HEI Reports Second Quarter 2011 Earnings & Declares Dividend

Diluted Earnings Per Share $0.28 in 2Q 2011 vs $0.31 in 2Q 2010

Interim Rate Increase Granted to Oahu Utility in July

Bank Continues Solid Performance

Board of Directors Declares Dividend of $0.31 Per Share

03 Aug, 2011, 20:00 ET from Hawaiian Electric Industries, Inc.

HONOLULU, Aug. 3, 2011 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE: HE) (HEI) today reported consolidated net income for common stock for the second quarter of 2011 was $27.1 million, or $0.28 diluted EPS, compared to $29.3 million, or $0.31 diluted EPS for the second quarter of 2010.  

“Earnings were lower in the second quarter as our utilities invested in their clean energy and reliability strategies which required additional capital investments and higher operating expenses.  Now that rate relief has recently been approved for our largest utility, earnings should improve in the second half of the year,” said Constance H. Lau, HEI president and chief executive officer.

“At our bank, we had another solid quarter with continued improvement in credit quality and loan growth for the third consecutive quarter.  Performance continued to exceed peer banks with a return on assets of 1.24%, net interest margin of 4.07% and efficiency ratio of 57%,” added Lau.

UTILITY CONTINUES TO INVEST IN CLEAN ENERGY STRATEGIES

Electric utility net income for the second quarter of 2011 was $17.0 million compared to $17.6 million in the second quarter of 2010. The $0.6 million net income decline resulted primarily from (on an after-tax basis):

  • $3 million higher planned operations and maintenance (O&M) expenses(1);
  • $2 million of unusual items that are unlikely to recur including a 2011 billing adjustment and 2010 fuel cost recovery of previously recognized biofuels costs;
  • $1 million lower fuel efficiency savings attributable to the implementation of the heat rate deadband which became effective with decoupling; and
  • $1 million lower allowance for funds used during construction as a result of projects put into service in 2010.

The quarter benefitted from several key developments, including:

  • $2 million of rate relief granted in late 2010 and early 2011 for our Maui County and Hawaii Island utilities, respectively;
  • $2 million lower depreciation expense from the change in depreciation rates and methods for our Hawaii Island and Maui County utilities; and
  • $1 million write-down of our investment in the combined heat and power system in 2010.

Our Oahu utility implemented sales decoupling earlier this year, and its second quarter decoupling revenues were essentially flat with sales revenues in the second quarter of 2010.  For our Hawaii Island and Maui County utilities which are awaiting decoupling implementation, their combined kilowatthour sales were flat compared with the same quarter last year.

As planned, O&M expenses(1) increased 6% over the same quarter last year to safely and responsibly operate our systems, invest in our clean energy strategies and serve our customers.  This is in line with our previous guidance of a full year increase of 7% over the prior year.  The second quarter increase was primarily due to higher transmission and distribution operations, vegetation, substation maintenance and administrative and general expenses.  We are now targeting O&M to be flat with 2010.  Oahu expenses in 2011 are expected to be higher than in 2010, but consistent with the levels included in our recent rate decision.  Hawaii Island and Maui County expenses in 2011 are expected to be slightly lower than in 2010.

Effective July 26, 2011, the Public Utilities Commission granted HECO a net interim increase of $38.2 million in annual revenues, or 2.2% increase, net of revenues previously being recovered through the decoupling Revenue Adjustment Mechanism.

(1) Excludes demand-side management (DSM) program costs. DSM program costs were $1 million in the second quarter of 2011 compared to nil in the second quarter of 2010.  DSM program costs are recovered through a surcharge.

SOLID BANK PERFORMANCE:  CONTINUED IMPROVEMENT IN CREDIT QUALITY AND MODERATE LOAN GROWTH

Bank net income for the second quarter of 2011 was $15.2 million, compared to $13.9 million in the first, or linked, quarter of 2011.  Loans and total assets increased $31 million and $32 million, respectively, over the same period, representing the third consecutive quarter of loan growth and second consecutive quarter of asset growth.

