HEI Reports 2020 Results

Rhea-AI Summary

Hawaiian Electric Industries (HEI) reported consolidated net income of $197.8 million for 2020, with an EPS of $1.81, down from $217.9 million and $1.99 in 2019. The company's utility, Hawaiian Electric, saw a rise in net income to $169.3 million, driven by cost savings and solar integrations, enhancing community support during the pandemic. American Savings Bank, however, faced challenges, reporting a drop in net income to $57.6 million amid credit risks, despite record mortgage originations. HEI's board raised the quarterly dividend to $0.34 per share, yielding 3.9%.

Positive

• Consolidated net income increased to $197.8 million in 2020.
• Hawaiian Electric's net income grew to $169.3 million, driven by cost efficiencies and renewable energy integration.
• American Savings Bank achieved record residential mortgage production of $1.2 billion.
• Increased quarterly dividend to $0.34 per share, a 3.9% yield.

Negative

• American Savings Bank's net income declined to $57.6 million in 2020 from $89 million in 2019 due to credit risks.
• The provision for credit losses increased by $27.3 million over the prior year, signaling credit risk management challenges.

HONOLULU, Feb. 16, 2021 /PRNewswire/ --

2020 Highlights:

• Solid consolidated earnings reflect strength of HEI platform and commitment to community
• Financial stability enabled HEI companies to support customers and communities during pandemic
• Record charitable commitments of $5.5 million; $3.5 million related to COVID, including $2 million to help qualifying families with utility bills
  
  
• Hawaiian Electric delivered on strategic priorities while supporting customers
• Proposed holding base rates flat to help manage customer bills
• Cost savings and efficiency focus enabled utility to forego base rate increase
• Collaborated with stakeholders to develop performance-based regulation framework
• Continued to lead nation in rooftop solar integration with 20% of residential customers and 36% of Oahu single family homes now with rooftop solar
• Aggressively advanced utility-scale renewable procurements; together Stage 1 and Stage 2 projects filed or pending filing have potential to add 657 MW of solar and ~3 GWh of storage
• 2020 RPS of 34.5% exceeded 2020 renewable portfolio milestone of 30%
  
  
• American Savings Bank delivered solid profitability in dynamic environment
• Record residential mortgage production of $1.2 billion
• Grew total deposits 17.8% to $7.4 billion and total loans 4.4% to $5.3 billion
• Net interest margin of 3.29%, with record low cost of funds
• Net charge-off ratio improved to 0.40%, compared to 0.45% in prior year
• Deployed $370 million in round one Paycheck Protection Program loans, supporting ~4,100 small businesses representing 40,000+ jobs

1	Results for 2020 included impact of after-tax gain of $5.2 million ($7.0 million pre-tax) related to the bank's sale of Visa Class B shares in the second quarter of 2020, as well as certain direct and incremental COVID-19 related costs at the bank totaling $3.7 million after-tax ($5.1 million pre-tax).
2	Unless otherwise indicated, throughout this release earnings per share (EPS) refers to diluted earnings per share.

Hawaiian Electric Industries, Inc. (NYSE: HE) (HEI) today reported 2020 year-end consolidated net income for common stock of $197.8 million³ and EPS of $1.81 compared to $217.9 million⁴ and EPS of $1.99 for 2019. For the fourth quarter of 2020, consolidated net income for common stock was $50.5 million and EPS was $0.46 compared to $66.3 million⁵ and EPS of $0.61 for the fourth quarter of 2019.

"I am proud of the commitment of our employees across the HEI family of companies as we worked to support our customers through this difficult economy, protect fellow employees, and care for our community, all while continuing to advance long-term priorities and deliver solid consolidated financial results," said Constance H. Lau, HEI president and CEO. "Based on our utility's strong financial results, at year end we provided $2 million for Hawaiian Electric to be the founding sponsor of an Aloha United Way program to help families across the islands who are financially impacted by the pandemic pay bills for electric, water, sewer and gas utilities.

"In December the Hawaii Public Utilities Commission issued its phase two decision on performance-based regulation, a landmark regulatory framework designed to increase renewable energy, lower costs and improve customer service. Our utility's focus on efficiency will enable it to deliver on its customer savings commitments and position it well to operate under the new regulatory framework while continuing to aggressively advance our ambitious clean energy transition.

