed their short-term payment deferral period, approximately $17 million of loans required further assistance through repayment modifications and ASB reflected these loans as troubled debt restructured loans as of June 30, 2021. Approximately $12 million of loans were not able to resume their contractual payments and were considered delinquent as of June 30, 2021.
As a result of an overall continued strengthening of the Hawaii economy and a corresponding improvement in the credit outlook in the second quarter of 2021, as reflected in upgrades in the commercial loan portfolio and overall lower net charge offs, ASB recorded a $12 million negative provision for credit losses to reduce the allowance for credit losses. For the six months ended June 30, 2021, the bank recorded a negative provision for credit losses of $20.6 million. The provision for credit losses in future quarters will be dependent on future economic conditions and changes to borrower credit quality at that time.
In 2020, ASB temporarily closed 15 of its 49 branches and reduced banking hours at the branches that remained open in an effort to reduce social gathering and protect employees and customers. The bank has since reopened six of the branches that were temporarily closed and permanently closed eight branches. One of the reopened branches is now a digital branch. The reduction in ASB’s branch network should not have a significant impact to the bank’s customers as there are other branches nearby and other channels such as online and mobile banking. ASB continues to evaluate its branch network to determine whether further changes may be appropriate given its customers’ use of other banking channels.
ASB’s senior management team continues to address the impacts to the operations and business of the bank as a result of the pandemic. Senior management also continues to meet regularly with ASB’s board of directors to keep them apprised of the impacts of the COVID-19 pandemic.
The CARES Act was signed into law on March 27, 2020. The CARES Act provided over $2 trillion in economic assistance for American workers, families, and small businesses, and job preservation for American industries. The PPP was established under the CARES Act and implemented by the United States Small Business Administration (SBA) to provide a direct incentive for small businesses to keep their workers on the payroll as a result of the COVID-19 crisis. The Paycheck Protection Program Flexibility Act was signed into law on June 5, 2020 and the Economic Aid Act was signed into law on December 27, 2020, which amended some of the prior rules and guidelines of the CARES Act. The Economic Aid Act established a second round of PPP, reopening the PPP for first-time borrowers and allowing for a second draw for businesses that meet more restrictive eligibility criteria to target businesses hardest hit by the pandemic. Loans issued through the PPP are 100% federally guaranteed and have a maturity of 2-5 years, depending on when the loan was made, at a fixed interest rate of 1%. Loan payments will be deferred until the earlier of (a) the date that the forgiven amount is remitted to the lender by the SBA; or (b) 10 months from the date the covered period ends. The SBA will forgive all loan amounts to a particular small business if such small business is compliant with the terms and conditions of the PPP. Small businesses generally have 24 weeks from disbursement of the loan to incur allowable expenses such as payroll costs, interest on mortgages, rent and utility expenses that would be covered by the loan forgiveness rules, with 60% of the loan forgiveness needing to be for payroll costs. Small businesses may receive partial forgiveness if they do not spend the entirety of their PPP loan on eligible expenses, or if less than 60% of the loan disbursement is spent on payroll costs. Employers had until December 31, 2020 to restore their workforce, or, for a PPP loan made after December 27, 2020, before the last day of the Covered Period. Lenders processed and approved the PPP loans under delegated authority of the SBA. As an existing SBA certified lender, ASB worked with a number of small businesses, both customers and non-customers, to complete the loan application forms so that these businesses could participate in the program. During the first round of PPP, the Bank secured more than $370 million in PPP loans for approximately 4,100 small businesses that supported over 40,000 jobs; ASB received processing fees totaling approximately $13 million and started recognizing these fees over the life of the loans. During the second round of PPP, ASB secured more than $175 million for
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approximately 2,200 small businesses that supported more than 20,000 jobs; ASB received processing fees for approximately $9 million. As of July 16, 2021, SBA has remitted forgiveness funds in the amount of $320 million for more than 3,700 Round 1 and Round 2 PPP loans representing approximately 99% of PPP loan applicant balances.
Other provisions of the CARES Act provides that a financial institution may elect to suspend the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and any related impairment for accounting purposes. 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.
Three months ended June 30Increase
(in millions)20212020(decrease)Primary reason(s)
Interest income$62 $60 $2 
Average loan portfolio yields 8 basis points lower—impacted by the continued low interest rate environment as adjustable rate loans have repriced lower during the past year and new loan production yields continue to originate below their portfolio yields.
Average loan portfolio balances decreased $158 million - home equity lines of credit, consumer and commercial loan portfolio balances decreased by $200 million, $92 million and $56 million, respectively. The decrease in these loan portfolios were due to ASB’s strategic decision to reduce production of these loans in the current economic environment. Average commercial real estate loan portfolio balance increased $216 million.
Average investment securities portfolio balance increased $1.4 billion—excess liquidity from strong deposit growth invested in agency securities.
Average investment securities yields 23 basis points lower—impacted by the continued low interest rate environment as new investment security purchase yields were lower than the investment security portfolio yields.
Noninterest income15 24 (9)
Lower gain on sale of investment securities - in 2020, ASB sold all of its Visa Class B restricted shares and $160 million of investment securities with no similar sales in 2021.
Lower mortgage banking income - lower residential loan sale volume due to ASB’s decision to portfolio a larger portion of the residential loan production.
Higher customer fee income - lower fee income in 2020 was primarily due to ASB’s decision to waive overdraft and other deposit account fees to accommodate the hardships customers were experiencing during the COVID-19 pandemic.
Less: gain on sale of investment securities, net— (9)9 Gain on sale of investment securities, net, 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 investment securities, net in the condensed consolidated statements of income, and accordingly, is reflected below following operating income as a separate line item and excluded from Revenues.
Revenues77 75 2 The increase in revenues for the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to higher interest income.
Interest expense1 3 (2)
Lower interest expense on deposits—lower term certificate balances due to runoff of government term certificates and lower deposit yields as a result of the continued low interest rate environment..
Average core deposit balances increased $662 million; average term certificate balances decreased $245 million.
Average deposit yields decreased from 18 basis points to 7 basis points.