The $1.3 million increase in second quarter 2011 net income compared to the linked quarter was primarily due to (on an after-tax basis):

  • $1 million lower provision for loan losses from continued improvement in credit quality and portfolio mix; and
  • $1 million higher noninterest income from a non-recurring insurance gain and higher fee income.

These were partially offset by $1 million higher noninterest expense.

Compared to the same quarter of 2010, net income decreased by $0.9 million as a $2 million after-tax reduction in noninterest expense was more than offset by (on an after-tax basis):

  • $1 million reduction in noninterest income due to lower overdraft fees of $2 million as a result of regulatory changes which became effective in the third quarter of 2010, partially offset by the non-recurring insurance gain and higher fees for other products and services; 
  • $1 million reduction in net interest income principally due to the year-over-year runoff in the residential loan portfolio; and
  • $1 million higher provision for loan losses (as the current quarter had no comparable significant reserve reversal as was realized in the second quarter of 2010).

Net interest margin was 4.07% in the second quarter of 2011, down from 4.16% in the linked quarter and 4.22% in the second quarter of 2010.  The decline in net interest margin from the linked quarter was attributable primarily to lower deferred loan fees associated with lower loan prepayments, as well as lower yields on newly originated assets.     

Provision for loan losses (pretax) was $2.6 million in the second quarter of 2011 compared to $1.0 million in the second quarter of 2010 and $4.6 million in the linked quarter.  The provision in the second quarter 2010 was lower due to $2.4 million of loan loss reserves that were released attributable to two specific loans.  The company continues to expect loan loss provision expense to be in the range of $15 to $20 million for the full year of 2011.

The second quarter 2011 net charge-off ratio remains low and declined further to 0.45%, from 0.49% reported in the linked quarter and from the 0.57% in the second quarter last year.

Noninterest expense (pretax) for the second quarter 2011 of $36.2 million was down from $39.6 million in the second quarter of 2010 and up $1.1 million compared to the linked quarter.  This is in line with our annual noninterest expense target of $145 million for 2011. 

The bank remains well-capitalized with a Tier 1 leverage ratio of 9.1% and total risk-based capital ratio of 13.3% as of the end of the second quarter of 2011.

HOLDING AND OTHER COMPANIES

The holding and other companies’ net losses were $5.1 million in the second quarter of 2011 compared to $4.5 million in the second quarter of 2010.

BOARD DECLARES QUARTERLY DIVIDEND

On August 2, 2011, the board of directors of HEI maintained the regular quarterly cash dividend of 31 cents per share, payable on September 13, 2011, to shareholders of record at the close of business on August 15, 2011 (ex-dividend date is August 11, 2011).  The dividend is equivalent to an annual rate of $1.24 per share.

Dividends have been paid continuously since 1901.  At the indicated annual dividend rate and the closing share price on August 2, 2011 of $23.11, HEI’s yield is 5.4%.

WEBCAST AND TELECONFERENCE

Hawaiian Electric Industries, Inc. will conduct a webcast and teleconference call to review its second quarter 2011 earnings on Thursday, August 4, 2011, at 8:00 a.m. Hawaii time (2:00 p.m. Eastern time).  The event can be accessed through HEI’s website at www.hei.com or by dialing (800) 901-5241, passcode:  40101562 for the teleconference call.  HEI and Hawaiian Electric Company, Inc. (HECO) 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, HECO’s and American Savings Bank, F.S.B.’s (ASB) press releases, SEC filings and public conference calls and webcasts.  Investors may also wish to refer to the PUC website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC.  The HEI and PUC websites, and the information included on those websites, are not incorporated into HEI and HECO filings with the SEC.

An online replay of the webcast will be available at the same website beginning about two hours after the event.  Replays of the teleconference call will also be available approximately two hours after the event through August 18, 2011, by dialing (888) 286-8010, passcode: 78587296.

