Hawaiian Electric Industries Reports Second Quarter 2014 Earnings Consolidated Earnings Per Share of $0.41

Utility and Bank Deliver Results In Line with Expectations

HONOLULU, Aug. 11, 2014 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock for the second quarter of 2014 of $41.4 million, or $0.41 diluted earnings per share (EPS), compared to $40.6 million, or $0.41 diluted EPS for the second quarter of 2013.

"HEI's financial results were in line with internal expectations.  Our utilities are aggressively managing costs and redirecting savings to accelerate investments for the benefit of our customers.  We are making investments to improve reliability, increase the amount of renewables and pave the way for expected lower costs for customers," said Constance H. Lau, HEI president and chief executive officer.

"American Savings Bank continued to deliver solid results with year-to-date annualized loan growth of 6.5% which helped offset the impact of the continued low interest rate environment.  American paid dividends of $9.75 million to HEI in the quarter while maintaining strong capital levels," added Lau.

HAWAIIAN ELECTRIC COMPANY CONTINUES INVESTMENTS FOR IMPROVED RELIABILITY TO BETTER SERVE OUR CUSTOMERS

Hawaiian Electric Company's1 net income for the second quarter of 2014 was $34.2 million compared to $28.7 million in the second quarter of 2013.  The $5.5 million increase from the prior year was driven by the following items (on an after-tax basis):

  • Net revenues2 were $11 million higher compared to the second quarter of 2013 primarily due to $8 million in 2014 revenues attributable to the recovery of costs for clean energy and reliability investments and a $4 million refund to customers recorded in the second quarter 2013 resulting from the final Maui County 2012 rate case decision.

These increases were partially offset by the following (on an after-tax basis):

  • Operations and maintenance (O&M) expenses3 were $2 million higher in the second quarter of 2014 compared to the same quarter last year.  This is largely due to expenses related to installing smart grid technologies as part of our grid modernization program and reversals in the second quarter of 2013 of previously expensed costs, partially offset by savings from the deactivation of generating units;
  • Depreciation expense for the second quarter of 2014 was $2 million higher as a result of increasing investments for integration of more renewable energy, improved customer reliability and greater system efficiency; and
  • Interest expense was $1 million higher in the second quarter of 2014 due to new debt issued in the fourth quarter of 2013 to fund our clean energy and reliability investments.

1 Hawaiian Electric Company, unless otherwise defined, refers to the three utilities, Hawaiian Electric Company, Inc. on Oahu, Maui Electric Company, Limited, and Hawaii Electric Light Company, Inc.

2 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 Consolidated Statements of Income.

3 Excludes net income neutral expenses covered by surcharges or by third parties of $3 million in the second quarter of 2014 and $2 million in the second quarter of 2013. See "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.

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.

AMERICAN SAVINGS BANK CONTINUES TO DELIVER SOLID PERFORMANCE

American Savings Bank's (American) net income for the second quarter of 2014 was $11.7 million compared to $14.5 million in the first, or linked, quarter of 2014 and $15.9 million in the second quarter of 2013.

Second quarter 2014 net income was $2.9 million lower than the linked quarter primarily driven by (on an after-tax basis) a first quarter $2 million gain on the sale of the municipal bond securities portfolio and a $1 million increase in noninterest expense due to higher branch security expense, product development expenses and the timing of expenses associated with debit cards. 

Compared to the second quarter of 2013, net income decreased by $4.2 million.  The decrease was primarily driven by (on an after-tax basis):  $1 million lower interchange fees due to the Durbin Amendment which placed a limit on interchange fees and became effective on July 1, 2013; $1 million decrease in mortgage banking income; $1 million lower gain on sale of securities; and $1 million higher provision for loan losses.

Overall, American achieved solid profitability with a year-to-date annualized return on average equity of 9.9% and a return on average assets of 0.98%.

Please also refer to the American news release issued on July 30, 2014.

HOLDING AND OTHER COMPANIES

The holding and other companies' net losses were $4.5 million in the second quarter of 2013 compared to $4.0 million in the second quarter of 2013. The higher net loss was due to higher administrative and general expenses partially offset by lower interest expense.

HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE

Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its second quarter 2014 earnings and 2014 EPS guidance on Monday, August 11, 2014 at 7:00 a.m. Hawaii time (1:00 p.m. Eastern time).  The event can be accessed through HEI's website at www.hei.com or by dialing (877) 474-9504, passcode: 92297255 for the teleconference call.  The presentation for the webcast will be on HEI's website under the heading "Investor Relations."  HEI and Hawaiian Electric Company intend to continue to use HEI's website, www.hei.com, 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.  Also, at the Investor Relations section of HEI's website, investors may sign up to receive e-mail alerts (based on each investor's selected preferences).  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 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 on-line replay of the webcast will be available on HEI's website beginning about two hours after the event.  Audio replays of the teleconference will also be available approximately two hours after the event through August 25, 2014, by dialing (888) 286-8010, passcode: 58411343.

HEI supplies power to approximately 450,000 customers or 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, 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 14 to 15 of this release.

FORWARD-LOOKING STATEMENTS

This release may contain "forward-looking statements," which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as "expects," "anticipates," "intends," "plans," "believes," "predicts," "estimates" or similar expressions.  In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements.  Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries, the performance of the industries in which they do business and economic and market factors, among other things.  These forward-looking statements are not guarantees of future performance.

Forward-looking statements in this release should be read in conjunction with the "Forward-Looking Statements" and "Risk Factors" discussions (which are incorporated by reference herein) set forth in HEI's Annual Report on Form 10-K for the year ended December 31, 2013, HEI's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 and HEI's future periodic reports that discuss important factors that could cause HEI's results to differ materially from those anticipated in such statements.  These forward-looking statements speak only as of the date of the report, presentation or filing in which they are made.  Except to the extent required by the federal securities laws, HEI, Hawaiian Electric Company, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


Three months ended
June 30


Six months ended
June 30

(in thousands, except per share amounts)

2014


2013


2014


2013

Revenues








Electric utility

$

738,429


$

728,525


$

1,458,491


$

1,445,966

Bank

60,616


66,027


124,235


130,783

Other

(388)


15


(320)


50

Total revenues

798,657


794,567


1,582,406


1,576,799

Expenses








Electric utility

668,361


669,550


1,317,757


1,335,870

Bank

43,568


41,322


85,564


84,327

Other

4,453


3,488


8,504


7,570

Total expenses

716,382


714,360


1,411,825


1,427,767

Operating income (loss)








Electric utility

70,068


58,975


140,734


110,096

Bank

17,048


24,705


38,671


46,456

Other

(4,841)


(3,473)


(8,824)


(7,520)

Total operating income

82,275


80,207


170,581


149,032

Interest expense, net—other than on deposit liabilities and other bank borrowings

(20,022)


(18,442)


(39,478)


(37,173)

Allowance for borrowed funds used during construction

523


398


1,137


1,128

Allowance for equity funds used during construction

1,387


1,560


2,996


2,775

Income before income taxes

64,163


63,723


135,236


115,762

Income taxes

22,269


22,662


46,942


40,549

Net income

41,894


41,061


88,294


75,213

Preferred stock dividends of subsidiaries

473


473


946


946

Net income for common stock

$

41,421


$

40,588


$

87,348


$

74,267

Basic earnings per common share

$

0.41


$

0.41


$

0.86


$

0.75

Diluted earnings per common share

$

0.41


$

0.41


$

0.86


$

0.75

Dividends per common share

$

0.31


$

0.31


$

0.62


$

0.62

Weighted-average number of common shares outstanding

101,495


98,660


101,439


98,399

Adjusted weighted-average shares

101,825


99,249


102,045


98,961

Net income (loss) for common stock by segment








Electric utility

$

34,230


$

28,693


$

69,650


$

53,122

Bank

11,676


15,919


26,215


30,074

Other

(4,485)


(4,024)


(8,517)


(8,929)

Net income for common stock

$

41,421


$

40,588


$

87,348


$

74,267

Comprehensive income attributable to Hawaiian Electric Industries, Inc.

$

44,321


$

32,283


$

91,415


$

65,901

Return on average common equity (twelve months ended1





10.3%


8.5%

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014 (when filed), as updated by SEC Forms 8-K. 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, 2014 and 2013 return on average common equity (twelve months ended June 30) were 10.3% and 10.0%, respectively.  See reconciliation of GAAP to non-GAAP measures.



Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(dollars in thousands)

June 30, 2014


December 31, 2013

Assets




Cash and cash equivalents

$

188,377


$

220,036

Accounts receivable and unbilled revenues, net

349,771


346,785

Available-for-sale investment and mortgage-related securities

549,321


529,007

Investment in stock of Federal Home Loan Bank of Seattle

80,863


92,546

Loans receivable held for investment, net

4,245,240


4,110,113

Loans held for sale, at lower of cost or fair value

956


5,302

Property, plant and equipment, net of accumulated depreciation of $2,224,728 and $2,192,422 at the respective dates

3,980,096


3,865,514

Regulatory assets

582,645


575,924

Other

557,684


512,627

Goodwill

82,190


82,190

Total assets

$

10,617,143


$

10,340,044

Liabilities and shareholders' equity




Liabilities




Accounts payable

$

176,379


$

212,331

Interest and dividends payable

25,315


26,716

Deposit liabilities

4,524,860


4,372,477

Short-term borrowings—other than bank

185,175


105,482

Other bank borrowings

242,455


244,514

Long-term debt, net—other than bank

1,517,945


1,492,945

Deferred income taxes

579,222


529,260

Regulatory liabilities

354,980


349,299

Contributions in aid of construction

442,379


432,894

Defined benefit pension and other postretirement benefit plans liability

278,427


288,539

Other

494,834


524,224

Total liabilities

8,821,971


8,578,681

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: 101,560,176 shares and 101,259,800 shares at the respective dates

1,493,436


1,488,126

Retained earnings

280,126


255,694

Accumulated other comprehensive loss, net of tax benefits

(12,683)


(16,750)

Total shareholders' equity

1,760,879


1,727,070

Total liabilities and shareholders' equity

$

10,617,143


$

10,340,044

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014 (when filed), as updated by SEC Forms 8-K.



Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Six months ended June 30

2014


2013

(in thousands)




Cash flows from operating activities




Net income

$

88,294


$

75,213

Adjustments to reconcile net income to net cash provided by operating activities




Depreciation of property, plant and equipment

86,397


79,843

Other amortization

4,014


2,868

Provision for loan losses

2,016


899

Loans receivable originated and purchased, held for sale

(69,656)


(128,276)

Proceeds from sale of loans receivable, held for sale

75,040


148,243

Increase in deferred income taxes

28,252


40,403

Excess tax benefits from share-based payment arrangements

(267)


(445)

Allowance for equity funds used during construction

(2,996)


(2,775)

Change in cash overdraft

(1,038)


Changes in assets and liabilities




Decrease (increase) in accounts receivable and unbilled revenues, net

(2,986)


3,564

Decrease (increase) in fuel oil stock

(27,206)


43,974

Increase in regulatory assets

(17,731)


(37,586)

Decrease in accounts, interest and dividends payable

(64,843)


(43,384)

Change in prepaid and accrued income taxes and utility revenue taxes

(32,510)


(33,822)

Decrease in defined benefit pension and other postretirement benefit plans liability

(1,714)


(330)

Change in other assets and liabilities

(16,871)


(17,597)

Net cash provided by operating activities

46,195


130,792

Cash flows from investing activities




Available-for-sale investment and mortgage-related securities purchased

(125,531)


(39,721)

Principal repayments on available-for-sale investment and mortgage-related securities

33,202


62,819

Proceeds from sale of available-for-sale investment securities

79,564


71,367

Redemption of stock from Federal Home Loan Bank of Seattle

11,683


1,742

Net increase in loans held for investment

(137,122)


(201,184)

Proceeds from sale of real estate acquired in settlement of loans

2,162


5,712

Capital expenditures

(149,253)


(158,830)

Contributions in aid of construction

13,209


17,188

Other

(16)


622

Net cash used in investing activities

(272,102)


(240,285)

Cash flows from financing activities




Net increase in deposit liabilities

152,383


46,326

Net increase in short-term borrowings with original maturities of three months or less

79,693


42,093

Net decrease in retail repurchase agreements

(2,053)


(8,054)

Proceeds from other bank borrowings


25,000

Repayments of other bank borrowings


(25,000)