"While our bank's financial results were impacted by pandemic-driven credit risk that we continue to manage closely, they also reflect the benefits of record mortgage originations, good cost control to offset increased costs related to COVID while still investing in core priorities, and conservative liquidity and capital management," said Lau.

3	See footnote 1.
4	Results for 2019 included after-tax gain on sale (included in bank noninterest income) of bank properties exited when the bank moved to its new campus and after-tax campus transition costs (included in noninterest expense) of $7.9 million and $2.4 million, respectively, and $7.9 million and $0.2 million for the fourth quarter of 2019, respectively.
5	See footnote 4.

HAWAIIAN ELECTRIC COMPANY EARNINGS

Full Year Results:

Hawaiian Electric Company's (Hawaiian Electric) full-year 2020 net income was $169.3 million, compared to $156.8 million in 2019. The increase over the prior year was primarily driven by the following after-tax items:

• $17 million under the rate adjustment mechanism (RAM), which funds investments in resilience, reliability and the integration of renewable energy;
• $6 million from lower operations and maintenance (O&M) expenses, primarily due to fewer generating facility overhauls, efficiency improvements in planning and execution of work, and reduced staffing levels, offset in part by higher environmental reserves for Pearl Harbor sediment remediation;
• $3 million from lower interest expense due to debt refinancings; and
• $2 million from recovery of the West Loch PV and Grid Modernization projects under the major project interim recovery (MPIR) mechanism, partially offset by lower MPIR revenues for the Schofield generation project.
  

These items were partially offset by the following after-tax items:

• $5 million from higher depreciation expense due to increasing investments to integrate more renewable energy and improve customer reliability and system efficiency;
• $4 million from higher enterprise resource planning system implementation benefits to be returned to customers;
• $4 million lower allowance for funds used during construction (AFUDC) as there were fewer long duration projects in construction work in progress; and
• $2 million higher fuel handling costs.

Fourth Quarter Results:

Hawaiian Electric's net income for the fourth quarter of 2020 was $43.0 million, compared to $45.4 million in the fourth quarter of 2019, primarily driven by the following after-tax items:

• $4 million from higher O&M expenses, largely due to higher environmental reserves for Pearl Harbor sediment remediation;
• $1 million from higher depreciation expense due to increasing investments to integrate more renewable energy and improve customer reliability and system efficiency;
• $1 million from lower AFUDC; and
• $1 million due to lower amortization of excess deferred income taxes and other miscellaneous tax adjustments.
  

These items were partially offset by the following after-tax items:

• $4 million from higher RAM revenues; and
• $1 million from lower non-service pension costs due to the reset of pension costs included in rates as part of rate case decisions.

Note:	Amounts indicated as after-tax in this earnings release are based upon adjusting items using the current year composite statutory tax rates of 25.75% for the utilities and 26.79% for the bank.

AMERICAN SAVINGS BANK EARNINGS

Full Year Results:

American Savings Bank's (American) full-year 2020 net income was $57.6 million⁶ compared to $89.0 million⁷ in 2019. Net interest income was $233.5 million in 2020 compared to $248.1 million in 2019, primarily due to lower net interest margin as yields on earning assets were impacted by the lower interest rate environment. Noninterest income was $5.3 million higher than 2019, primarily due to higher mortgage banking income in 2020. The provision for credit losses in 2020 was $27.3 million higher than 2019, reflecting additional credit risk within the loan portfolio associated with the negative impacts of COVID-19. Noninterest expense for the year was $6.2 million higher than 2019 primarily due to $5.1 million of COVID-19 related expenses combined with higher pension-related costs of $2.3 million and $0.7 million in costs associated with the bank's branch consolidation strategy, partially offset by reductions in data processing and marketing expenses.

Total loans were $5.3 billion as of December 31, 2020, up 4.4% from December 31, 2019, driven mainly by the addition of $300 million in Paycheck Protection Program loans, as well as a $210 million increase in commercial real estate loans, offset by reductions in the home equity line of credit and consumer loan portfolios.

Total deposits were $7.4 billion as of December 31, 2020, an increase of 17.8% from December 31, 2019. The average cost of funds was a record low 0.16% for the full year 2020, down thirteen basis points versus the prior year.

American's return on average equity for the full year 2020 was 8.1% compared to 13.5% in 2019. The bank's return on average assets was 0.74% compared to 1.25% in 2019.