Lower interest expense on other borrowings—primarily due to lower repurchase agreement yields as a result of the continued low interest rate environment.
Provision for credit losses(12)15 (27)
Negative provision for credit losses reflects improvement in economic outlook, strong credit results including lower net charge-offs and credit upgrades in commercial real estate and commercial loan portfolios.
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Three months ended June 30Increase
(in millions)20212020(decrease)Primary reason(s)
Negative provision for credit losses also due to a shift in mix - lower personal unsecured loan portfolio balances which had higher credit loss rates partly offset by higher commercial real estate loan portfolio balances.
Delinquency rates have increased—from 0.38% at June 30, 2020 to 0.43% at June 30, 2021 due to higher residential 1-4 family loan delinquencies, partly offset by lower personal unsecured loan delinquencies.
Net charge-off to average loans have decreased—from 0.49% at June 30, 2020 to 0.04% at June 30, 2021 due to lower personal unsecured loan portfolio net charge-offs.
Noninterest expense48 48 — 
Higher compensation and benefits expenses—increase in incentive compensation payout for commission based employees and payment of the separation and release agreement with the former President and Chief Executive Officer.
Lower other expenses - 2020 expenses included higher direct and incremental COVID-19 related costs1 to enhance cleaning and sanitation of ASB’s facilities as well as incremental compensation expense.
Expenses37 66 (29)The decrease in expenses for the three months ended June 30, 2021 compared to the same period in 2020 was due to lower provision for credit losses and lower interest expense.
Operating income40 9 31 The increase in operating income for the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to higher interest income, lower provision for credit losses and lower interest expense, partly offset by lower noninterest income.
Gain on sale of investment securities, net— 9 (9)The decrease in gain on sale of investment securities - ASB sold all of its Visa Class B restricted shares and $160 million of investment securities with no similar sales in 2021.
Net income30 14 16 The increase in net income for the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to higher operating income, partly offset by lower gain on sale of investment securities and higher income tax expense.
1 Higher operating expenses in 2020, which were considered direct and incremental COVID-19 related costs, included approximately $2.3 million of incremental compensation expense and $1.1 million of enhanced cleaning and sanitation costs.
 Six months ended June 30Increase 
(in millions)20212020(decrease)Primary reason(s)
Interest income$121 $125 $(4)
Average loan portfolio yields 32 basis points lower—impacted by the continued low interest rate environment as adjustable rate loans have repriced lower during the past year and new loan production yields continue to originate below their portfolio yields.
Average loan portfolio balances increased $24 million - commercial real estate and commercial loan portfolio balances increased by $213 million and $109 million, respectively. Home equity lines of credit and consumer loan portfolios decreased $181 million and $92 million, respectively - strategic decision to reduce production of these loans in the current economic environment.
Average investment securities portfolio balance increased $1.2 billion—excess liquidity from strong deposit growth invested in agency securities.
Average investment securities yields 71 basis points lower—impacted by the continued low interest rate environment as new investment security purchase yields were lower than the investment security portfolio yields.
Noninterest income34 39 (5)
Lower gain on sale of investment securities - in 2020, ASB sold all of its Visa Class B restricted shares and $160 million of investment securities with no similar sales in 2021.
Lower mortgage banking income - lower residential loan sale profit margin in 2021 compared to 2020.
Higher customer fee income - lower fee income in 2020 was primarily due to ASB’s decision to waive overdraft and other deposit account fees to accommodate the hardships customers were experiencing during the COVID-19 pandemic.
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 Six months ended June 30Increase 
(in millions)20212020(decrease)Primary reason(s)
Less: gain on sale of investment securities, net(1)(9)8 Gain on sale of investment securities, net, 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 investment securities, net in the condensed consolidated statements of income, and accordingly, is reflected after operating income as a separate line item and excluded from Revenues.
Revenues154 155 (1)The decrease in revenues for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to lower interest and noninterest income, partly offset by lower reclassification of gain on sale of investment securities.
Interest expense3 7 (4)
Lower interest expense on deposits—lower term certificate balances due to runoff of government term certificates and lower deposit yields as a result of the continued low interest rate environment.
Average core deposit balances increased $666 million; average term certificate balances decreased $238 million.
Average deposit yields decreased from 20 basis points to 7 basis points.
Lower interest expense on other borrowings—primarily due to lower repurchase agreement yields as a result of the continued low interest rate environment.
Provision for credit losses(21)26 (47)
Negative provision for credit losses reflects improvement in economic outlook, strong credit results including lower net charge-offs and credit upgrades in commercial real estate and commercial loan portfolios.
Negative provision for credit losses also due to lower personal unsecured loan portfolio balances which had higher credit loss rates.
Delinquency rates have increased—from 0.38% at June 30, 2020 to 0.43% at June 30, 2021 due to higher residential 1-4 family loan delinquencies, partly offset by lower personal unsecured loan delinquencies.
Net charge-off to average loans have decreased—from 0.46% at June 30, 2020 to 0.11% at June 30, 2021 due to lower personal unsecured loan portfolio net charge-offs.
Noninterest expense96 94 2 
Higher compensation and benefits expenses—increase in incentive compensation payout for commission based employees and payment of the separation and release agreement with the former President and Chief Executive Officer.
Current year noninterest expense benefited from a one-time credit adjustment for a change in accounting for the ASB retirement plan.
Lower other expenses - 2020 expenses included higher direct and incremental COVID-19 related costs1 to enhance cleaning and sanitation of ASB’s facilities as well as incremental compensation expense.
Expenses78 127 (49)The decrease in expenses for the six months ended June 30, 2021 compared to the same period in 2020 was due to lower provision for credit losses and lower interest expense, partly offset by higher noninterest expenses.
Operating income76 28 48 The increase in operating income for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to lower provision for credit losses and lower interest expense, partly offset by lower interest and noninterest income and higher noninterest expenses.
Gain on sale of investment securities, net1 9 (8)The decrease in gain on sale of investment securities - primarily due to the sale of ASB’s Visa Class B restricted shares in 2020 with no similar sales in 2021.
Net income60 30 30 Net income for the six months ended June 30, 2021 was higher than the same period in 2020 due to higher operating income, partly offset by lower gain on sale of investment securities and higher income tax expense.

