HEI Exhibit 99
NEWS RELEASENovember 2, 2017
| Contact: | Clifford H. Chen | Telephone: (808) 543-7300 |
| Treasurer & Manager, Investor Relations & Strategic Planning | E-mail: ir@hei.com | |
HEI REPORTS THIRD QUARTER 2017 EARNINGS OF $60.1 MILLION
Diluted Earnings Per Share of $0.55
Utility Earnings Flat
Bank Earnings Strong
HONOLULU - Hawaiian Electric Industries, Inc. (HEI) (NYSE - HE) today reported consolidated net income for common stock for the third quarter of 2017 of $60.1 million and diluted earnings per share (EPS) of $0.55 compared to $127.1 million and EPS of $1.17 for the third quarter of 2016. Third quarter of 2016 core earnings1 and core EPS1 were $63.3 million and $0.58, respectively. HEI’s third quarter of 2016 core earnings1 included $6 million of favorable tax adjustments at the holding company as HEI moved out of a federal net operating loss position, enabling the recognition of tax benefits.
“HEI’s core earnings1 for the quarter compared well to the prior year quarter. The utility performed as we expected, and we saw strong performance by American Savings Bank. The bank delivered higher earnings and profitability driven by improving credit quality and higher yields on interest-earning assets. This exemplifies the value of the unique combination of businesses which comprise HEI,” said Constance H. Lau, HEI president and chief executive officer.
_________________
Note: Amounts indicated as “after-tax” in this earnings release are based upon adjusting items for the composite statutory tax rates of 39% for the utilities and 40% for the bank.
1 Non-GAAP measure that excludes after-tax income and costs related to the terminated merger with NextEra Energy, Inc., the cancelled spin-off of ASB Hawaii, Inc., and the termination of the liquefied natural gas (LNG) contract which required PUC approval of the merger with NextEra Energy, Inc. (the “Transaction Adjustments”). See the “Explanation of HEI’s Use of Certain Unaudited Non-GAAP measures” and the related reconciliation.
Hawaiian Electric Industries, Inc.
November 2, 2017
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HAWAIIAN ELECTRIC COMPANY EARNINGS
Hawaiian Electric Company’s2 net income for the third quarter of 2017 was $47.5 million as our utilities continue to perform according to plan for this transition year compared to $47.0 million in the third quarter of 2016. The $0.5 million net income increase from the prior year quarter was primarily driven by the following after-tax items:
| • | $2 million higher net revenues3 mainly due to higher recovery of costs for integrating more renewables and reliability investments and the Hawaii Electric Light 2016 interim rate increase which became effective on August 31, 2017; |
| • | $2 million higher allowance for funds used during construction primarily due to the Schofield generating plant project expected to be placed in service in the second quarter of 2018; and |
| • | $1 million favorable tax adjustments as the utility moved out of a federal net operating loss position, enabling the recognition of tax benefits in the third quarter of 2017. |
These increases were offset by the following after-tax items:
| • | $4 million higher operations and maintenance expenses4 compared to the prior year quarter primarily due to higher overhaul expenses and enterprise resource planning project costs; and |
| • | $1 million higher depreciation expense as a result of increasing investments for the integration of more renewable energy and improved customer reliability. |
_________________
2 | Hawaiian Electric Company refers to the three utilities, Hawaiian Electric Company, Inc. on Oahu, Maui Electric Company, Limited, and Hawaii Electric Light Company, Inc. |
3 | Net revenues represent the after-tax impact of “Revenues” less the following expenses which are largely pass through items in revenues: “fuel oil,” “purchased power” and “taxes, other than income taxes” as shown on the Hawaiian Electric Company, Inc. and Subsidiaries’ Condensed Consolidated Statements of Income. |
4 | Excludes net income neutral expenses covered by surcharges or by third parties and merger-related costs including the terminated LNG contract costs. See the “Explanation of HEI’s Use of Certain Unaudited Non-GAAP measures” and the related reconciliation. |
Hawaiian Electric Industries, Inc.
November 2, 2017
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AMERICAN SAVINGS BANK EARNINGS
American Savings Bank’s (American) net income for the third quarter of 2017 was $17.6 million compared to $16.7 million in the second (or linked) quarter of 2017 and $15.1 million in the third quarter of 2016.
Compared to the third quarter of 2016, the $2.5 million increase was primarily driven by the following on an after-tax basis:
| • | $3 million higher net interest income driven mainly by growth in interest-earning assets funded by strong deposit growth and overall improvement in asset yields; and |
| • | $3 million lower provision for loan losses resulting from work to improve commercial loan asset quality. |
These items were offset by the following on an after-tax basis:
| • | $2 million lower noninterest income primarily due to lower mortgage banking income and no gain on sale of real estate; and |
| • | $1 million higher noninterest expense primarily due to higher performance-based incentive cost. |
Compared to the linked second quarter of 2017, the $0.9 million increase was primarily driven by lower provision for loan losses.
