HEI Reports 2023 Results

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The reported full-year consolidated net income of $199.2 million and EPS of $1.81 for Hawaiian Electric Industries, Inc. (HEI) represents a decline from the previous year's figures of $241.1 million and EPS of $2.20. This decrease in profitability is noteworthy, particularly since it includes significant after-tax expenses related to the Maui wildfires and a strategic loss from balance sheet repositioning by American Savings Bank (ASB). These events signal a potential impact on shareholder value and could influence investor confidence, especially considering the reduction in the quarterly cash dividend from Hawaiian Electric to HEI.

Furthermore, the utility's increased revenues driven by various mechanisms such as the annual revenue adjustment (ARA) and the major project interim recovery (MPIR) are indicative of a strategic response to operational challenges. However, the increased operations and maintenance expenses, along with higher interest and depreciation expenses, suggest escalating costs that could affect future profitability. The bank's balance sheet repositioning, while resulting in a short-term loss, is aimed at improving net interest margins and profitability, which may be of interest to stakeholders evaluating long-term financial health.

HEI's focus on modernizing its generation system and enhancing grid resilience is a response to the growing need for sustainable and reliable energy infrastructure. The utility's investments in renewable energy integration and system efficiency improvements are aligned with broader industry trends towards decarbonization and energy transition. The financial impact of these investments, including higher depreciation expenses, is a critical consideration for stakeholders assessing the balance between capital expenditure and future earnings potential.

Additionally, the after-tax Maui windstorm and wildfire-related expenses highlight the increasing financial risks utilities face from climate-related events. The proactive steps taken by Hawaiian Electric to mitigate these risks, such as deferral treatments and insurance recoveries, demonstrate strategic risk management. However, the ongoing costs associated with these events could influence operational stability and regulatory developments in the sector.

ASB's reported net income of $53.4 million for the full year 2023, down from $80.0 million in 2022, reflects the challenges faced by the banking sector in a changing economic landscape. The bank's strategic decision to sell low-yielding securities to reduce high cost deposits, although resulting in a loss, is a move to improve its net interest margin amidst a rising interest rate environment. This repositioning could benefit ASB in the long run if the interest rate landscape remains favorable for banks.

The bank's strong capital position and credit quality, coupled with its lending capacity and liquidity, are positive indicators of its financial stability. However, the lower return on average equity and assets compared to the previous year could raise concerns among investors regarding the bank's performance efficiency. The banking sector is highly sensitive to interest rate fluctuations and ASB's adjustments to its balance sheet in anticipation of these changes will be a key factor to watch for future profitability.

02/13/2024 - 04:00 PM

Full Year Net Income of $199.2 million and Diluted Earnings Per Share (EPS) of $1.81

2023 Results Include $14.1 Million of After-tax Maui Wildfire-Related Expenses and an $11.0 Million After-tax Loss Resulting from ASB’s Fourth Quarter Balance Sheet Repositioning

Core Businesses Continue to Perform Well
Utility Continuing to Progress Resilience Work in West Maui
ASB’s Balance Sheet Repositioning Strengthens Balance Sheet and Positions Bank for Improved Net Interest Margin and Profitability
Strong Credit Quality and Capital Position at ASB

HONOLULU--(BUSINESS WIRE)-- Hawaiian Electric Industries, Inc. (NYSE: HE) (HEI) today reported full year 2023 consolidated net income for common stock of $199.2 million and EPS of $1.81 compared to $241.1 million and EPS of $2.20 for 2022. Net income for the year included $14.1 million of after-tax wildfire-related expenses, and an $11.0 million after-tax loss on the sale of investment securities executed by American Savings Bank (ASB) in the fourth quarter. The loss resulted from selling low-yielding securities in order to reduce high cost deposits, strengthening the bank’s balance sheet while positioning the bank for improved profitability. Core net income and EPS¹ for the year were $224.3 million and $2.04, respectively, compared to $235.0 million and $2.14 for 2022. For the fourth quarter of 2023, consolidated net income for common stock was $48.8 million and EPS was $0.44 compared to $57.3 million and EPS of $0.52 for the fourth quarter of 2022. Core net income and EPS¹ for the fourth quarter were $53.4 million and $0.48, respectively. There were no core net income adjustments for the fourth quarter of 2022.