1 Higher operating expenses in 2020, which were considered direct and incremental COVID-19 related costs, included approximately $2.3 million of incremental compensation expense and $1.1 million of enhanced cleaning and sanitation costs.
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ASB’s return on average assets, return on average equity and net interest margin were as follows:
Three months ended June 30Six months ended June 30
(%)2021202020212020
Return on average assets1.38 0.72 1.39 0.79 
Return on average equity16.76 8.00 16.40 8.57 
Net interest margin2.98 3.21 2.97 3.46 
Three months ended June 30
20212020
(dollars in thousands)Average
balance		Interest
income/
expense		Yield/
rate (%)		Average
balance		Interest
 income/
expense		Yield/
rate (%)
Assets:
Interest-earning deposits$69,987 $19 0.11 $239,186 $60 0.10 
FHLB stock11,263 94 3.38 9,649 75 3.13 
Investment securities
Taxable2,748,382 10,770 1.57 1,346,145 5,978 1.78 
Non-taxable36,960 198 2.13 28,794 221 3.04 
Total investment securities2,785,342 10,968 1.57 1,374,939 6,199 1.80 
Loans
Residential 1-4 family2,146,078 19,473 3.63 2,175,756 21,635 3.98 
Commercial real estate1,153,578 9,541 3.29 937,990 8,298 3.52 
Home equity line of credit890,998 7,062 3.18 1,090,752 8,473 3.12 
Residential land17,840 204 4.57 13,326 184 5.53 
Commercial942,871 10,279 4.36 999,251 7,686 3.08 
Consumer140,001 4,504 12.91 232,360 7,286 12.61 
Total loans 1,2
5,291,366 51,063 3.86 5,449,435 53,562 3.94 
Total interest-earning assets 3
8,157,958 62,144 3.05 7,073,209 59,896 3.39 
Allowance for credit losses(91,329)(80,083)
Noninterest-earning assets724,767 783,826 
Total assets$8,791,396 $7,776,952 
Liabilities and shareholder’s equity:
Savings$3,054,677 $199 0.03 $2,550,162 $619 0.10 
Interest-bearing checking1,221,540 60 0.02 1,096,350 93 0.03 
Money market192,667 31 0.06 159,876 89 0.22 
Time certificates494,844 991 0.80 740,297 2,270 1.23 
Total interest-bearing deposits4,963,728 1,281 0.10 4,546,685 3,071 0.27 
Advances from Federal Home Loan Bank31,573 19 0.24 24,231 21 0.36 
Securities sold under agreements to repurchase and federal funds purchased85,330 4 0.02 87,631 54 0.25 
Total interest-bearing liabilities5,080,631 1,304 0.10 4,658,547 3,146 0.27 
Noninterest bearing liabilities:
Deposits2,831,273 2,273,656 
Other156,883 144,256 
Shareholder’s equity722,609 700,493 
Total liabilities and shareholder’s equity$8,791,396 $7,776,952 
Net interest income$60,840 $56,750 
Net interest margin (%) 4
2.98 3.21 