Total loans were $4.7 billion at September 30, 2017, a decrease of $65 million or 1.8% annualized from December 31, 2016. This decrease reflects American’s work to improve overall commercial loan quality through a strategic decrease in its exposure to national syndicated credits, as well as a reduction in its commercial real estate loan portfolio. The decrease in American’s commercial portfolio was partially offset by growth in home equity lines of credit, consumer and residential loan portfolios.
Total deposits were $5.8 billion at September 30, 2017, an increase of $203 million or 4.9% annualized from December 31, 2016. Low-cost core deposits increased $153 million or 4.2%
Hawaiian Electric Industries, Inc.
November 2, 2017
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annualized from December 31, 2016. The average cost of funds was 0.20% for the third quarter of 2017 compared to 0.21% for the second quarter of 2017 and 0.24% for the third quarter of 2016.
Overall, American achieved solid profitability in the third quarter of 2017 with a return on average equity of 11.6% and a return on average assets of 1.07%.
For additional information, refer to the American news release issued on October 30, 2017.
HOLDING AND OTHER COMPANIES
The holding and other companies’ net loss was $5.0 million in the third quarter of 2017 compared to $65.1 million net income in the third quarter of 2016. Excluding the Transaction Adjustments which totaled $63.8 million in the third quarter of 2016, the holding and other companies’ net loss was $5.0 million in the third quarter of 2017 compared to $1.2 net income in the third quarter of 2016. The holding company’s third quarter of 2016 net income included $6.0 million of favorable tax adjustments as HEI moved out of a federal net operating loss position, enabling the recognition of tax benefits.
WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE
HEI will conduct a webcast and conference call to discuss its third quarter of 2017 earnings and 2017 EPS guidance on Thursday, November 2, 2017, at 9:00 a.m. Hawaii time (3:00 p.m. Eastern time).
Interested parties within the United States may listen to the conference by calling (844) 834-0652 and international parties may listen to the conference by calling (412) 317-5198 or by accessing the webcast on HEI’s website, www.hei.com, under the heading “Investor Relations.” HEI and Hawaiian Electric Company intend to continue to use HEI’s website as a means of disclosing additional information. Such disclosures will be included on HEI’s website in the Investor Relations section. Accordingly, investors should routinely monitor such portions of HEI’s website, in addition to following HEI’s, Hawaiian Electric Company’s and American’s press releases, HEI’s and Hawaiian Electric Company’s Securities and Exchange Commission (SEC) filings and HEI’s public conference calls and webcasts. The information on HEI’s website is not incorporated by reference in this document or in HEI’s and Hawaiian Electric Company’s SEC filings unless, and except to the extent, specifically incorporated by reference. Investors may also wish to refer to the Public Utilities
Hawaiian Electric Industries, Inc.
November 2, 2017
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Commission of the State of Hawaii (PUC) website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC. No information on the PUC website is incorporated by reference in this document or in HEI’s and Hawaiian Electric Company’s SEC filings.
An online replay of the webcast will be available at the same website beginning about two hours after the event. Replays of the conference call will also be available approximately two hours after the event through November 16, 2017 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10112461.
HEI supplies power to approximately 95% of Hawaii’s population through its electric utilities, Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited and provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, F.S.B., one of Hawaii’s largest financial institutions.
NON-GAAP MEASURES
See “Explanation of HEI’s Use of Certain Unaudited Non-GAAP Measures” and related reconciliations on pages 12 to 13 of this release.