Fourth Quarter Results:

American's fourth quarter 2020 net income was $15.7 million compared to $12.2 million in the third, or linked quarter of 2020, and $28.2 million⁸ in the fourth quarter of 2019. The increase in net income compared to the linked quarter was primarily due to lower provision for credit losses. The decrease in net income from the prior year quarter was primarily due to gains on sales of properties in the fourth quarter of 2019.

Overall, American's return on average equity⁹ for the fourth quarter of 2020 was 8.6%, compared to 6.8% in the linked quarter and 16.5%¹⁰ in the fourth quarter of 2019. Return on average assets was 0.77% for the fourth quarter of 2020, compared to 0.61% in the linked quarter and 1.58% in the same quarter last year.

Please refer to American's news release issued on January 29, 2021 for additional information on American.

6	See footnote 1.
7	See footnote 4.
8	See footnote 4.
9	Bank return on average equity calculated using weighted average daily common equity.
10	See footnote 4.

HOLDING AND OTHER COMPANIES

The holding and other companies' net loss was $29.1 million in 2020 compared to $27.9 million in 2019. The fourth quarter net loss of $8.2 million was $0.9 million higher than the prior year quarter. The greater net loss compared to the prior year and prior year quarter was primarily due to increased charitable contributions to support communities affected by the pandemic.

BOARD INCREASES QUARTERLY DIVIDEND

On February 9, 2021, HEI announced that the Board of Directors increased HEI's quarterly cash dividend from $0.33 per share to $0.34 per share, payable on March 10, 2021, to shareholders of record at the close of business on February 25, 2021 (ex-dividend date is February 24, 2021). This quarterly dividend is equivalent to an annual rate of $1.36 per share. Dividends have been paid on an uninterrupted basis since 1901. At the indicated annual dividend rate and based on the closing price per share on February 12, 2021 of $34.72, HEI's dividend yield is 3.9%.

WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2021 GUIDANCE

HEI will conduct a webcast and conference call to review its fourth quarter and full year 2020 results and 2021 EPS guidance on Tuesday, February 16, 2021 at 11:15 a.m. Hawaii time (4:15 p.m. Eastern).

Parties in the U.S. may listen to the conference call by dialing (844) 834-0652. International parties may listen to the conference call by dialing (412) 317-5198. Parties may also access presentation materials and/or listen to the conference call by visiting the conference call/webcast link on HEI's website at www.hei.com under the "Investor Relations" section, sub-heading "News and Events — Events and Presentations."

A replay will be available online and via phone. The online replay will be available on HEI's website about two hours after the event. An audio replay will also be available about two hours after the event through March 2, 2021. To access the audio replay, dial (877) 344-7529 (U.S.) or (412) 317-0088 (international) and enter passcode 10151332.

HEI and Hawaiian Electric 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 the Investor Relations section of HEI's website at www.hei.com in addition to following HEI's, Hawaiian Electric's and American's press releases, HEI's and Hawaiian Electric'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'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 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's SEC filings.

HEI supplies power to approximately 95% of Hawaii's population through its electric utility, Hawaiian Electric; provides a wide array of banking and other financial services to consumers and businesses through American, one of Hawaii's largest financial institutions; and helps advance Hawaii's clean energy and sustainability goals through investments by its non-regulated subsidiary, Pacific Current.

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 "will," "expects," "anticipates," "intends," "plans," "believes," "predicts," "estimates" or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries, the performance of the industries in which they do business and economic, political and market factors, among other things. These forward-looking statements are not guarantees of future performance.