HEI supplies power to over 400,000 customers or 95% of Hawaii’s population through its electric utilities, HECO, 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 ASB, one of Hawaii’s largest financial institutions.

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 (including future revenues, expenses, earnings or losses or growth rates), ongoing business strategies or prospects or possible future actions, which may be provided by management, 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 assumptions about 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” discussion (which is incorporated by reference herein) set forth on pages iv and v of HEI's Quarterly Report on Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011 (when filed), and in HEI’s future periodic reports that discuss important factors that could cause HEI’s results to differ materially from those anticipated in such statements.  Forward-looking statements speak only as of the date of this release.

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)

2011

2010

2011

2010

Revenues

Electric utility

$ 728,738

$ 584,095

$ 1,374,073

$ 1,132,206

Bank

66,318

71,632

131,631

142,546

Other

(737)

(63)

(752)

(48)

794,319

655,664

1,504,952

1,274,704

Expenses

Electric utility

686,220

542,660

1,286,347

1,048,162

Bank

42,498

45,857

86,057

95,000

Other

1,940

3,516

5,512

7,204

730,658

592,033

1,377,916

1,150,366

Operating income (loss)

Electric utility

42,518

41,435

87,726

84,044

Bank

23,820

25,775

45,574

47,546

Other

(2,677)

(3,579)

(6,264)

(7,252)

63,661

63,631

127,036

124,338

Interest expense–other than on deposit liabilities

    and other bank borrowings

(24,177)

(20,520)

(44,317)

(40,901)

Allowance for borrowed funds used during construction

553

790

1,073

1,569

Allowance for equity funds used during construction

1,317

1,847

2,561

3,620

Income before income taxes

41,354

45,748

86,353

88,626

Income taxes

13,742

16,013

29,806

31,292

Net income

27,612

29,735

56,547

57,334

Preferred stock dividends of subsidiaries

473

473

946

946

Net income for common stock

$   27,139

$   29,262

$      55,601

$      56,388

Basic earnings per common share

$       0.28

$       0.31

$          0.58

$          0.61

Diluted earnings per common share

$       0.28

$       0.31

$          0.58

$          0.61

Dividends per common share

$       0.31

$       0.31

$          0.62

$          0.62

Weighted-average number of common shares outstanding

95,393

93,159

95,107

92,867

Adjusted weighted-average shares

95,555

93,414

95,394

93,159

Income (loss) by segment

    Electric utility

$   17,024

$   17,642

$      36,213

$      35,694

    Bank

15,195

16,131

29,046

29,867

    Other

(5,080)

(4,511)

(9,658)

(9,173)

Net income for common stock

$   27,139

$   29,262

$      55,601

$      56,388

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference and included in HEI’s Annual Report on SEC Form 10-K for the year ended December 31, 2010 and the consolidated financial statements and the notes thereto in HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011 (when filed). Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30,

December 31,

(dollars in thousands)

2011

2010

Assets

Cash and cash equivalents

$      266,746

$      330,651

Accounts receivable and unbilled revenues, net

319,533

266,996

Available-for-sale investment and mortgage-related securities

711,347

678,152

Investment in stock of Federal Home Loan Bank of Seattle

97,764

97,764

Loans receivable held for investment, net

3,580,418

3,489,880

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

4,784

7,849

Property, plant and equipment, net of accumulated depreciation of

   $2,055,204 in 2011 and $2,037,598 in 2010

3,204,996

3,165,918

Regulatory assets

478,766

478,330

Other

494,527

487,614

Goodwill

82,190

82,190

    Total assets

$   9,241,071

$   9,085,344

Liabilities and shareholders’ equity

Liabilities

Accounts payable

$      168,187

$      202,446

Interest and dividends payable

29,593

27,814

Deposit liabilities

4,054,949

3,975,372

Short-term borrowings—other than bank

-

24,923

Other bank borrowings

239,122

237,319

Long-term debt, net—other than bank

1,440,006

1,364,942

Deferred income taxes

316,843

278,958

Regulatory liabilities

309,809

296,797

Contributions in aid of construction

339,489

335,364

Other

796,573

823,479

    Total liabilities

7,694,571

7,567,414

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:  95,853,329 share in 2011 and 94,690,932 shares in 2010