“Although 2023 was one of the most challenging years ever for our company and the communities we serve, I am encouraged by the collaborative efforts of so many in our state to prioritize Maui’s recovery following the devastating August wildfires. Our hearts continue to be with the people of Maui, and we remain committed to supporting the recovery and rebuild effort,” said Scott Seu, HEI president and CEO.

“Our core businesses delivered solid results under challenging circumstances, and both the utility and bank remain focused on supporting our communities and customers. The utility is continuing to execute on its plans to modernize its generation system and make our electric grids more resilient.

“The bank continues to be well-positioned with strong capital, excellent credit quality, lending capacity and ample liquidity. In addition, the sale of investment securities executed in the fourth quarter further positions ASB for improved profitability and net interest margin while strengthening the balance sheet.”

HAWAIIAN ELECTRIC COMPANY (HAWAIIAN ELECTRIC) EARNINGS²

Full Year Results:

Hawaiian Electric’s full-year net income was $194.0 million compared to $188.9 million in 2022, with the increase primarily driven by the following after-tax items:

$34 million higher revenues, including $27 million from the annual revenue adjustment (ARA) mechanism, $5 million from the fossil fuel cost risk-sharing mechanism and $4 million from the major project interim recovery (MPIR) mechanism, partially offset by lower performance incentive mechanism revenue;
$6 million higher allowance for funds used during construction (AFUDC) related to increased capital expenditures;
$4 million in higher interest income; and
$2 million in research and development tax credits.

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

$28 million in higher operations and maintenance (O&M) expenses, including $8 million of labor and associated costs for the Maui windstorm and wildfire response. The remaining increase in O&M included higher transmission and distribution maintenance, and higher outside services costs;
$7 million higher interest expense due to increased borrowings; and
$6 million higher depreciation expense due to increasing investments to integrate more renewable energy and improve customer reliability and system efficiency.

Excluding incremental after-tax Maui windstorm and wildfire-related expenses, Hawaiian Electric’s core net income³ for 2023 was $195.1 million. The incremental after-tax Maui windstorm and wildfire-related expenses (excluding the One ‘Ohana Initiative contribution) of $1.1 million were comprised of $29.6 million of expenses, net of $17.5 million of insurance-related recoveries and $10.9 million of deferral treatment of costs pursuant to the Public Utilities Commission’s decision allowing Hawaiian Electric to defer these costs.

Fourth Quarter Results:

Hawaiian Electric’s net income for the fourth quarter of 2023 was $58.2 million, compared to $48.6 million in the fourth quarter of 2022, with the variance primarily driven by the following after-tax items: $9 million of combined deferral treatment and insurance recoveries, net of expenses, related to the Maui windstorm and wildfires, $8 million higher revenues, including $7 million from the ARA mechanism and $1 million from the MPIR mechanism; $2 million in research and development tax credits and $1 million higher AFUDC; partially offset by $8 million of higher operation and maintenance expenses primarily related to transmission and distribution, bad debt and other outside services. Normalizing for the deferral treatment and insurance recoveries, and excluding incremental after-tax Maui windstorm and wildfire-related expenses, Hawaiian Electric’s core net income³ for the fourth quarter of 2023 was $48.9 million.

Utility Dividend Declaration

On February 9, 2024 Hawaiian Electric’s Board of Directors declared a $13 million quarterly cash dividend to its sole common stockholder, HEI. This is down from approximately $30 million declared in each of the previous three consecutive quarters. With the suspension of HEI’s dividend to its common stockholders, cash needs at the HEI parent company are limited relative to cash needs prior to the dividend suspension, and reducing the utility’s dividend to HEI allows more cash to be kept at the utility, supporting its ability to perform needed restoration work in West Maui, make critical capital investments supporting wildfire mitigation and in other electrical infrastructure while capital markets access remains limited.

AMERICAN SAVINGS BANK EARNINGS

Full Year Results:

ASB’s full year 2023 net income was $53.4 million, compared to $80.0 million in 2022. Net income for the year included $8.3 million of Maui wildfire-related expenses after tax, and an $11.0 million after-tax loss on the sale of investment securities recorded in the fourth quarter. The loss resulted from selling low-yielding securities in order to reduce high cost deposits, strengthening the bank’s balance sheet while positioning the bank for improved profitability. Core net income⁴ for the year was $72.6 million.