Forward-looking statements in this release should be read in conjunction with the "Cautionary Note Regarding 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, 2019 and HEI's other 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, 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 DATA (Unaudited)
		Three months ended December 31								Years ended December 31
(in thousands, except per share amounts)		2020				2019				2020				2019
Revenues
Electric utility		$	571,095			$	645,333			$	2,265,320			$	2,545,942
Bank		80,415				80,630				313,511				327,917
Other		707				3				944				89
Total revenues		652,217				725,966				2,579,775				2,873,948
Expenses
Electric utility		502,822				575,002				1,996,770				2,291,564
Bank (includes $10.8 million gain on sales of properties in 2019)		62,002				45,403				251,702				217,008
Other		6,719				4,766				19,810				17,355
Total expenses		571,543				625,171				2,268,282				2,525,927
Operating income (loss)
Electric utility		68,273				70,331				268,550				254,378
Bank		18,413				35,227				61,809				110,909
Other		(6,012)				(4,763)				(18,866)				(17,266)
Total operating income		80,674				100,795				311,493				348,021
Retirement defined benefits expense—other than service costs		(240)				(634)				(3,210)				(2,806)
Interest expense, net—other than on deposit liabilities and other bank borrowings		(22,220)				(21,818)				(88,694)				(90,899)
Allowance for borrowed funds used during construction		751				988				2,992				4,453
Allowance for equity funds used during construction		2,212				2,652				8,768				11,987
Gain on sale of investment securities, net		—				—				9,275				653
Income before income taxes		61,177				81,983				240,624				271,409
Income taxes		10,219				15,247				40,910				51,637
Net income		50,958				66,736				199,714				219,772
Preferred stock dividends of subsidiaries		473				473				1,890				1,890
Net income for common stock		$	50,485			$	66,263			$	197,824			$	217,882
Basic earnings per common share		$	0.46			$	0.61			$	1.81			$	2.00
Diluted earnings per common share		$	0.46			$	0.61			$	1.81			$	1.99
Dividends declared per common share		$	0.33			$	0.32			$	1.32			$	1.28
Weighted-average number of common shares outstanding		109,181				108,973				109,140				108,949
Weighted-average shares assuming dilution		109,339				109,405				109,356				109,407
Net income (loss) for common stock by segment
Electric utility		$	43,041			$	45,361			$	169,340			$	156,840
Bank		15,658				28,230				57,583				88,973
Other		(8,214)				(7,328)				(29,099)				(27,931)
Net income for common stock		$	50,485			$	66,263			$	197,824			$	217,882
Comprehensive income attributable to Hawaiian Electric Industries, Inc.		$	49,940			$	70,597			$	216,599			$	248,453
Return on average common equity (%) (twelve months ended)										8.6				9.8

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

 

Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME DATA (Unaudited)
		Three months ended December 31								Years ended December 31
($ in thousands, except per barrel amounts)		2020				2019				2020				2019
Revenues		$	571,095			$	645,333			$	2,265,320			$	2,545,942
Expenses
Fuel oil		124,560				179,387				515,274				720,709
Purchased power		143,070				160,920				568,749				633,256
Other operation and maintenance		125,361				119,932				474,192				481,737
Depreciation		55,498				53,936				222,733				215,731
Taxes, other than income taxes		54,333				60,827				215,822				240,131
Total expenses		502,822				575,002				1,996,770				2,291,564
Operating income		68,273				70,331				268,550				254,378
Allowance for equity funds used during construction		2,212				2,652				8,768				11,987
Retirement defined benefits expense—other than service costs		432				(709)				(763)				(2,836)
Interest expense and other charges, net		(17,026)				(16,897)				(67,794)				(70,842)
Allowance for borrowed funds used during construction		751				988				2,992				4,453
Income before income taxes		54,642				56,365				211,753				197,140
Income taxes		11,102				10,505				40,418				38,305
Net income		43,540				45,860				171,335				158,835
Preferred stock dividends of subsidiaries		229				229				915				915
Net income attributable to Hawaiian Electric		43,311				45,631				170,420				157,920
Preferred stock dividends of Hawaiian Electric		270				270				1,080				1,080
Net income for common stock		$	43,041			$	45,361			$	169,340			$	156,840
Comprehensive income attributable to Hawaiian Electric		$	41,302			$	43,910			$	167,700			$	155,462
OTHER ELECTRIC UTILITY INFORMATION
Kilowatthour sales (millions)
Hawaiian Electric		1,624				1,723				6,183				6,563
Hawaii Electric Light		257				272				978				1,050
Maui Electric		260				296				959				1,127
		2,141				2,291				8,120				8,740
Average fuel oil cost per barrel		$	58.19			$	78.04			$	63.00			$	82.17
Return on average common equity (%) (twelve months ended)1										8.1				7.8

1  Simple average.
This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC.

 