Proceeds from issuance of long-term debt

125,000


50,000

Repayment of long-term debt

(100,000)


(50,000)

Excess tax benefits from share-based payment arrangements

267


445

Net proceeds from issuance of common stock

3,048


11,994

Common stock dividends

(62,892)


(48,921)

Preferred stock dividends of subsidiaries

(946)


(946)

Other

(252)


606

Net cash provided by financing activities

194,248


43,543

Net decrease in cash and cash equivalents

(31,659)


(65,950)

Cash and cash equivalents, beginning of period

220,036


219,662

Cash and cash equivalents, end of period

$

188,377


$

153,712

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014 (when filed), as updated by SEC Forms 8-K. Cash flows for interim periods are not necessarily indicative of cash flows to be expected for future interim periods or the full year.



Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



Three months ended
June 30

Six months ended
June 30

(dollars in thousands, except per barrel amounts)

2014


2013


2014


2013

Revenues

$

738,429


$

728,525


$

1,458,491


$

1,445,966

Expenses








Fuel oil

270,257


289,278


556,557


594,378

Purchased power

188,323


178,444


353,239


331,808

Other operation and maintenance

98,564


94,397


187,170


196,210

Depreciation

41,593


38,590


83,196


76,870

Taxes, other than income taxes

69,624


68,841


137,595


136,604

Total expenses

668,361


669,550


1,317,757


1,335,870

Operating income

70,068


58,975


140,734


110,096

Allowance for equity funds used during construction

1,387


1,560


2,996


2,775

Interest expense and other charges, net

(16,852)


(14,408)


(32,575)


(28,927)

Allowance for borrowed funds used during construction

523


398


1,137


1,128

Income before income taxes

55,126


46,525


112,292


85,072

Income taxes

20,397


17,333


41,644


30,952

Net income

34,729


29,192


70,648


54,120

Preferred stock dividends of subsidiaries

229


229


458


458

Net income attributable to Hawaiian Electric

34,500


28,963


70,190


53,662

Preferred stock dividends of Hawaiian Electric

270


270


540


540

Net income for common stock

34,230


28,693


$

69,650


$

53,122

Comprehensive income attributable to Hawaiian Electric

$

34,243


$

28,710


$

69,672


$

53,157

OTHER ELECTRIC UTILITY INFORMATION








Kilowatthour sales (millions)








Hawaiian Electric

1,652


1,702


3,247


3,293

Hawaii Electric Light

261


265


520


528

Maui Electric

276


280


548


549


2,189


2,247


4,315


4,370

Wet-bulb temperature (Oahu average; degrees Fahrenheit)

69.1


69.3


68.1


67.6

Cooling degree days (Oahu)

1,244


1,114


2,072


1,903

Average fuel oil cost per barrel

$

132.07


$

129.94


$

131.60


$

131.49










Twelve months ended June 30






2014


2013

Return on average common equity (%) (simple average)1








Hawaiian Electric





9.56


6.80

Hawaii Electric Light





7.58


5.18

Maui Electric





8.16


7.39

Hawaiian Electric Consolidated





8.99


6.58

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in Hawaiian Electric's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and the consolidated financial statements and the notes thereto in Hawaiian Electric's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

On a core basis, the 2014 and 2013 return on average common equity (twelve months ended June 30) were 9.6% and 8.7%, respectively for Hawaiian Electric; 7.6% and 6.4%, respectively for Hawaii Electric Light; 8.2% and 8.8%, respectively for Maui Electric and 9.0% and 8.3% respectively, for Hawaiian Electric Consolidated.  See reconciliation of GAAP to non-GAAP measures.



Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(dollars in thousands, except par value)

June 30, 2014


December 31, 2013

Assets




Property, plant and equipment




Utility property, plant and equipment




Land

$

52,010


$

51,883

Plant and equipment

5,830,723


5,701,875

Less accumulated depreciation

(2,150,913)


(2,111,229)

Construction in progress

168,280


143,233

  Utility property, plant and equipment, net

3,900,100


3,785,762

Nonutility property, plant and equipment, less accumulated depreciation of $1,226 and $1,223 at respective dates

6,564


6,567

Total property, plant and equipment, net

3,906,664


3,792,329

Current assets




Cash and cash equivalents

12,720


62,825

Customer accounts receivable, net

175,634


175,448

Accrued unbilled revenues, net

141,869


144,124

Other accounts receivable, net

18,915


14,062

Fuel oil stock, at average cost

161,293


134,087

Materials and supplies, at average cost

60,879


59,044

Prepayments and other

61,891


52,857

Regulatory assets

78,945


69,738

Total current assets

712,146


712,185

Other long-term assets




Regulatory assets

503,700


506,186

Unamortized debt expense

8,905


9,003

Other

68,426


67,426

Total other long-term assets

581,031


582,615

Total assets

$

5,199,841


$

5,087,129

Capitalization and liabilities




Capitalization




Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 15,429,105 shares)

$

102,880


$

102,880

Premium on capital stock

541,449


541,452

Retained earnings

974,028


948,624

Accumulated other comprehensive income, net of income taxes-retirement benefit plans

630


608

Common stock equity

1,618,987


1,593,564

Cumulative preferred stock — not subject to mandatory redemption

34,293


34,293

Long-term debt, net

1,206,545


1,206,545

Total capitalization

2,859,825


2,834,402

Current liabilities




Current portion of long-term debt

11,400


11,400

Short-term borrowings from non-affiliates

102,989


Accounts payable

153,743


189,559

Interest and preferred dividends payable

21,751


21,652

Taxes accrued

216,374


249,445

Regulatory liabilities

789


1,916

Other

64,569


63,881

Total current liabilities

571,615


537,853

Deferred credits and other liabilities




Deferred income taxes

557,056


507,161

Regulatory liabilities

354,191


347,383

Unamortized tax credits

77,713


73,539

Defined benefit pension and other postretirement benefit plans liability

252,785


262,162

Other

84,277


91,735

Total deferred credits and other liabilities

1,326,022


1,281,980

Contributions in aid of construction

442,379


432,894

Total capitalization and liabilities

$

5,199,841


$

5,087,129

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in Hawaiian Electric's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and the consolidated financial statements and the notes thereto in Hawaiian Electric's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014 (when filed), as updated by SEC Forms 8-K.



Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Six months ended June 30

2014


2013

(in thousands)




Cash flows from operating activities




Net income

$

70,648


$

54,120

Adjustments to reconcile net income to net cash provided by operating activities




Depreciation of property, plant and equipment

83,196


76,870

Other amortization

3,597


2,884

Increase in deferred income taxes

45,386


38,780

Change in tax credits, net

4,227


2,997

Allowance for equity funds used during construction

(2,996)


(2,775)

Change in cash overdraft

(1,038)


Changes in assets and liabilities




Decrease (increase) in accounts receivable

(5,039)


32,253

Decrease (increase) in accrued unbilled revenues

2,255


(4,889)

Decrease (increase) in fuel oil stock

(27,206)


43,974

Increase in materials and supplies

(1,835)


(7,139)

Increase in regulatory assets

(17,731)


(37,586)

Decrease in accounts payable

(63,306)


(41,234)

Change in prepaid and accrued income taxes and utility revenue taxes

(38,270)


(38,123)

Increase (decrease) in defined benefit pension and other postretirement benefit plans liability

(498)


989

Change in other assets and liabilities

(26,258)


(9,419)

Net cash provided by operating activities

25,132


111,702

Cash flows from investing activities




Capital expenditures

(145,734)


(150,251)

Contributions in aid of construction

13,209


17,188

Other


623

Net cash used in investing activities

(132,525)


(132,440)

Cash flows from financing activities




Common stock dividends

(44,246)


(40,789)

Preferred stock dividends of Hawaiian Electric and subsidiaries

(998)


(998)

Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less

102,989


53,992

Other

(457)


(9)

Net cash provided by financing activities

57,288


12,196

Net decrease in cash and cash equivalents

(50,105)


(8,542)

Cash and cash equivalents, beginning of period

62,825


17,159

Cash and cash equivalents, end of period

$

12,720


$

8,617

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in Hawaiian Electric's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and the consolidated financial statements and the notes thereto in Hawaiian Electric's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014 (when filed), as updated by SEC Forms 8-K. Cash flows for interim periods are not necessarily indicative of cash flows to be expected for future interim periods or the full year.