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Six months ended June 30
20212020
(dollars in thousands)Average
balance		Interest
income/
expense		Yield/
rate (%)		Average
balance
Interest
 income/
expense
Yield/
rate (%)
Assets:      
Interest-earning deposits$58,597 $31 0.11 $132,920 $152 0.23 
FHLB stock10,600 175 3.34 9,512 153 3.25 
Investment securities
Taxable2,551,569 19,136 1.50 1,367,306 14,997 2.19 
Non-taxable42,250 469 2.21 28,738 526 3.62 
Total investment securities2,593,819 19,605 1.51 1,396,044 15,523 2.22 
Loans   
Residential 1-4 family2,147,923 39,061 3.64 2,177,118 43,557 4.00 
Commercial real estate1,131,338 18,546 3.27 918,076 17,807 3.86 
Home equity line of credit914,340 14,327 3.16 1,095,224 17,693 3.25 
Residential land17,152 414 4.83 13,688 381 5.57 
Commercial952,481 19,191 4.04 843,277 14,416 3.42 
Consumer149,413 9,491 12.81 241,138 15,275 12.74 
Total loans 1,2
5,312,647 101,030 3.81 5,288,521 109,129 4.13 
Total interest-earning assets 3
7,975,663 120,841 3.04 6,826,997 124,957 3.66 
Allowance for credit losses(96,492)  (76,292)  
Noninterest-earning assets745,690   753,029   
Total assets$8,624,861   $7,503,734   
Liabilities and shareholder’s equity:      
Savings$2,978,592 $390 0.03 $2,472,957 $1,159 0.09 
Interest-bearing checking1,200,909 117 0.02 1,072,680 323 0.06 
Money market185,511 68 0.07 153,826 339 0.44 
Time certificates517,527 2,168 0.84 755,323 4,837 1.28 
Total interest-bearing deposits4,882,539 2,743 0.11 4,454,786 6,658 0.30 
Advances from Federal Home Loan Bank30,853 42 0.27 23,713 111 0.94 
Securities sold under agreements to repurchase and federal funds purchased80,358 8 0.02 91,822 277 0.61 
Total interest-bearing liabilities4,993,750 2,793 0.11 4,570,321 7,046 0.31 
Noninterest bearing liabilities:      
Deposits2,738,967   2,094,215   
Other162,444   144,433   
Shareholder’s equity729,700   694,765   
Total liabilities and shareholder’s equity$8,624,861   $7,503,734   
Net interest income $118,048   $117,911  
Net interest margin (%) 4
  2.97   3.46 
1   Includes loans held for sale, at lower of cost or fair value.
2   Includes recognition of net deferred loan fees of $4.6 million and $0.7 million for the three months ended June 30, 2021 and 2020, respectively, and $7.4 million and $0.7 million for the six months ended June 30, 2021 and 2020, respectively,
together with interest accrued prior to suspension of interest accrual on nonaccrual loans. Includes nonaccrual loans.
3   For the three and six months ended June 30, 2021 and 2020, 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. In 2020, the Federal
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Open Market Committee lowered its federal funds rate target range to 0% - 0.25% in response to the financial crisis caused by the COVID-19 pandemic, which resulted in a decrease in ASB’s net interest income and net interest margin. A prolonged low interest rate environment may continue to negatively impact ASB’s net interest income and net interest margin.
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 4 of the Condensed Consolidated Financial Statements for the composition of ASB’s loans.
Home equity— key credit statistics. The 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 June 30, 2021, approximately 23% 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 58% of ASB’s HELOC loan portfolio is in a first lien position.
Attention had been given by regulators and rating agencies to the potential for increased exposure to credit losses associated with HELOCs that were originated during the period of rapid home price appreciation between 2003 and 2007 as they have reached 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 ASB’s 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 HELOC portfolio.
Loan portfolio risk elements.  See Note 4 of the Condensed Consolidated Financial Statements.
Investment securities.  ASB’s investment portfolio was comprised as follows:
 June 30, 2021December 31, 2020
(dollars in thousands)Balance% of totalBalance% of total
U.S. Treasury and federal agency obligations$136,374 5 %$62,322 3 %
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies2,701,891 94 2,076,506 95 
Corporate bonds31,869 1 31,351 1 
Mortgage revenue bonds15,427 — 27,185 1 
Total investment securities$2,885,561 100 %$2,197,364 100 %
Currently, ASB’s investment portfolio consists of 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 of the U.S. government. The increase in the investment securities portfolio was primarily due to the purchase of securities with excess liquidity.
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. While deposits have increased by $486 million year-to-date, in part due to PPP loan proceeds and consumer economic impact payments from the CARES Act stimulus program, deposit retention and sustained 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, securities sold under agreements to repurchase and federal funds purchased continue to be additional sources of funds. As of June 30, 2021 ASB’s costing liabilities consisted of 98% deposits and 2% other borrowings compared to 99% deposits and 1% other borrowings as of December 31, 2020. The weighted average cost of deposits for the first six months of 2021 and 2020 was 0.07% and 0.20%, respectively.
Federal Home Loan Bank of Des Moines. As of June 30, 2021 and December 31, 2020, ASB had no advances outstanding at the FHLB of Des Moines. As of June 30, 2021, the unused borrowing capacity with the FHLB of Des Moines was $2.0 billion. The FHLB of Des Moines continues to be an important source of liquidity for ASB.
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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 June 30, 2021, ASB had an unrealized loss, net of taxes, on available-for-sale investment securities (including securities pledged for repurchase agreements) in AOCI of $8.8 million compared to an unrealized gain, net of taxes, of $20.0 million as of December 31, 2020. See “Item 3. Quantitative and qualitative disclosures about market risk” for a discussion of ASB’s interest rate risk sensitivity.
During the first six months of 2021, ASB recorded a negative provision for credit losses of $20.0 million in the allowance for credit losses primarily due to improvement in the economic outlook, strong credit results including lower net charge-offs and credit upgrades in commercial real estate and commercial loan portfolios and due to lower personal unsecured loan portfolio balances which had higher credit loss rates. During the first six months of 2020, ASB recorded a provision for credit losses of $20.7 million in the allowance for credit losses primarily due to increased loss reserves for the consumer loan portfolio, increased loss rates for the commercial and commercial real estate portfolios and reserves for forecasted deterioration due to the COVID-19 pandemic.
 Six months ended June 30
Year ended
December 31, 2020
(in thousands)20212020
Allowance for credit losses$101,201 $53,355 $53,355 
Impact of adopting ASU No. 2016-13— 19,441 19,441 
Provision for credit losses(19,992)20,734 49,811 
Less: net charge-offs2,957 12,223 21,406 
Allowance for credit losses, end of period$78,252 $81,307 $101,201 
Ratio of net charge-offs during the period to average loans outstanding (annualized)0.11 %0.46 %0.40 %
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 six months ended June 30, 2021 and 2020, ASB recorded a recovery in the provision for credit losses for unfunded commitments of $0.7 million and a provision for credit losses for unfunded commitments of $4.8 million, respectively. As of June 30, 2021 and December 31, 2020, the reserve for unfunded loan commitments was $3.7 million and $4.3 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.”
Changes to Community Bank Leverage Ratio. In April 2020, the federal bank regulatory agencies issued two interim final rules to implement Section 4012 of the CARES Act, which requires the agencies to temporarily lower the community bank leverage ratio to 8 percent. The two rules modify the community bank leverage ratio framework so that:
•Beginning in the second quarter of 2020 and until the end of the year, a banking organization that has a leverage ratio of 8 percent or greater and meets certain other criteria may elect to use the community bank leverage ratio framework; and
•Community banking organizations will have until January 1, 2022 before the community bank leverage ratio requirement is re-established at greater than 9 percent.
Under the interim final rules, the community bank leverage ratio was 8 percent beginning in the second quarter of 2020 and for the remainder of calendar year 2020, 8.5 percent for calendar year 2021, and 9 percent thereafter. The interim final rules also maintain a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 1 percent below the applicable community bank leverage ratio.
As of June 30, 2021, the bank was in compliance with all of the minimum capital requirements under OCC regulations, and was categorized as “well capitalized” under the regulatory framework for prompt corrective action. Beginning in the second quarter of 2020, ASB adopted the community bank leverage ratio framework, which allowed it to report only on the community bank leverage ratio, but does not change minimum capital requirements under OCC regulations. At June 30, 2021 and March
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31, 2021, ASB’s leverage ratio was below the 8.5 percent requirement to qualify for abbreviated reporting under the community bank leverage framework for 2021 and will begin reporting its risk-based capital ratios in the third quarter of 2021.
Covered Savings Associations. On May 24, 2019, the OCC issued a final rule to allow federal savings associations with total consolidated assets of $20 billion or less, as reported by the association to the OCC on its call report as of December 31, 2017, to elect to operate as covered savings associations. A covered savings association generally has the same rights and privileges as a national bank that has its main office situated in the same location as the home office of the covered savings association, with some exceptions. On April 1, 2021, the general counsel of the Board of Governors of the Federal Reserve System issued an opinion letter to John Deere Financial, F.S.B. (a corporate subsidiary of a unitary thrift holding company whose structure is similar to that of HEI and ASB) finding that if John Deere Financial, F.S.B. elected to operate as a covered savings association, its parent would no longer be able to hold John Deere Financial, F.S.B. per an exemption under HOLA. Although the Board of Governors has not issued any interpretation directly to ASB, at this point, ASB will not elect to operate as a covered savings association.