###
Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | ||||||||||||||||
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| (in thousands, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Revenues | ||||||||||||||||
| Electric utility | $ | 598,769 | $ | 572,253 | $ | 1,674,255 | $ | 1,549,700 | ||||||||
| Bank | 74,289 | 73,708 | 222,474 | 213,297 | ||||||||||||
| Other | 127 | 94 | 299 | 262 | ||||||||||||
| Total revenues | 673,185 | 646,055 | 1,897,028 | 1,763,259 | ||||||||||||
| Expenses | ||||||||||||||||
| Electric utility | 511,693 | 482,441 | 1,483,194 | 1,333,876 | ||||||||||||
| Bank | 47,525 | 50,981 | 146,754 | 150,752 | ||||||||||||
| Other | 4,422 | 7,191 | 13,777 | 18,883 | ||||||||||||
| Total expenses | 563,640 | 540,613 | 1,643,725 | 1,503,511 | ||||||||||||
| Operating income (loss) | ||||||||||||||||
| Electric utility | 87,076 | 89,812 | 191,061 | 215,824 | ||||||||||||
| Bank | 26,764 | 22,727 | 75,720 | 62,545 | ||||||||||||
| Other | (4,295 | ) | (7,097 | ) | (13,478 | ) | (18,621 | ) | ||||||||
| Total operating income | 109,545 | 105,442 | 253,303 | 259,748 | ||||||||||||
| Merger termination fee | — | 90,000 | — | 90,000 | ||||||||||||
| Interest expense, net—other than on deposit liabilities and other bank borrowings | (19,227 | ) | (19,365 | ) | (59,235 | ) | (56,792 | ) | ||||||||
| Allowance for borrowed funds used during construction | 1,339 | 854 | 3,371 | 2,276 | ||||||||||||
| Allowance for equity funds used during construction | 3,482 | 2,274 | 8,908 | 6,010 | ||||||||||||
| Income before income taxes | 95,139 | 179,205 | 206,347 | 301,242 | ||||||||||||
| Income taxes | 34,595 | 51,592 | 72,003 | 96,203 | ||||||||||||
| Net income | 60,544 | 127,613 | 134,344 | 205,039 | ||||||||||||
| Preferred stock dividends of subsidiaries | 471 | 471 | 1,417 | 1,417 | ||||||||||||
| Net income for common stock | $ | 60,073 | $ | 127,142 | $ | 132,927 | $ | 203,622 | ||||||||
| Basic earnings per common share | $ | 0.55 | $ | 1.17 | $ | 1.22 | $ | 1.89 | ||||||||
| Diluted earnings per common share | $ | 0.55 | $ | 1.17 | $ | 1.22 | $ | 1.88 | ||||||||
| Dividends declared per common share | $ | 0.31 | $ | 0.31 | $ | 0.93 | $ | 0.93 | ||||||||
| Weighted-average number of common shares outstanding | 108,786 | 108,268 | 108,737 | 107,951 | ||||||||||||
| Weighted-average shares assuming dilution | 108,865 | 108,472 | 108,909 | 108,171 | ||||||||||||
| Net income (loss) for common stock by segment | ||||||||||||||||
| Electric utility | $ | 47,487 | $ | 46,974 | $ | 94,596 | $ | 108,198 | ||||||||
| Bank | 17,592 | 15,104 | 50,138 | 41,062 | ||||||||||||
| Other | (5,006 | ) | 65,064 | (11,807 | ) | 54,362 | ||||||||||
| Net income for common stock | $ | 60,073 | $ | 127,142 | $ | 132,927 | $ | 203,622 | ||||||||
| Comprehensive income attributable to Hawaiian Electric Industries, Inc. | $ | 60,627 | $ | 125,473 | $ | 136,836 | $ | 212,861 | ||||||||
Return on average common equity (twelve months ended)1 | 8.5 | % | 12.3 | % | ||||||||||||
This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto in HEI filings with the SEC. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.
1 On a core basis, 2017 and 2016 returns on average common equity (twelve months ended September 30) were 8.5% and 9.5%, respectively. See reconciliation of GAAP to non-GAAP measures.
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Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (dollars in thousands) | September 30, 2017 | December 31, 2016 | ||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 202,173 | $ | 278,452 | ||||
| Accounts receivable and unbilled revenues, net | 264,426 | 237,950 | ||||||
| Available-for-sale investment securities, at fair value | 1,320,110 | 1,105,182 | ||||||
| Stock in Federal Home Loan Bank, at cost | 9,706 | 11,218 | ||||||
| Loans receivable held for investment, net | 4,623,234 | 4,683,160 | ||||||
| Loans held for sale, at lower of cost or fair value | 15,728 | 18,817 | ||||||
| Property, plant and equipment, net of accumulated depreciation of $2,537,320 and $2,444,348 at September 30, 2017 and December 31, 2016, respectively | 4,813,875 | 4,603,465 | ||||||
| Regulatory assets | 936,964 | 957,451 | ||||||
| Other | 474,444 | 447,621 | ||||||
| Goodwill | 82,190 | 82,190 | ||||||
| Total assets | $ | 12,742,850 | $ | 12,425,506 | ||||
| Liabilities and shareholders’ equity | ||||||||
| Liabilities | ||||||||
| Accounts payable | $ | 160,897 | $ | 143,279 | ||||
| Interest and dividends payable | 26,484 | 25,225 | ||||||
| Deposit liabilities | 5,752,326 | 5,548,929 | ||||||
| Short-term borrowings—other than bank | 24,498 | — | ||||||
| Other bank borrowings | 153,552 | 192,618 | ||||||
| Long-term debt, net—other than bank | 1,618,446 | 1,619,019 | ||||||
| Deferred income taxes | 756,814 | 728,806 | ||||||
| Regulatory liabilities | 466,216 | 410,693 | ||||||
| Contributions in aid of construction | 565,118 | 543,525 | ||||||
| Defined benefit pension and other postretirement benefit plans liability | 620,788 | 638,854 | ||||||
| Other | 460,396 | 473,512 | ||||||
| Total liabilities | 10,605,535 | 10,324,460 | ||||||
| Preferred stock of subsidiaries - not subject to mandatory redemption | 34,293 | 34,293 | ||||||
| Shareholders’ equity | ||||||||
| Preferred stock, no par value, authorized 10,000,000 shares; issued: none | — | — | ||||||
| Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 108,785,978 shares and 108,583,413 shares at September 30, 2017 and December 31, 2016, respectively | 1,661,492 | 1,660,910 | ||||||
| Retained earnings | 470,750 | 438,972 | ||||||
| Accumulated other comprehensive loss, net of tax benefits | (29,220 | ) | (33,129 | ) | ||||
| Total shareholders’ equity | 2,103,022 | 2,066,753 | ||||||
| Total liabilities and shareholders’ equity | $ | 12,742,850 | $ | 12,425,506 | ||||
This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto in HEI filings with the SEC.