American Savings Bank, F.S.B.

STATEMENTS OF INCOME DATA

(Unaudited)



Three months ended 


Six months ended June 30

(in thousands)

June 30, 2014


March 31, 2014


June 30, 2013


2014


2013

Interest and dividend income










Interest and fees on loans

$

43,851


$

43,682


$

43,624


$

87,533


$

86,227

Interest and dividends on investment and mortgage-related securities

2,950


3,035


3,234


5,985


6,698

Total interest and dividend income

46,801


46,717


46,858


93,518


92,925

Interest expense










Interest on deposit liabilities

1,237


1,225


1,296


2,462


2,608

Interest on other borrowings

1,420


1,405


1,178


2,825


2,342

Total interest expense

2,657


2,630


2,474


5,287


4,950

Net interest income

44,144


44,087


44,384


88,231


87,975

Provision (credit) for loan losses

1,021


995


(959)


2,016


899

Net interest income after provision (credit) for loan losses

43,123


43,092


45,343


86,215


87,076

Noninterest income










Fees from other financial services

5,217


5,128


7,996


10,345


15,639

Fee income on deposit liabilities

4,645


4,421


4,433


9,066


8,747

Fee income on other financial products

2,064


2,290


1,780


4,354


3,574

Mortgage banking income

246


628


2,003


874


5,349

Gain on sale of securities


2,847


1,226


2,847


1,226

Other income, net

1,643


1,588


1,731


3,231


3,323

Total noninterest income

13,815


16,902


19,169


30,717


37,858

Noninterest expense










Compensation and employee benefits

19,872


20,286


20,063


40,158


40,151

Occupancy

4,489


3,953


4,219


8,442


8,342

Data processing

2,971


3,060


2,827


6,031


5,814

Services

2,855


2,273


2,328


5,128


4,431

Equipment

1,609


1,645


1,870


3,254


3,644

Other expense

8,094


7,153


8,500


15,247


16,095

Total noninterest expense

39,890


38,370


39,807


78,260


78,477

Income before income taxes

17,048


21,624


24,705


38,672


46,457

Income taxes

5,372


7,085


8,786


12,457


16,383

Net income

$

11,676


$

14,539


$

15,919


$

26,215


$

30,074

Comprehensive income

$

14,434


$

15,563


$

7,340


$

29,997


$

22,824

OTHER BANK INFORMATION (annualized %, except as of period end)











Return on average assets

0.87


1.10


1.25


0.98


1.19

Return on average equity

8.78


11.03


12.56


9.90


11.93

Return on average tangible common equity

10.39


13.06


15.00


11.72


14.25

Net interest margin

3.55


3.64


3.79


3.59


3.79

Net charge-offs (recoveries) to average loans outstanding

(0.04)


0.02


0.08


(0.01)


0.10

As of period end










Nonperforming assets to loans outstanding and real estate owned *

1.05


1.12


1.56





Allowance for loan losses to loans outstanding

0.99


0.98


1.04





Tier-1 leverage ratio *

9.0


9.0


9.3





Total risk-based capital ratio *

12.6


12.7


12.5





Tangible common equity to total assets

8.46


8.44


8.42





Dividend paid to HEI (via ASHI) ($ in millions)

10


9


10





*  Regulatory basis

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014 (when filed), as updated by SEC Forms 8-K. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.



American Savings Bank, F.S.B.

BALANCE SHEETS DATA

(Unaudited)


(in thousands)

June 30, 2014


December 31, 2013

Assets








Cash and cash equivalents



$

174,950




$

156,603

Available-for-sale investment and mortgage-related securities



549,321




529,007

Investment in stock of Federal Home Loan Bank of Seattle



80,863




92,546

Loans receivable held for investment



4,287,612




4,150,229

Allowance for loan losses



(42,372)




(40,116)