1,343,537

1,314,199

Retained earnings

178,513

181,910

Accumulated other comprehensive loss, net of tax benefits

(9,843)

(12,472)

    Total shareholders' equity

1,512,207

1,483,637

    Total liabilities and shareholders' equity

$   9,241,071

$   9,085,344

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference and included in HEI’s Annual Report on SEC Form 10-K for the year ended December 31, 2010 and the consolidated financial statements and the notes thereto in HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011 (when filed). Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six months ended June 30,

2011

2010

(in thousands)

Cash flows from operating activities

Net income

$   56,547

$   57,334

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

     Depreciation of property, plant and equipment

75,243

79,606

     Other amortization

11,965

2,149

     Provision for loan losses

7,105

6,349

     Loans receivable originated and purchased, held for sale

(64,028)

(136,197)

     Proceeds from sale of loans receivable, held for sale

71,829

167,583

     Changes in deferred income taxes

39,051

(2,381)

     Changes in excess tax benefits from share-based payment arrangements

(55)

97

     Allowance for equity funds used during construction

(2,561)

(3,620)

     Decrease in cash overdraft

(2,305)

(302)

     Changes in assets and liabilities

          Increase in accounts receivable and unbilled revenues, net

(52,537)

(25,012)

          Increase in fuel oil stock

(6,509)

(49,759)

          Increase (decrease) in accounts, interest and dividends payable

(41,989)

1,359

          Changes in prepaid and accrued income taxes and utility revenue taxes

8,333

(30,699)

         Changes in other assets and liabilities

(44,908)

11,732

Net cash provided by operating activities

55,181

78,239

Cash flows from investing activities

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

(193,119)

(379,896)

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

161,526

203,783

Proceeds from sale of available-for-sale investment securities

2,066

-

Net decrease (increase)  in loans held for investment

(104,824)

61,017

Proceeds from sale of real estate acquired in settlement of loans

3,977

2,118

Capital expenditures

(89,088)

(76,659)

Contributions in aid of construction

8,153

9,430

Other

(2,911)

(10)

Net cash used in investing activities

(214,220)

(180,217)

Cash flows from financing activities

Net increase (decrease) in deposit liabilities

79,577

(57,226)

Net increase (decrease) in short-term borrowings with original maturities of

  three months or less

(24,923)

13,023

Net increase (decrease) in retail repurchase agreements

1,803

(41,112)

Proceeds from issuance of long-term debt

125,000

-

Repayment of long-term debt

(50,000)

Changes in excess tax benefits from share-based payment arrangements

55

(97)

Net proceeds from issuance of common stock

12,071

10,789

Common stock dividends

(47,331)

(46,246)

Preferred stock dividends of subsidiaries

(946)

(946)

Other

(172)

(1,805)

Net cash provided by (used in) financing activities

95,134

(123,620)

Net decrease in cash and cash equivalents

(63,905)

(225,598)

Cash and cash equivalents, beginning of period

330,651

503,922

Cash and cash equivalents, end of period

$   266,746

$   278,324

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference and included in HEI’s Annual Report on SEC Form 10-K for the year ended December 31, 2010 and the consolidated financial statements and the notes thereto in HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011 (when filed). Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

Hawaiian Electric Company, Inc. (HECO) and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Three months ended

Six months ended

June 30,

June 30,

(dollars in thousands, except per barrel amounts)