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Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| (dollars in thousands, except per barrel amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Revenues | $ | 598,769 | $ | 572,253 | $ | 1,674,255 | $ | 1,549,700 | ||||||||
| Expenses | ||||||||||||||||
| Fuel oil | 146,258 | 128,624 | 431,787 | 334,263 | ||||||||||||
| Purchased power | 160,347 | 157,750 | 440,538 | 412,667 | ||||||||||||
| Other operation and maintenance | 100,102 | 94,789 | 306,716 | 298,260 | ||||||||||||
| Depreciation | 48,206 | 46,759 | 144,578 | 140,300 | ||||||||||||
| Taxes, other than income taxes | 56,780 | 54,519 | 159,575 | 148,386 | ||||||||||||
| Total expenses | 511,693 | 482,441 | 1,483,194 | 1,333,876 | ||||||||||||
| Operating income | 87,076 | 89,812 | 191,061 | 215,824 | ||||||||||||
| Allowance for equity funds used during construction | 3,482 | 2,274 | 8,908 | 6,010 | ||||||||||||
| Interest expense and other charges, net | (16,907 | ) | (17,323 | ) | (52,625 | ) | (49,734 | ) | ||||||||
| Allowance for borrowed funds used during construction | 1,339 | 854 | 3,371 | 2,276 | ||||||||||||
| Income before income taxes | 74,990 | 75,617 | 150,715 | 174,376 | ||||||||||||
| Income taxes | 27,005 | 28,145 | 54,623 | 64,682 | ||||||||||||
| Net income | 47,985 | 47,472 | 96,092 | 109,694 | ||||||||||||
| Preferred stock dividends of subsidiaries | 228 | 228 | 686 | 686 | ||||||||||||
| Net income attributable to Hawaiian Electric | 47,757 | 47,244 | 95,406 | 109,008 | ||||||||||||
| Preferred stock dividends of Hawaiian Electric | 270 | 270 | 810 | 810 | ||||||||||||
| Net income for common stock | $ | 47,487 | $ | 46,974 | $ | 94,596 | $ | 108,198 | ||||||||
| Comprehensive income attributable to Hawaiian Electric | $ | 47,509 | $ | 47,125 | $ | 95,117 | $ | 108,610 | ||||||||
| OTHER ELECTRIC UTILITY INFORMATION | ||||||||||||||||
| Kilowatthour sales (millions) | ||||||||||||||||
| Hawaiian Electric | 1,776 | 1,800 | 4,924 | 4,982 | ||||||||||||
| Hawaii Electric Light | 272 | 277 | 782 | 795 | ||||||||||||
| Maui Electric | 292 | 295 | 822 | 836 | ||||||||||||
| 2,340 | 2,372 | 6,528 | 6,613 | |||||||||||||
| Average fuel oil cost per barrel | $ | 66.73 | $ | 57.72 | $ | 67.42 | $ | 52.06 | ||||||||
Return on average common equity (twelve months ended)1 | 7.16 | % | 8.11 | % | ||||||||||||
This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.
1 Simple average. On a core basis, 2017 and 2016 returns on average common equity (twelve months ended September 30) were 7.2% and 8.2%, respectively. See reconciliation of GAAP to non-GAAP measures.