American Savings Bank, F.S.B. STATEMENTS OF INCOME DATA (Unaudited)
		Three months ended												Years ended December 31
($ in thousands)		December 31, 2020				September 30, 2020				December 31, 2019				2020				2019
Interest and dividend income
Interest and fees on loans		$	52,629			$	52,419			$	57,892			$	214,134			$	233,632
Interest and dividends on investment securities		7,590				7,221				7,160				30,529				32,922
Total interest and dividend income		60,219				59,640				65,052				244,663				266,554
Interest expense
Interest on deposit liabilities		1,709				2,287				3,907				10,654				16,830
Interest on other borrowings		11				61				249				460				1,610
Total interest expense		1,720				2,348				4,156				11,114				18,440
Net interest income		58,499				57,292				60,896				233,549				248,114
Provision for credit losses		11,307				13,970				5,607				50,811				23,480
Net interest income after provision for credit losses		47,192				43,322				55,289				182,738				224,634
Noninterest income
Fees from other financial services		4,541				4,233				4,830				16,447				19,275
Fee income on deposit liabilities		4,217				3,832				5,475				16,059				20,877
Fee income on other financial products		1,773				1,524				1,378				6,381				6,507
Bank-owned life insurance		2,051				1,965				1,378				6,483				7,687
Mortgage banking income		7,801				7,681				1,863				23,734				4,943
Gain on sale of real estate		—				—				10,762				—				10,762
Gain on sale of securities, net		—				—				—				9,275				653
Other income, net		(187)				(231)				654				(256)				2,074
Total noninterest income		20,196				19,004				26,340				78,123				72,778
Noninterest expense
Compensation and employee benefits		27,156				26,431				26,383				104,443				103,009
Occupancy		5,171				5,693				5,429				21,573				21,272
Data processing		3,717				3,366				3,953				14,769				15,306
Services		3,214				2,624				2,378				11,121				10,239
Equipment		2,371				2,001				2,344				9,001				8,760
Office supplies, printing and postage		1,046				1,187				1,192				4,623				5,512
Marketing		1,527				727				1,035				3,435				4,490
FDIC insurance		775				714				(45)				2,342				1,204
Other expense1		4,470				4,556				3,537				20,283				15,586
Total noninterest expense		49,447				47,299				46,206				191,590				185,378
Income before income taxes		17,941				15,027				35,423				69,271				112,034
Income taxes		2,283				2,877				7,193				11,688				23,061
Net income		$	15,658			$	12,150			$	28,230			$	57,583			$	88,973
Comprehensive income		$	18,306			$	13,543			$	33,300			$	81,191			$	118,379
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets		0.77				0.61				1.58				0.74				1.25
Return on average equity		8.58				6.75				16.45				8.11				13.48
Return on average tangible common equity		9.67				7.62				18.69				9.17				15.39
Net interest margin		3.12				3.12				3.74				3.29				3.85
Efficiency ratio		62.83				61.99				52.97				61.47				57.77
Net charge-offs to average loans outstanding		0.36				0.32				0.41				0.40				0.45
As of period end
Nonaccrual loans to loans receivable held for investment		0.89				0.77				0.58
Allowance for credit losses to loans outstanding		1.90				1.67				1.04
Tangible common equity to tangible assets		7.9				8.0				8.6
Tier-1 leverage ratio		8.4				8.3				9.1
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)		$	3.0			$	—			$	9.0			$	31.0			$	56.0

1	The fourth quarter of 2020, third quarter of 2020 and year ended December 31, 2020 include approximately $0.6 million, $0.7 million and $5.1 million, respectively, of certain direct and incremental COVID-19 related costs. For 2020, these costs, which have been recorded in Other expense, include $2.5 million of compensation expense and $2.0 million of enhanced cleaning and sanitation costs
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

 

Contact:	Julie R. Smolinski	Telephone: (808) 543-7300
	Vice President, Investor Relations & Corporate Sustainability	E-mail: ir@hei.com

 

 

View original content to download multimedia:http://www.prnewswire.com/news-releases/hei-reports-2020-results-301228789.html

SOURCE Hawaiian Electric Industries, Inc.

FAQ

What is HEI's net income for 2020?

Hawaiian Electric Industries reported a consolidated net income of $197.8 million for 2020.

How much was HEI's quarterly dividend increased?

HEI's quarterly dividend was increased from $0.33 to $0.34 per share.

What challenges did American Savings Bank face in 2020?

American Savings Bank faced increased credit risk, resulting in a net income decline to $57.6 million.

What was the EPS for HEI in 2020?

HEI's earnings per share (EPS) for 2020 was $1.81.

What percentage of Hawaiian Electric's customers utilize rooftop solar?

20% of Hawaiian Electric's residential customers utilize rooftop solar.