2011

2010

2011

2010

Operating revenues

$  727,652

$  582,094

$ 1,371,953

$ 1,128,806

Operating expenses

Fuel oil

312,141

215,322

573,001

427,074

Purchased power

171,737

139,513

319,695

256,295

Other operation

67,388

60,254

132,919

119,498

Maintenance

31,276

32,223

60,472

59,276

Depreciation

36,258

38,649

72,690

77,291

Taxes, other than income taxes

67,152

54,170

127,147

105,961

Income taxes

11,160

11,113

22,770

22,154

697,112

551,244

1,308,694

1,067,549

Operating income

30,540

30,850

63,259

61,257

Other income

Allowance for equity funds used during construction

1,317

1,847

2,561

3,620

Other, net

898

372

1,808

1,613

2,215

2,219

4,369

5,233

Interest and other charges

Interest on long-term debt

14,383

14,383

28,766

28,766

Amortization of net bond premium and expense

766

726

1,549

1,393

Other interest charges

636

609

1,175

1,208

Allowance for borrowed funds used during construction

(553)

(790)

(1,073)

(1,569)

15,232

14,928

30,417

29,798

Net income

17,523

18,141

37,211

36,692

Preferred stock dividends of subsidiaries

229

229

458

458

Net income attributable to HECO

17,294

17,912

36,753

36,234

Preferred stock dividends of HECO

270

270

540

540

Net income for common stock

$      17,024

$      17,642

$      36,213

$      35,694

OTHER ELECTRIC UTILITY INFORMATION

Kilowatthour sales (millions)

2,361

2,374

4,711

4,647

Wet-bulb temperature (Oahu average; degrees Fahrenheit)

70.5

67.9

68.8

66.8

Cooling degree days (Oahu)

1,257

1,210

2,177

2,067

Average fuel oil cost per barrel

$123.69

$86.38

$112.23

$84.13

Customer accounts (end of period)

445,427

442,936

445,427

442,936

 Twelve months ended

Return on average common equity  

June 30, 2011

(rate-making, simple average method)

Allowed %(1)

Actual %

  HECO

10.00

4.73

  HELCO

10.50

8.99

  MECO

10.50

7.02

(1) Based on the decisions applicable to rates in effect on June 30, 2011 (interim decisions for HELCO and MECO; final decision for HECO, which reflects the approval of decoupling and other cost-recovery mechanisms). MECO's interim rates became effective in  August 2010. HELCO’s interim rates became effective in January 2011.  On July 22, 2011, HECO received an interim decision and order in its 2011 test year rate case which granted HECO an allowed return of 10.00%.

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in HECO’s Annual Report on SEC Form 10-K for the year ended December 31, 2010 and the consolidated financial statements and the notes thereto in HECO's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011 (when filed). Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

Hawaiian Electric Company, Inc. (HECO) and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30,

December 31,

(in thousands, except share data)

2011

2010

Assets

Utility plant, at cost

Land

$     51,439

$     51,364

Plant and equipment

4,941,887

4,896,974

Less accumulated depreciation

(1,968,207)

(1,941,059)