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Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (dollars in thousands, except par value) | September 30, 2017 | December 31, 2016 | ||||||
| Assets | ||||||||
| Property, plant and equipment | ||||||||
| Utility property, plant and equipment | ||||||||
| Land | $ | 53,913 | $ | 53,153 | ||||
| Plant and equipment | 6,778,254 | 6,605,732 | ||||||
| Less accumulated depreciation | (2,460,429 | ) | (2,369,282 | ) | ||||
| Construction in progress | 307,492 | 211,742 | ||||||
| Utility property, plant and equipment, net | 4,679,230 | 4,501,345 | ||||||
| Nonutility property, plant and equipment, less accumulated depreciation of $1,233 and $1,232 at September 30, 2017 and December 31, 2016, respectively | 7,409 | 7,407 | ||||||
| Total property, plant and equipment, net | 4,686,639 | 4,508,752 | ||||||
| Current assets | ||||||||
| Cash and cash equivalents | 9,987 | 74,286 | ||||||
| Customer accounts receivable, net | 133,135 | 123,688 | ||||||
| Accrued unbilled revenues, net | 109,707 | 91,693 | ||||||
| Other accounts receivable, net | 4,097 | 5,233 | ||||||
| Fuel oil stock, at average cost | 60,253 | 66,430 | ||||||
| Materials and supplies, at average cost | 55,959 | 53,679 | ||||||
| Prepayments and other | 29,871 | 23,100 | ||||||
| Regulatory assets | 72,773 | 66,032 | ||||||
| Total current assets | 475,782 | 504,141 | ||||||
| Other long-term assets | ||||||||
| Regulatory assets | 864,191 | 891,419 | ||||||
| Unamortized debt expense | 661 | 208 | ||||||
| Other | 80,228 | 70,908 | ||||||
| Total other long-term assets | 945,080 | 962,535 | ||||||
| Total assets | $ | 6,107,501 | $ | 5,975,428 | ||||
| Capitalization and liabilities | ||||||||
| Capitalization | ||||||||
| Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 16,019,785 shares at September 30, 2017 and December 31, 2016) | $ | 106,818 | $ | 106,818 | ||||
| Premium on capital stock | 601,487 | 601,491 | ||||||
| Retained earnings | 1,120,571 | 1,091,800 | ||||||
| Accumulated other comprehensive income (loss), net of income taxes | 199 | (322 | ) | |||||
| Common stock equity | 1,829,075 | 1,799,787 | ||||||
| Cumulative preferred stock — not subject to mandatory redemption | 34,293 | 34,293 | ||||||
| Long-term debt, net | 1,318,623 | 1,319,260 | ||||||
| Total capitalization | 3,181,991 | 3,153,340 | ||||||
| Current liabilities | ||||||||
| Short-term borrowings from non-affiliates | 6,000 | — | ||||||
| Accounts payable | 124,240 | 117,814 | ||||||
| Interest and preferred dividends payable | 25,261 | 22,838 | ||||||
| Taxes accrued | 183,365 | 172,730 | ||||||
| Regulatory liabilities | 3,399 | 3,762 | ||||||
| Other | 59,611 | 55,221 | ||||||
| Total current liabilities | 401,876 | 372,365 | ||||||
| Deferred credits and other liabilities | ||||||||
| Deferred income taxes | 767,611 | 733,659 | ||||||
| Regulatory liabilities | 462,817 | 406,931 | ||||||
| Unamortized tax credits | 88,827 | 88,961 | ||||||
| Defined benefit pension and other postretirement benefit plans liability | 581,713 | 599,726 | ||||||
| Other | 57,548 | 76,921 | ||||||
| Total deferred credits and other liabilities | 1,958,516 | 1,906,198 | ||||||
| Contributions in aid of construction | 565,118 | 543,525 | ||||||
| Total capitalization and liabilities | $ | 6,107,501 | $ | 5,975,428 | ||||
This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC.
9
American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)
| Three months ended | Nine months ended September 30 | |||||||||||||||||||
| (in thousands) | September 30, 2017 | June 30, 2017 | September 30, 2016 | 2017 | 2016 | |||||||||||||||
| Interest and dividend income | ||||||||||||||||||||
| Interest and fees on loans | $ | 52,210 | $ | 52,317 | $ | 50,444 | $ | 155,269 | $ | 148,571 | ||||||||||
| Interest and dividends on investment securities | 6,850 | 6,763 | 4,759 | 20,593 | 14,219 | |||||||||||||||