FINANCIAL CONDITION
Liquidity and capital resources.
(dollars in millions)June 30, 2021December 31, 2020% change
Total assets$8,910 $8,397 6 
Investment securities2,886 2,197 31 
Loans held for investment, net5,106 5,233 (2)
Deposit liabilities7,873 7,387 7 
Other bank borrowings130 90 45 
As of June 30, 2021, ASB was one of Hawaii’s largest financial institutions based on assets of $8.7$8.9 billion and deposits of $7.7$7.9 billion.
As of March 31,June 30, 2021, ASB’s unused FHLB borrowing capacity was approximately $2.0 billion. As of March 31,June 30, 2021, ASB had commitments to borrowers for loans and unused lines and letters of credit of $1.9$2.0 billion, of which, commitments to lend to borrowers whose loan terms have been modified in troubled debt restructurings were nil. Management believes ASB’s current sources of funds will enable it to meet these obligations while maintaining liquidity at satisfactory levels.
For the threesix months ended March 31,June 30, 2021, net cash provided by ASB’s operating activities was $17$63 million. Net cash used during the same period by ASB’s investing activities was $448$633 million, primarily due to purchases of available-for-sale securities of $782 million,$1.1 billion, purchases of held-to-maturity securities of $88$187 million, additions to premises and equipment of $3$6 million, contributions to low income housing investments of $3$6 million and a net increase in stock from the Federal Home Loan Bank, of $1 million, partly offset by the receipt of investment security repayments from investment securitiesand maturities of $205$359 million, proceeds from the sale of investment securities of $197 million, a net decrease in loans of $24$92 million, proceeds from the sale of residential loans of $17 million and proceeds from redemption of bank owned life insurance of $3 million. Net cash provided by financing activities during this period was $362$499 million, primarily due to increases in deposit liabilities of $358$486 million and a net increase in repurchase agreements of $13$40 million, partly offset by a net decrease in mortgage escrow deposits of $4 million and $5$28 million in common stock dividends to HEI (through ASB Hawaii).
For the threesix months ended March 31,June 30, 2020, net cash provided by ASB’s operating activities was $29 million. Net cash used during the same period by ASB’s investing activities was $140$440 million, primarily due to purchases of available-for-sale securities of $159$477 million, a net increase in loans of $66$328 million, additions to premises and equipment of $2$4 million and contributions to low income housing investments of $1$2 million, partly offset by the receipt of investment security repayments and maturities of $197 million, proceeds from the sale of investment securities of $82$169 million and proceeds from the sale of low income housing investments of $7 million. Net cash provided by financing activities during this period was $122$740 million, primarily due to increases in deposit liabilities of $112$758 million and a net increase in other bank borrowings with original maturitiesproceeds from FHLB advances of three months or less of $42$30 million, partly offset by a net decrease in mortgage escrow depositsrepurchase agreements of $5$20 million and $28 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. Beginning in the second quarter of 2020, ASB has adopted the community bank leverage ratio framework and is required to report only its leverage ratio. As of March 31,June 30, 2021 and December 31, 2020, ASB was well-capitalized (well-capitalized ratio requirements noted in parentheses) with a Tier-1 leverage ratio of 8.3%8.0% (5.0%) and 8.4%
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(5.0%), respectively. All dividends are subject to review by the OCC and FRB and receipt of a letter from the FRB
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communicating the agencies’ non-objection to the payment of any dividend ASB proposes to declare and pay to HEI (through ASB Hawaii).
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company considers interest-rate risk (a non-trading market risk) to be a significant market risk for ASB as it could potentially have 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 2020 Form 10-K (pages 74 to 76).
ASB’s interest-rate risk sensitivity measures as of March 31,June 30, 2021 and December 31, 2020 constitute “forward-looking statements” and were as follows:
Change in interest ratesChange in NII
(gradual change in interest rates)		Change in EVE
(instantaneous change in interest rates)
(basis points)March 31, 2021December 31, 2020March 31, 2021December 31, 2020
+3005.1 %7.0 %18.5 %31.4 %
+2003.5 5.0 13.5 23.9 
+1001.9 2.7 7.6 14.0 
-100(2.1)(1.9)(14.6)(25.2)
Change in interest ratesChange in NII
(gradual change in interest rates)		Change in EVE
(instantaneous change in interest rates)
(basis points)June 30, 2021December 31, 2020June 30, 2021December 31, 2020
+3005.4 %7.0 %18.6 %31.4 %
+2003.9 5.0 14.0 23.9 
+1002.2 2.7 8.3 14.0 
-100(2.4)(1.9)(16.5)(25.2)