Loans receivable held for investment, net



4,245,240




4,110,113

Loans held for sale, at lower of cost or fair value



956




5,302

Other



284,607




268,063

Goodwill



82,190




82,190

Total assets



$

5,418,127




$

5,243,824









Liabilities and shareholder's equity








Deposit liabilities—noninterest-bearing



$

1,301,758




$

1,214,418

Deposit liabilities—interest-bearing



3,223,102




3,158,059

Other borrowings



242,455




244,514

Other



116,953




105,679

Total liabilities



4,884,268




4,722,670

Common stock



337,262




336,054

Retained earnings



205,012




197,297

Accumulated other comprehensive loss, net of tax benefits








Net unrealized losses on securities

$

(315)




$

(3,663)



Retirement benefit plans

(8,100)


(8,415)


(8,534)


(12,197)

Total shareholder's equity



533,859




521,154

Total liabilities and shareholder's equity



$

5,418,127




$

5,243,824

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 2013 and HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014 (when filed), as updated by SEC Forms 8-K.

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 the utility and HEI.  Management believes these non-GAAP measures provide useful information and are a better indicator of the companies' core operating activities.  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 for both the utility and HEI consolidated and the corresponding adjusted return on average common equity (ROACE).

The reconciling adjustments from GAAP earnings to core earnings are limited to the settlement charge for the partial write-off of utility assets in the fourth quarter of 2012.  For more information on the settlement charge recorded in 2012, see the Form 8-K filed on March 20, 2013.  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 O&M adjusted for "O&M-related net income neutral items" which are O&M expenses covered by specific surcharges or by third parties.  This item is grossed-up in revenue and expense and does not impact net income.



RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES

Hawaiian Electric Industries, Inc. and Subsidiaries (HEI)

Unaudited




($ in millions)








Twelve months ended June 30,

2014


2013

HEI CONSOLIDATED NET INCOME




GAAP (as reported)

$

174.6


$

135.8

Excluding special items (after-tax):




Settlement agreement for the partial writedown of certain utility assets


24.4

Non-GAAP (core)

$

174.6


$

160.2

HEI CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average)

Based on GAAP

10.3%


8.5%

Based on non-GAAP (core)2

10.3%


10.0%

Note:  Columns may not foot due to rounding


1  Accounting principles generally accepted in the United States of America


2  Calculated as core net income divided by average GAAP common equity



RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES

Hawaiian Electric Company, Inc. and Subsidiaries

Unaudited


($ in millions)




Twelve months ended June 30,

2014


2013

HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME




GAAP (as reported)

$

139.5


$

95.7

Excluding special items (after-tax):




Settlement agreement for the partial writedown of certain utility assets


24.4

Non-GAAP (core)

$

139.5


$

120.2





HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average):




Based on GAAP

9.0%


6.6%

Based on non-GAAP (core)2

9.0%


8.3%




Hawaiian Electric


Hawaii Electric Light


Maui Electric

Twelve months ended June 30,

 

2014


2013


2014


2013


2014


2013

NET INCOME












GAAP (as reported)

 

$

98.9


$

64.0


$

20.8


$

14.4


$

19.7


$

17.3

Excluding special items (after-tax):












Settlement agreement for the partial writedown of certain utility assets

 


17.7



3.4



3.4

Non-GAAP (core)

 

$

98.9


$

81.7


$

20.8


$

17.8


$

19.7


$

20.7













RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average):

Based on GAAP

 

9.6%


6.8%


7.6%


5.2%


8.2%


7.4%

Based on non-GAAP (core)2

 

9.6%


8.7%


7.6%


6.4%


8.2%


8.8%













Three months ended June 30,









2014


2013

HAWAIIAN ELECTRIC CONSOLIDATED OTHER OPERATION AND MAINTENANCE (O&M) EXPENSE

GAAP (as reported)









$

98.6


$

94.4

Excluding O&M-related net income neutral items3









(2.9)


(2.0)

Adjusted O&M expense (Non-GAAP measure)









$

95.6


$

92.4


Note:  Columns may not foot due to rounding

Accounting principles generally accepted in the United States of America

2  Calculated as core net income divided by average GAAP common equity

3  Expenses covered by surcharges or by third parties recorded in revenues


Contact:

Clifford H. Chen



Manager, Investor Relations &

Telephone: (808) 543-7384


Strategic Planning

E-mail: cchen@hei.com

Logo - http://photos.prnewswire.com/prnh/20110411/LA80136LOGO

SOURCE Hawaiian Electric Industries, Inc.



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