| Total interest and dividend income | 59,060 | 59,080 | 55,203 | 175,862 | 162,790 | |||||||||||||||
| Interest expense | ||||||||||||||||||||
| Interest on deposit liabilities | 2,444 | 2,311 | 1,871 | 6,858 | 5,154 | |||||||||||||||
| Interest on other borrowings | 470 | 824 | 1,464 | 2,110 | 4,416 | |||||||||||||||
| Total interest expense | 2,914 | 3,135 | 3,335 | 8,968 | 9,570 | |||||||||||||||
| Net interest income | 56,146 | 55,945 | 51,868 | 166,894 | 153,220 | |||||||||||||||
| Provision for loan losses | 490 | 2,834 | 5,747 | 7,231 | 15,266 | |||||||||||||||
| Net interest income after provision for loan losses | 55,656 | 53,111 | 46,121 | 159,663 | 137,954 | |||||||||||||||
| Noninterest income | ||||||||||||||||||||
| Fees from other financial services | 5,635 | 5,810 | 5,599 | 17,055 | 16,799 | |||||||||||||||
| Fee income on deposit liabilities | 5,533 | 5,565 | 5,627 | 16,526 | 16,045 | |||||||||||||||
| Fee income on other financial products | 1,904 | 1,971 | 2,151 | 5,741 | 6,563 | |||||||||||||||
| Bank-owned life insurance | 1,257 | 1,925 | 1,616 | 4,165 | 3,620 | |||||||||||||||
| Mortgage banking income | 520 | 587 | 2,347 | 1,896 | 5,096 | |||||||||||||||
| Gains on sale of investment securities, net | — | — | — | — | 598 | |||||||||||||||
| Other income, net | 380 | 391 | 1,165 | 1,229 | 1,786 | |||||||||||||||
| Total noninterest income | 15,229 | 16,249 | 18,505 | 46,612 | 50,507 | |||||||||||||||
| Noninterest expense | ||||||||||||||||||||
| Compensation and employee benefits | 23,724 | 24,742 | 22,844 | 71,703 | 67,197 | |||||||||||||||
| Occupancy | 4,284 | 4,185 | 3,991 | 12,623 | 12,244 | |||||||||||||||
| Data processing | 3,262 | 3,207 | 3,150 | 9,749 | 9,599 | |||||||||||||||
| Services | 2,863 | 2,766 | 2,427 | 7,989 | 8,093 | |||||||||||||||
| Equipment | 1,814 | 1,771 | 1,759 | 5,333 | 5,193 | |||||||||||||||
| Office supplies, printing and postage | 1,444 | 1,527 | 1,483 | 4,506 | 4,431 | |||||||||||||||
| Marketing | 934 | 839 | 747 | 2,290 | 2,507 | |||||||||||||||
| FDIC insurance | 746 | 822 | 907 | 2,296 | 2,704 | |||||||||||||||
| Other expense | 5,050 | 4,705 | 4,591 | 14,066 | 13,948 | |||||||||||||||
| Total noninterest expense | 44,121 | 44,564 | 41,899 | 130,555 | 125,916 | |||||||||||||||
| Income before income taxes | 26,764 | 24,796 | 22,727 | 75,720 | 62,545 | |||||||||||||||
| Income taxes | 9,172 | 8,063 | 7,623 | 25,582 | 21,483 | |||||||||||||||
| Net income | $ | 17,592 | $ | 16,733 | $ | 15,104 | $ | 50,138 | $ | 41,062 | ||||||||||
| Comprehensive income | $ | 18,009 | $ | 18,956 | $ | 13,176 | $ | 53,613 | $ | 49,537 | ||||||||||
| OTHER BANK INFORMATION (annualized %, except as of period end) | ||||||||||||||||||||
| Return on average assets | 1.07 | 1.02 | 0.97 | 1.02 | 0.89 | |||||||||||||||
| Return on average equity | 11.64 | 11.25 | 10.36 | 11.24 | 9.5 | |||||||||||||||
| Return on average tangible common equity | 13.47 | 13.06 | 12.06 | 13.04 | 11.07 | |||||||||||||||
| Net interest margin | 3.69 | 3.68 | 3.57 | 3.68 | 3.59 | |||||||||||||||
| Efficiency ratio | 61.82 | 61.73 | 59.54 | 61.15 | 61.81 | |||||||||||||||
| Net charge-offs to average loans outstanding | 0.32 | 0.21 | 0.20 | 0.27 | 0.19 | |||||||||||||||
| As of period end | ||||||||||||||||||||
| Nonaccrual loans to loans receivable held for investment | 0.50 | 0.44 | 1.11 | |||||||||||||||||
| Allowance for loan losses to loans outstanding | 1.13 | 1.19 | 1.24 | |||||||||||||||||
| Tangible common equity to tangible assets | 8.01 | 7.88 | 8.03 | |||||||||||||||||
| Tier-1 leverage ratio | 8.7 | 8.5 | 8.6 | |||||||||||||||||
| Total capital ratio | 13.9 | 13.7 | 13.3 | |||||||||||||||||
| Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions) | $ | 9.4 | $ | 9.4 | $ | 9.0 | $ | 28.1 | $ | 27.0 | ||||||||||
This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto in HEI filings with the SEC. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.
10
American Savings Bank, F.S.B.