ASB’s net interest income (NII) sensitivity profile was less asset sensitive as of March 31,June 30, 2021 as compared to December 31, 2020, primarily driven by the increase in market rates, growth in the fixed rate portion of the HELOC portfolio and core deposit funded investment securities purchases. The increase in market rates decreased prepayment expectations in the bank’s fixed-rate mortgage and mortgage-backed investment portfolios, driving decreased asset sensitivity. In addition, the fixed rate portion of the HELOC portfolio grew, contributing to decreased asset sensitivity. Lastly, the deployment of strong core deposit growth into new fixed-rate investment purchases further contributed to decreased sensitivity.
Economic value of equity (EVE) sensitivity decreased as of March 31,June 30, 2021 compared to December 31, 2020 as the duration of assets lengthened. The steepening of the yield curve led to slower prepayment expectations and lengthened the duration of the fixed-rate mortgage and mortgage-backed investment portfolios.
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 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. 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.
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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 firstsecond quarter of 2021 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 firstsecond quarter of 2021 that have materially affected, or are reasonably likely to materially affect, Hawaiian Electric’s internal control over financial reporting.
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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 2020 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 3 and 4 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 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 18 to 30 of HEI’s and Hawaiian Electric’s 2020 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Purchases of HEI common shares were made on the open market during the firstsecond quarter of 2021 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 ProgramsMaximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 to 31, 202118,229$34.08—NA
February 1 to 28, 202127,571$34.29—NA
March 1 to 31, 2021179,276$38.47—NA
Period*
Total Number of Shares Purchased **		 
Average
Price Paid
per Share **		 Total Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 to 30, 202123,560$43.08—NA
May 1 to 31, 202121,172$43.73—NA
June 1 to 30, 2021158,234$43.67—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,” 12,13915,929 of the 18,22923,560 shares, 16,28816,232 of the 27,57121,172 shares and 154,919135,891 of the 179,276158,234 shares were purchased for the DRIP; 4,7406,635 of the 18,22923,560 shares, 9,1763,497 of the 27,57121,172 shares and 19,31918,372 of the 179,276158,234 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.