Net interest income was $252.0 million in 2023 compared to $252.6 million in 2022, with higher interest and dividend income approximately offset by the impacts of higher funding costs. Noninterest income for 2023 was $45.4 million compared to $57.0 million in 2022. The decrease in noninterest income was primarily due to a $15.0 million pre-tax ($11.0 million after-tax) loss on sale of investment securities recorded in the fourth quarter. The sale of investment securities was executed in order to reposition the balance sheet by divesting securities with below-market yields to pay down higher cost funding, positioning ASB for improved net interest margin and profitability.

As of December 31, 2023 and compared to December 31, 2022:

Total earning assets were $9.2 billion, up 0.50%;
Total loans were $6.2 billion, up 3.4%; and
Total deposits were $8.1 billion, approximately flat.

The average cost of funds was 0.93% for the full year 2023, 77 basis points higher than the prior year as higher interest rates and a shift in funding mix increased funding costs.

ASB’s return on average equity for the full year 2023 was 11.0% compared to 14.1% in 2022. Return on average assets for the full year was 0.55% in 2023 compared to 0.86% in 2022. Core return on average equity and core return on average assets⁴ were 14.9% and 0.75%, respectively.

Fourth Quarter Results:

Net income for the fourth quarter of 2023 was $3.2 million, and included $2.0 million of after-tax Maui wildfire-related expenses as well as the aforementioned loss on sale of securities. This compared to $17.9 million in the fourth quarter of 2022. Core net income⁴ for the fourth quarter was $16.2 million.

For the fourth quarter 2023, return on average equity was 2.7%, compared to 15.7% in the fourth quarter of 2022. Core return on average equity⁵ for the quarter was 13.7%. Return on average assets was 0.13% for the fourth quarter of 2023, compared to 0.76% in the same quarter last year. Core return on average assets⁵ was 0.67%. Please refer to ASB’s news release issued on January 30, 2024 for additional information on ASB.

HOLDING AND OTHER COMPANIES

The holding and other companies’ net loss was $48.1 million in 2023 compared to $27.8 million in 2022. The higher net loss for the year was primarily due to the after-tax $6.2 million gain on sale of an equity method investment recorded in 2022 at Pacific Current, higher interest expense, lower Pacific Current net income and wildfire-related expenses. Core net loss for the year was $43.4 million compared to $34.0 million in 2022⁵. The fourth quarter net loss was $12.6 million compared to $9.2 million in the fourth quarter of 2022. The higher net loss compared to the prior year quarter was primarily due to lower Pacific Current net income, higher interest expense and wildfire-related expenses. Core net loss for the fourth quarter of 2023 was $11.7 million⁵. There were no core adjustments to net income for the fourth quarter of 2022.

EARNINGS RELEASE, WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS

HEI will conduct a webcast and conference call to review its fourth quarter and full year 2023 consolidated financial results today at 11:30 a.m. Hawaii time (4:30 p.m. Eastern).

To listen to the conference call, dial 1-888-660-6377 (U.S.) or 1-929-203-0797 (international) and enter passcode 2393042. Parties may also access presentation materials (which include reconciliation of non-GAAP measures) and/or listen to the conference call by visiting the conference call link on HEI’s website at www.hei.com under “Investor Relations,” 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. The audio replay will also be available about two hours after the event through February 27, 2024. To access the audio replay, dial 1-800-770-2030 (U.S.) or 1-647-362-9199 (international) and enter passcode 2393042.

HEI and Hawaiian Electric Company, Inc. (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 in the Investor Relations section of the website. Accordingly, investors should routinely monitor the Investor Relations section of HEI’s website, in addition to following HEI’s, Hawaiian Electric’s and ASB’s press releases, HEI’s and Hawaiian Electric’s Securities and Exchange Commission (SEC) filings and HEI’s public conference calls and webcasts. Investors may sign up to receive e-mail alerts via the “Investor Relations” section of the website. The information on HEI’s website is not incorporated by reference into this document or into 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 https://hpuc.my.site.com/cdms/s/ to review documents filed with, and issued by, the PUC. No information on the PUC website is incorporated by reference into this document or into HEI’s and Hawaiian Electric’s SEC filings.