BALANCE SHEETS DATA
(Unaudited)
| (in thousands) | September 30, 2017 | December 31, 2016 | ||||||||||
| Assets | ||||||||||||
| Cash and due from banks | $ | 120,492 | $ | 137,083 | ||||||||
| Interest-bearing deposits | 69,223 | 52,128 | ||||||||||
| Restricted cash | — | 1,764 | ||||||||||
| Available-for-sale investment securities, at fair value | 1,320,110 | 1,105,182 | ||||||||||
| Stock in Federal Home Loan Bank, at cost | 9,706 | 11,218 | ||||||||||
| Loans receivable held for investment | 4,676,281 | 4,738,693 | ||||||||||
| Allowance for loan losses | (53,047 | ) | (55,533 | ) | ||||||||
| Net loans | 4,623,234 | 4,683,160 | ||||||||||
| Loans held for sale, at lower of cost or fair value | 15,728 | 18,817 | ||||||||||
| Other | 378,224 | 329,815 | ||||||||||
| Goodwill | 82,190 | 82,190 | ||||||||||
| Total assets | $ | 6,618,907 | $ | 6,421,357 | ||||||||
| Liabilities and shareholder’s equity | ||||||||||||
| Deposit liabilities–noninterest-bearing | $ | 1,710,698 | $ | 1,639,051 | ||||||||
| Deposit liabilities–interest-bearing | 4,041,628 | 3,909,878 | ||||||||||
| Other borrowings | 153,552 | 192,618 | ||||||||||
| Other | 107,558 | 101,635 | ||||||||||
| Total liabilities | 6,013,436 | 5,843,182 | ||||||||||
| Common stock | 1 | 1 | ||||||||||
| Additional paid in capital | 344,512 | 342,704 | ||||||||||
| Retained earnings | 279,956 | 257,943 | ||||||||||
| Accumulated other comprehensive loss, net of tax benefits | ||||||||||||
| Net unrealized losses on securities | $ | (5,479 | ) | $ | (7,931 | ) | ||||||
| Retirement benefit plans | (13,519 | ) | (18,998 | ) | (14,542 | ) | (22,473 | ) | ||||
| Total shareholder’s equity | 605,471 | 578,175 | ||||||||||
| Total liabilities and shareholder’s equity | $ | 6,618,907 | $ | 6,421,357 | ||||||||
This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto in HEI filings with the SEC.
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EXPLANATION OF HEI’S USE OF CERTAIN UNAUDITED NON-GAAP MEASURES
HEI and Hawaiian Electric Company management use certain non-GAAP measures to evaluate the performance of HEI and the utility. Management believes these non-GAAP measures provide useful information and are a better indicator of the companies’ core operating activities given the non-recurring nature of these items. Core earnings and other financial measures as presented here may not be comparable to similarly titled measures used by other companies. The accompanying tables provide a reconciliation of reported GAAP1 earnings to non-GAAP core earnings and the adjusted return on average common equity (ROACE) for HEI and the utility.
The reconciling adjustments from GAAP earnings to core earnings are limited to income, costs and associated taxes related to the terminated merger between HEI and NextEra Energy, Inc., the cancelled spin-off of ASB Hawaii, Inc., and the termination of the liquefied natural gas (LNG) contract which required the Hawaii Public Utilities Commission approval of the merger with NextEra Energy, Inc. For more information on the transactions, see HEI’s Form 8-K filed on July 18, 2016 and HEI’s Form 8-K filed on July 19, 2016. Management does not consider these items to be representative of the company’s fundamental core earnings.
The accompanying table also provides the calculation of utility GAAP other operation and maintenance (O&M ) expense adjusted for costs related to the terminated merger discussed above. “O&M-related net income neutral items” which are O&M expenses covered by specific surcharges or by third parties have also been excluded. These “O&M-related net income neutral items” are grossed-up in revenue and expense and do not impact net income.
RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES | |||||||||||||
| Hawaiian Electric Industries, Inc. and Subsidiaries (HEI) | |||||||||||||
| Unaudited | Three months ended September 30 | Nine months ended September 30 | |||||||||||
| ($ in millions, except per share amounts) | 2017 | 2016 | 2017 | 2016 | |||||||||
| HEI CONSOLIDATED (INCOME) EXPENSES RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY AND CANCELLED SPIN-OFF OF ASB HAWAII | |||||||||||||
| Pre-tax (income) expenses | $ | — | $ | (88.5 | ) | $ | — | $ | (84.9 | ) | |||
| Current income taxes (benefits) | — | 24.7 | — | 24.7 | |||||||||
| After-tax (income) expenses | $ | — | $ | (63.8 | ) | $ | — | $ | (60.3 | ) | |||
HEI CONSOLIDATED LNG CONTRACT COSTS2 | |||||||||||||
| Pre-tax expenses | $ | — | $ | — | $ | — | $ | 3.4 | |||||
| Current income taxes (benefits) | — | — | — | (1.3 | ) | ||||||||
| After-tax (income) expenses | $ | — | $ | — | $ | — | $ | 2.1 | |||||
| HEI CONSOLIDATED NET INCOME | |||||||||||||
| GAAP (as reported) | $ | 60.1 | $ | 127.1 | $ | 132.9 | $ | 203.6 | |||||
| Excluding special items (after-tax): | |||||||||||||
| (Income) expenses related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii | — | (63.8 | ) | — | (60.3 | ) | |||||||
Costs related to the terminated LNG contract2 | — | — | — | 2.1 | |||||||||
| Non-GAAP (core) net income | $ | 60.1 | $ | 63.3 | $ | 132.9 | $ | 145.4 | |||||
| HEI CONSOLIDATED DILUTED EARNINGS PER COMMON SHARE | |||||||||||||
| GAAP (as reported) | $ | 0.55 | $ | 1.17 | $ | 1.22 | $ | 1.88 | |||||
| Excluding special items (after-tax): | |||||||||||||
| (Income) expenses related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii | — | (0.59 | ) | — | (0.56 | ) | |||||||
Costs related to the terminated LNG contract2 | — | — | — | 0.02 | |||||||||
| Non-GAAP (core) diluted earnings per common share | $ | 0.55 | $ | 0.58 | $ | 1.22 | $ | 1.34 | |||||
| Twelve months ended September 30 | |||||||||||||
| 2017 | 2016 | ||||||||||||
HEI CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average) | |||||||||||||
| Based on GAAP | 8.5 | % | 12.3 | % | |||||||||
Based on non-GAAP (core)3 | 8.5 | % | 9.5 | % | |||||||||
| Note: Columns may not foot due to rounding | |||||||||||||
1 Accounting principles generally accepted in the United States of America | |||||||||||||
2 The LNG contract was terminated as it was conditioned on the merger with NextEra Energy closing | |||||||||||||
3 Calculated as core net income divided by average GAAP common equity | |||||||||||||
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RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES | |||||||||||||
| Hawaiian Electric Company, Inc. and Subsidiaries | |||||||||||||
| Unaudited | Three months ended September 30 | Nine months ended September 30 | |||||||||||
| ($ in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||
| HAWAIIAN ELECTRIC CONSOLIDATED COSTS RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY | |||||||||||||
| Pre-tax expenses | $ | — | $ | — | $ | — | $ | 0.1 | |||||
| Current income tax benefits | — | — | — | — | |||||||||
| After-tax expenses | $ | — | $ | — | $ | — | $ | 0.1 | |||||
HAWAIIAN ELECTRIC CONSOLIDATED LNG CONTRACT COSTS2 | |||||||||||||
| Pre-tax expenses | $ | — | $ | — | $ | — | $ | 3.4 | |||||
| Current income tax benefits | — | — | — | (1.3 | ) | ||||||||
| After-tax expenses | $ | — | $ | — | $ | — | $ | 2.1 | |||||
| HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME | |||||||||||||
| GAAP (as reported) | $ | 47.5 | $ | 47.0 | $ | 94.6 | $ | 108.2 | |||||
| Excluding special items (after-tax): | |||||||||||||
| Costs related to the terminated merger with NextEra Energy | — | — | — | 0.1 | |||||||||
Costs related to the terminated LNG contract2 | — | — | — | 2.1 | |||||||||
| Non-GAAP (core) net income | $ | 47.5 | $ | 47.0 | $ | 94.6 | $ | 110.3 | |||||
| Twelve months ended September 30 | |||||||||||||
| 2017 | 2016 | ||||||||||||
HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average) | |||||||||||||
| Based on GAAP | 7.16 | % | 8.11 | % | |||||||||
Based on non-GAAP (core)3 | 7.16 | % | 8.24 | % | |||||||||
| Three months ended September 30 | Nine months ended September 30 | ||||||||||||
| ($ in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||
| HAWAIIAN ELECTRIC CONSOLIDATED OTHER O&M EXPENSE | |||||||||||||
| GAAP (as reported) | $ | 100.1 | $ | 94.8 | $ | 306.7 | $ | 298.3 | |||||
Excluding other O&M-related net income neutral items4 | 0.7 | 1.4 | 2.7 | 4.6 | |||||||||
| Excluding costs related to the terminated merger with NextEra Energy | — | — | — | 0.1 | |||||||||
Excluding costs related to the terminated LNG contract2 | — | — | — | 3.4 | |||||||||
| Non-GAAP (Adjusted other O&M expense) | $ | 99.4 | $ | 93.4 | $ | 304.0 | $ | 290.2 | |||||
| Note: Columns may not foot due to rounding | |||||||||||||
1 Accounting principles generally accepted in the United States of America | |||||||||||||
2 The LNG contract was terminated as it was conditioned on the merger with NextEra Energy closing | |||||||||||||
3 Calculated as core net income divided by average GAAP common equity | |||||||||||||
4 Expenses covered by surcharges or by third parties recorded in revenues | |||||||||||||
13