Construction in progress

122,946

101,562

    Net utility plant

3,148,065

3,108,841

Current assets

Cash and cash equivalents

25,534

122,936

Customer accounts receivable, net

174,434

138,171

Accrued unbilled revenues, net

122,863

104,384

Other accounts receivable, net

6,425

9,376

Fuel oil stock, at average cost

159,214

152,705

Materials and supplies, at average cost

38,207

36,717

Prepayments and other

41,094

55,216

Regulatory assets

9,982

7,349

    Total current assets

577,753

626,854

Other long-term assets

Regulatory assets

468,784

470,981

Unamortized debt expense

13,145

14,030

Other

71,375

64,974

    Total other long-term assets

553,304

549,985

         Total assets

$   4,279,122

$   4,285,680

Capitalization and liabilities

Capitalization

Common stock, $6 2/3 par value, authorized 50,000,000 shares; outstanding

   13,830,823 shares

$     92,224

$        92,224

Premium on capital stock

389,609

389,609

Retained earnings

855,790

854,856

Accumulated other comprehensive income, net of income taxes

783

709

    Common stock equity

1,338,406

1,337,398

Cumulative preferred stock – not subject to mandatory redemption

34,293

34,293

Long-term debt, net

1,000,506

1,057,942

    Total capitalization

2,373,205

2,429,633

Current liabilities

Current portion of long-term debt

57,500

-

Accounts payable

140,180

178,959

Interest and preferred dividends payable

20,457

20,603

Taxes accrued

173,811

175,960

Other

57,820

56,354

    Total current liabilities

449,768

431,876

Deferred credits and other liabilities

Deferred income taxes

301,503

269,286

Regulatory liabilities

309,809

296,797

Unamortized tax credits

60,143

58,810

Retirement benefits liability

335,874

355,844

Other

109,331

108,070

    Total deferred credits and other liabilities

1,116,660

1,088,807

Contributions in aid of construction

339,489

335,364

         Total capitalization and liabilities

$   4,279,122

$   4,285,680

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in HECO’s Annual Report on SEC Form 10-K for the year ended December 31, 2010 and the consolidated financial statements and the notes thereto in HECO's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011 (when filed). Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

Hawaiian Electric Company, Inc. (HECO) and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six months ended June 30,

2011

2010

(in thousands)

Cash flows from operating activities

Net income

$    37,211

$    36,692

Adjustments to reconcile net income to cash provided by operating activities

     Depreciation of property, plant and equipment

72,690

77,291

     Other amortization

10,833

3,101

     Changes in deferred income taxes

33,456

(4,522)

     Changes in tax credits, net

1,556

1,685

     Allowance for equity funds used during construction

(2,561)

(3,620)

     Decrease in cash overdraft

(2,305)

(302)

     Changes in assets and liabilities

          Increase in accounts receivable

(33,312)

(18,258)

          Increase in accrued unbilled revenues

(18,479)

(6,497)

          Increase in fuel oil stock

(6,509)

(49,759)

          Increase in materials and supplies

(1,490)

(872)

          Increase in regulatory assets

(14,498)

(2,252)

          Decrease in accounts payable

(48,288)

(1,186)

          Changes in prepaid and accrued income taxes and utility revenue taxes

12,178

(31,864)

          Changes in other assets and liabilities

(24,425)

14,669

Net cash provided by operating activities

16,057

14,306

Cash flows from investing activities

Capital expenditures

(85,395)

(71,497)

Contributions in aid of construction

8,153

9,430

Other

77

-

Net cash used in investing activities

(77,165)

(62,067)

Cash flows from financing activities

Common stock dividends

(35,279)

(26,887)

Preferred stock dividends of HECO and subsidiaries

(998)

(998)

Net increase in short-term borrowings from nonaffiliates and

affiliate with original maturities of three months or less

-

14,100

Other

(17)

(1,349)

Net cash used in financing activities

(36,294)

(15,134)

Net decrease in cash and cash equivalents

(97,402)

(62,895)

Cash and cash equivalents, beginning of period

122,936

73,578

Cash and cash equivalents, end of period

$    25,534

$    10,683

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in HECO’s Annual Report on SEC Form 10-K for the year ended December 31, 2010 and the consolidated financial statements and the notes thereto in HECO's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011 (when filed). 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. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME DATA

(Unaudited)

Three months ended

Six months ended

June 30,

March 31,

June 30,

June 30,

(in thousands)