_________________________

¹ Core net income, core EPS, core return on average equity and core return on average assets are non-GAAP measures which, for 2023, exclude Maui wildfire-related after-tax costs and, except for the utility, the after-tax loss on sale of securities resulting from the bank’s balance sheet repositioning executed in the fourth quarter; and for 2022, exclude the gain on sale of an equity method investment recorded in the first quarter at Pacific Current. See “Explanation of HEI’s Use of Certain Unaudited Non-GAAP Measures” and the related GAAP reconciliations.
² Utility amounts indicated as after-tax in this earnings release are based upon adjusting items using a current year composite statutory tax rate of 25.75%.
³ Refer to footnote 1.
⁴ Refer to footnote 1.
⁵ Refer to footnote 1.

ABOUT HEI

The HEI family of companies provides the energy and financial services that empower much of the economic and community activity of Hawaii. HEI’s electric utility, Hawaiian Electric, supplies power to approximately 95% of Hawaii’s population and is undertaking an ambitious effort to decarbonize its operations and the broader state economy. Its banking subsidiary, ASB, is one of Hawaii’s largest financial institutions, providing a wide array of banking and other financial services and working to advance economic growth, affordability and financial fitness. HEI also helps advance Hawaii’s sustainability goals through investments by its non-regulated subsidiary, Pacific Current. For more information, visit www.hei.com.

NON-GAAP MEASURES

Core net income is a non-GAAP measure which, for 2023, excludes Maui wildfire-related after-tax costs and, except for the utility, the after-tax loss on sale of investment securities resulting from the balance sheet repositioning transaction executed in the fourth quarter; and for 2022, excludes the gain on sale of an equity method investment recorded in the first quarter at Pacific Current. See “Explanation of HEI’s Use of Certain Unaudited Non-GAAP Measures” and related GAAP reconciliations at the end 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 “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, 2022, HEI’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, 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 and (i) extreme weather events, including windstorms and other natural disasters, particularly those driven or exacerbated by climate change, which could increase the risk of the Utilities’ equipment being damaged, becoming inoperable or contributing to a wildfire; (ii) the impact of the Maui windstorm and wildfires including the potential liabilities from the many lawsuits filed against the Company and potential regulatory penalties which may result in significant costs that may be unrecoverable through insurance and/or rates; (iii) an increase in insurance premiums and the inability to fully recover premiums through rates or the potential inability to obtain wildfire and general liability insurance coverage at reasonable rates, if available at all; (iv) the uncertainties surrounding the Company’s access to capital and credit markets due to the uncertainties associated with the costs related to the Maui windstorm and wildfires; (v) the