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Item 6. Exhibits
FormExecutive Separation and Release Agreement dated as of Restricted Stock Unit Agreement, pursuant to 2010 EquityMay 5, 2021 between Richard F. Wacker, American Savings Bank, F.S.B., and Incentive Plan, as amended and restated February 5, 2021.Hawaiian Electric Industries, Inc.
Preferability letterThird Amended and Restated Credit Agreement, dated as of Deloitte & Touche LLP, Independent Registered Public Accounting FirmMay 14, 2021, among Hawaiian Electric Industries, Inc., as Borrower, the Lenders Party Hereto and Bank of America, N.A. and U.S. Bank National Association, as Co-Syndication Agent, and Wells Fargo Bank, National Association, MUFG Union Bank, N.A., Barclays Bank PLC, Bank of Hawaii and The Toronto-Dominion Bank, New York Branch, as Co-Documentation Agents, and JPMorgan Chase Bank, N.A., as Administrative Agent, Swingline Lender and Issuing Bank, JP Morgan Chase Bank, N.A. and Bank of America, N.A. as Sustainability Structuring Agents and JPMorgan Chase Bank, N.A., BofA Securities, Inc. and U.S. Bank National Association, as Joint Lead Arrangers and Joint Book Runners.
Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Constance H. Lau (HEI Chief Executive Officer)
 
Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Gregory C. Hazelton (HEI Chief Financial Officer)
  
HEI Certification Pursuant to 18 U.S.C. Section 1350
HEI Exhibit 101.INSXBRL 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.SCHInline XBRL Taxonomy Extension Schema Document
  
HEI Exhibit 101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
  
HEI Exhibit 101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
  
HEI Exhibit 101.LABInline XBRL Taxonomy Extension Label Linkbase Document
  
HEI Exhibit 101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
HEI Exhibit 104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
  
Preferability letterThird Amended and Restated Credit Agreement, dated as of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. See Exhibit 18.1 hereinMay 14, 2021, among Hawaiian Electric Company, Inc., as Borrower, the Lenders Party Hereto and Bank of America, N.A. and U.S. Bank National Association, as Co-Syndication Agent, and Wells Fargo Bank, National Association, MUFG Union Bank, N.A., Barclays Bank PLC, Bank of Hawaii and The Toronto-Dominion Bank, New York Branch, as Co-Documentation Agents, and JPMorgan Chase Bank, N.A., as Administrative Agent, Swingline Lender and Issuing Bank, JP Morgan Chase Bank, N.A. and Bank of America, N.A. as Sustainability Structuring Agents and JPMorgan Chase Bank, N.A., BofA Securities, Inc. and U.S. Bank National Association, as Joint Lead Arrangers and Joint Book Runners.
Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Scott W. H. Seu (Hawaiian Electric Chief Executive Officer)
  
Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Tayne S. Y. Sekimura (Hawaiian Electric Chief Financial Officer)
  
Hawaiian Electric Certification Pursuant to 18 U.S.C. Section 1350

* Schedules and exhibits have been omitted from this filing pursuant to Item 601(a) (5) of the Regulation S-K. We agree to furnish a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request.
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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) (Registrant)
   
   
By/s/ Constance H. Lau By/s/ Scott W. H. Seu
 Constance H. Lau  Scott W. H. Seu
 President and Chief Executive Officer  President and Chief Executive Officer
 (Principal Executive Officer of HEI)  (Principal Executive Officer of Hawaiian Electric)
   
   
By/s/ Gregory C. Hazelton By/s/ Tayne S. Y. Sekimura
 Gregory C. Hazelton  Tayne S. Y. Sekimura
 Executive Vice President  Senior Vice President
 and Chief Financial Officer  and Chief Financial Officer
 (Principal Financial Officer of HEI)  (Principal Financial Officer of Hawaiian Electric)
   
   
Date: May 10,August 9, 2021 Date: May 10,August 9, 2021

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