2011

2011

2010

2011

2010

Interest and dividend income

Interest and fees on loans

$  45,648

$  46,097

$  49,328

$  91,745

$  99,073

Interest and dividends on investment and mortgage-related securities

3,793

3,769

3,646

7,562

6,963

    Total interest and dividend income

49,441

49,866

52,974

99,307

106,036

Interest expense

Interest on deposit liabilities

2,387

2,593

3,852

4,980

8,275

Interest on other borrowings

1,382

1,367

1,418

2,749

2,844

    Total interest expense

3,769

3,960

5,270

7,729

11,119

Net interest income

45,672

45,906

47,704

91,578

94,917

Provision for loan losses

2,555

4,550

990

7,105

6,349

Net interest income after provision for loan losses

43,117

41,356

46,714

84,473

88,568

Noninterest income

Fees from other financial services

7,240

6,946

6,649

14,186

13,063

Fee income on deposit liabilities

4,599

4,449

7,891

9,048

15,411

Fee income on other financial products

1,861

1,673

1,735

3,534

3,260

Other income

3,177

2,379

2,383

5,556

4,776

    Total noninterest income

16,877

15,447

18,658

32,324

36,510

Noninterest expense

Compensation and employee benefits

18,166

17,505

18,907

35,671

36,309

Occupancy

4,288

4,240

4,216

8,528

8,441

Data processing

2,058

1,970

4,564

4,028

8,902

Services

1,949

1,771

1,845

3,720

3,573

Equipment

1,772

1,657

1,640

3,429

3,349

Other expense

7,955

7,933

8,453

15,888

17,021

    Total noninterest expense

36,188

35,076

39,625

71,264

77,595

Income before income taxes

23,806

21,727

25,747

45,533

47,483

Income taxes

8,611

7,876

9,616

16,487

17,616

Net income

$  15,195

$  13,851

$  16,131

$  29,046

$  29,867

OTHER BANK INFORMATION (%)

Return on average assets

1.24

1.15

1.32

1.20

1.22

Return on average equity  

12.19

11.20

12.80

11.70

11.91

Net interest margin

4.07

4.16

4.22

4.11

4.20

Net charge-offs to average loans outstanding (annualized)

0.45

0.49

0.57

0.47

0.60

Efficiency ratio

57

57

59

57

59

As of period end

Nonperforming assets to loans outstanding and real estate owned **

1.69

1.82

1.90

Allowance for loan losses to loans outstanding

1.09

1.14

1.03

Tier-1 leverage ratio

9.1

9.1

9.3

Total risk-based capital ratio

13.3

13.5

14.1

Tangible common equity to total assets

8.5

8.4

8.7

**  Regulatory basis

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference and included in HEI’s Annual Report on SEC Form 10-K for the year ended December 31, 2010 and the consolidated financial statements and the notes thereto in HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011 (when filed). 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. and Subsidiaries

CONSOLIDATED BALANCE SHEETS DATA

(Unaudited)

June 30,

December 31,

(in thousands)

2011

2010

Assets

Cash and cash equivalents

$   178,251

$      204,397

Federal funds sold

1,249

1,721

Available-for-sale investment and mortgage-related securities

711,347

678,152

Investment in stock of Federal Home Loan Bank of Seattle

97,764

97,764

Loans receivable held for investment, net

3,580,418

3,489,880

Loans held for sale, lower of cost or fair value

4,784

7,849

Other

234,524

234,806

Goodwill

82,190

82,190

    Total assets

$4,890,527

$   4,796,759

Liabilities and shareholder’s equity

Deposit liabilities–noninterest-bearing

$   912,034

$      865,642

Deposit liabilities–interest-bearing

3,142,915

3,109,730

Other borrowings

239,122

237,319

Other

99,260

90,683

    Total liabilities

4,393,331

4,303,374

Common stock

331,348

330,562

Retained earnings

170,157

169,111

Accumulated other comprehensive loss, net of tax benefits

(4,309)

(6,288)

    Total shareholder's equity

497,196

493,385

    Total liabilities and shareholder's equity

$  4,890,527

$   4,796,759

This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference and included in HEI’s Annual Report on SEC Form 10-K for the year ended December 31, 2010 and the consolidated financial statements and the notes thereto in HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011 (when filed). Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

Contact:

Shelee M.T. Kimura

Manager, Investor Relations &

Telephone: (808) 543-7384

Strategic Planning

E-mail: skimura@hei.com

(Logo:  http://photos.prnewswire.com/prnh/20110411/LA80136LOGO)

SOURCE Hawaiian Electric Industries, Inc.



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