material reduction or extended delay in dividends or other distributions from one or more operating subsidiaries to HEI; (vi) further downgrades by securities rating agencies in their ratings of the securities of HEI and Hawaiian Electric and their impact on results of financing efforts; (vii) the risks of suffering losses and incurring liabilities that are uninsured (e.g., damages to the Utilities’ transmission and distribution system and losses from business interruption) or underinsured (e.g., losses not covered as a result of insurance deductibles or other exclusions or exceeding policy limits), and the risks associated with the operation of transmission and distribution assets and power generation facilities, including public and employee safety issues, and assets causing or contributing to wildfires. 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, ASB 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)		2023			2022			2023			2022
Revenues
Electric utility	$	854,106		$	924,951		$	3,269,521		$	3,408,587
Bank		102,947			89,218			394,663			321,068
Other		4,298			4,944			17,982			12,330
Total revenues		961,351			1,019,113			3,682,166			3,741,985
Expenses
Electric utility		768,682			849,558			2,967,363			3,109,396
Bank		86,282			66,753			317,051			219,550
Other		10,411			9,788			45,148			31,966
Total expenses		865,375			926,099			3,329,562			3,360,912
Operating income (loss)
Electric utility		85,424			75,393			302,158			299,191
Bank		16,665			22,465			77,612			101,518
Other		(6,113	)		(4,844	)		(27,166	)		(19,636	)
Total operating income		95,976			93,014			352,604			381,073
Retirement defined benefits credit—other than service costs		1,207			883			4,768			4,411
Interest expense, net—other than on deposit liabilities and other bank borrowings		(34,273	)		(27,462	)		(125,532	)		(103,402	)
Allowance for borrowed funds used during construction		1,403			1,015			5,201			3,416
Allowance for equity funds used during construction		4,091			3,143			15,164			10,574
Interest income		4,125			—			9,105			—
Loss on sales of investment securities and gain (loss) on sales of equity-method investment		(15,609	)		—			(15,609	)		8,123
Income before income taxes		56,920			70,593			245,701			304,195
Income taxes		7,658			12,772			44,573			61,167
Net income		49,262			57,821			201,128			243,028
Preferred stock dividends of subsidiaries		473			473			1,890			1,890
Net income for common stock	$	48,789		$	57,348		$	199,238		$	241,138
Basic earnings per common share	$	0.44		$	0.52		$	1.82		$	2.20
Diluted earnings per common share	$	0.44		$	0.52		$	1.81		$	2.20
Dividends declared per common share	$	—		$	0.35		$	1.08		$	1.40
Weighted-average number of common shares outstanding		110,134			109,471			109,739			109,434
Weighted-average shares assuming dilution		110,301			109,774			110,038			109,778
Net income (loss) for common stock by segment
Electric utility	$	58,183		$	48,621		$	193,952		$	188,929
Bank		3,231			17,897			53,362			79,989
Other		(12,625	)		(9,170	)		(48,076	)		(27,780	)
Net income for common stock	$	48,789		$	57,348		$	199,238		$	241,138
Comprehensive income (loss) attributable to HEI	$	117,463		$	74,864		$	245,916		$	(42,357	)
Return on average common equity (%) (twelve months ended)								8.8			10.5

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)		2023			2022			2023			2022
Revenues	$	854,106		$	924,951		$	3,269,521		$	3,408,587
Expenses
Fuel oil		329,728			391,071			1,211,420			1,265,614
Purchased power		172,779			186,757			671,769			793,584
Other operation and maintenance		126,373			126,342			533,557			497,601
Depreciation		60,924			59,503			243,705			235,424
Taxes, other than income taxes		78,878			85,885			306,912			317,173
Total expenses		768,682			849,558			2,967,363			3,109,396
Operating income		85,424			75,393			302,158			299,191
Allowance for equity funds used during construction		4,091			3,143			15,164			10,574
Retirement defined benefits credit—other than service costs		1,076			959			4,303			3,835
Interest expense and other charges, net		(22,575	)		(19,681	)		(86,140	)		(76,416	)
Allowance for borrowed funds used during construction		1,403			1,015			5,201			3,416
Interest income		2,330			—			6,454			—
Income before income taxes		71,749			60,829			247,140			240,600
Income taxes		13,067			11,709			51,193			49,676
Net income		58,682			49,120			195,947			190,924
Preferred stock dividends of subsidiaries		229			229			915			915
Net income attributable to Hawaiian Electric		58,453			48,891			195,032			190,009
Preferred stock dividends of Hawaiian Electric		270			270			1,080			1,080
Net income for common stock	$	58,183		$	48,621		$	193,952		$	188,929
Comprehensive income attributable to Hawaiian Electric	$	58,337		$	54,552		$	193,940		$	195,070
OTHER ELECTRIC UTILITY INFORMATION
Kilowatthour sales (millions)
Hawaiian Electric		1,604			1,603			6,138			6,212
Hawaii Electric Light		272			269			1,043			1,053
Maui Electric		264			282			1,046			1,089
		2,140			2,154			8,227			8,354
Average fuel oil cost per barrel	$	132.47		$	152.05		$	126.73		$	141.49
Return on average common equity (%) (twelve months ended)¹								8.2			8.2
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, 2023			September 30, 2023			December 31, 2022			2023			2022
Interest and dividend income
Interest and fees on loans	$	72,340		$	71,540		$	60,331	$	276,688		$	207,830
Interest and dividends on investment securities		15,587			14,096			14,315		58,095			58,044
Total interest and dividend income		87,927			85,636			74,646		334,783			265,874
Interest expense
Interest on deposit liabilities		17,961			14,446			3,755		48,905			7,327
Interest on other borrowings		8,721			8,598			4,775		33,892			5,974
Total interest expense		26,682			23,044			8,530		82,797			13,301
Net interest income		61,245			62,592			66,116		251,986			252,573
Provision for credit losses		304			8,835			2,729		10,357			2,037
Net interest income after provision for credit losses		60,941			53,757			63,387		241,629			250,536
Noninterest income
Fees from other financial services		4,643			4,703			4,764		19,034			19,830
Fee income on deposit liabilities		5,104			4,924			4,640		19,131			18,762
Fee income on other financial products		2,664			2,440			2,628		10,616			10,291
Bank-owned life insurance		1,707			2,303			1,872		7,390			2,533
Mortgage banking income		209			341			62		910			1,692
Gain on sale of real estate		—			—			776		495			1,778
Loss on sale of investment securities, net		(14,965	)		—			—		(14,965	)		—
Other income, net		693			627			606		2,799			2,086
Total noninterest income		55			15,338			15,348		45,410			56,972
Noninterest expense
Compensation and employee benefits		28,797			29,902			30,361		118,297			113,839
Occupancy		5,422			5,154			7,030		21,703			24,026
Data processing		5,305			5,133			4,537		20,545			17,681
Services		5,032			3,627			2,967		13,943			10,679
Equipment		3,114			3,125			2,937		11,842			10,100
Office supplies, printing and postage		1,019			1,022			1,142		4,315			4,398
Marketing		1,167			984			1,091		4,001			3,968
Other expense		9,250			7,399			6,034		28,992			20,576
Total noninterest expense		59,106			56,346			56,099		223,638			205,267
Income before income taxes		1,890			12,749			22,636		63,401			102,241
Income taxes		(1,341	)		1,384			4,739		10,039			22,252
Net income	$	3,231		$	11,365		$	17,897	$	53,362		$	79,989
Comprehensive income (loss)	$	70,585		$	(22,866	)	$	29,282	$	97,705		$	(218,844	)
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets		0.13			0.47			0.76		0.55			0.86
Return on average equity		2.74			9.19			15.73		10.98			14.08
Return on average tangible common equity		3.32			11.02			19.20		13.22			16.46
Net interest margin		2.63			2.70			2.91		2.74			2.89
Efficiency ratio		96.42			72.30			68.86		75.20			66.31
Net charge-offs to average loans outstanding		0.15			0.07			0.06		0.12			0.03
As of period end
Nonaccrual loans to loans receivable held for investment		0.46			0.16			0.28
Allowance for credit losses to loans outstanding		1.20			1.23			1.21
Tangible common equity to tangible assets		4.7			3.9			4.1
Tier-1 leverage ratio		7.7			7.7			7.8
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)	$	—		$	14.0		$	10.0	$	39.0		$	42.0

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

Explanation of HEI’s Use of Certain Unaudited Non-GAAP Measures

HEI, Hawaiian Electric and ASB management use certain non-GAAP measures to evaluate the performance of HEI, the utility and bank. 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 adjusted diluted EPS (for HEI consolidated); return on average common equity (for HEI consolidated and Hawaiian Electric); and returns on average equity, average tangible equity and average assets (for ASB).

The reconciling adjustments from GAAP¹ earnings to core earnings for 2023 are limited to the costs related to the recent Maui wildfires and, except for the utility, the loss on sale of investment securities from the balance sheet repositioning transaction executed in the fourth quarter. The reconciling adjustments from GAAP¹ earnings to core earnings for 2022 are limited to the gain on sale of an equity method investment recorded in the first quarter at Pacific Current. Management does not consider these items to be representative of the company’s fundamental core earnings.

Reconciliation of GAAP¹ to non-GAAP Measures Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries Unaudited

(in thousands)	Three months ended December 31, 2023			Year ended December 31, 2023			Year ended December 31, 2022
Maui wildfire-related costs
Pretax expenses:
Legal expenses	$	24,125		$	34,876		$	—
Outside services expenses		8,688			14,822			—
Provision for credit losses		—			5,900			—
One `Ohana Initiative Contribution		—			75,000			—
Other expenses		1,343			5,185			—
Interest expenses		1,645			2,600			—
Pretax expenses		35,801			138,383			—
Insurance recovery		(29,580	)		(104,580	)		—
Deferral of cost		(14,692	)		(14,692	)		—
Wildfire-related expenses, excluding insurance recovery and deferral		(8,471	)		19,111			—
Pretax loss on sale of investment securities		14,965			14,965			—
Gain on sale of equity method investment at Pacific Current		—			—			(8,123	)
Income tax benefits²		(1,858	)		(9,050	)		1,947
After-tax adjustments	$	4,636		$	25,026		$	(6,176	)
HEI consolidated net income
GAAP net income (as reported)	$	48,789		$	199,238		$	241,138
Excluding special items related to the Maui wildfire (after tax):
Legal expenses		17,909			25,886			—
Outside services expenses		6,430			10,976			—
Provision for credit losses		—			4,319			—
One `Ohana Initiative Contribution		—			55,688			—
Other expenses		993			3,832			—
Interest expenses		1,222			1,931			—
After tax expenses		26,554			102,632			—
Insurance recovery		(21,963	)		(77,651	)		—
Deferral of cost		(10,909	)		(10,909	)		—
Maui wildfire-related expenses, net of insurance recoveries and approved deferral treatment (after tax)		(6,318	)		14,072			—
Gain on sale of equity method investment (after tax)		—			—			(6,176	)
Loss on sale of investment securities (after tax)		10,954			10,954			—
Total core net income adjustments (after tax)		4,636			25,026			(6,176	)
Non-GAAP (core) net income	$	53,425		$	224,264		$	234,962
GAAP Diluted earnings per share (as reported)	$	0.44		$	1.81		$	2.20
Non-GAAP (core) Diluted earnings per share	$	0.48		$	2.04		$	2.14

Years ended December 31,	2023	2022
Ratios (%)
Based on GAAP¹
Return on average equity	8.8	10.5
Based on Non-GAAP (core)
Return on average equity	9.9	10.2

¹		Accounting principles generally accepted in the United States of America
²		Current year composite statutory tax rate of 25.75% is used for Utility and corporate amounts and current year composite statutory tax rate of 26.80% is used for ASB amounts.

Note: Other segment (Holding and Other Companies) wildfire-related expenses (legal, outside services and other) are included in “Expenses-Other” and interest expense is included in “Interest expense, net—other than on deposit liabilities and other bank borrowings” on the HEI and subsidiaries’ Consolidated Statements of Income Data. See Electric Utilities and Bank tables below for more detail.

Reconciliation of GAAP¹ to non-GAAP Measures Hawaiian Electric Company, Inc. and Subsidiaries Unaudited

(in thousands)	Three months ended December 31, 2023			Year ended December 31, 2023
Maui windstorm and wildfire-related costs
Pretax expenses:
Legal expenses²	$	18,486		$	24,737
Outside services expenses²		5,826			10,532
One `Ohana Initiative Contribution		—			75,000
Other expenses²		834			3,316
Interest expenses³		720			1,223
Pretax expenses		25,866			114,808
Insurance recovery		(23,613	)		(98,613	)
Deferral of cost		(14,692	)		(14,692	)
Total Maui windstorm and wildfire-related expenses, net of insurance recoveries and approved deferral treatment		(12,439	)		1,503
Income tax benefits⁴		3,203			(387	)
After-tax expenses	$	(9,236	)	$	1,116

Hawaiian Electric consolidated net income
GAAP net income (as reported)	$	58,183		$	193,952
Excluding special items related to the Maui windstorm and wildfires (after tax):
Legal expenses		13,726			18,367
Outside services expenses		4,326			7,820
One `Ohana Initiative Contribution		—			55,688
Other expenses		619			2,462
Interest expenses		534			908
Maui windstorm and wildfire-related cost (after tax)		19,205			85,245
Insurance recovery (after tax)		(17,532	)		(73,220	)
Deferral of cost (after tax)		(10,909	)		(10,909	)
Total Maui windstorm and wildfire- related expenses, net of insurance recoveries and approved deferral treatment (after tax)		(9,236	)		1,116
Non-GAAP (core) net income	$	48,947		$	195,068

Years ended December 31,	2023	2022
Ratios (%)
Based on GAAP¹
Return on average equity	8.2	8.2
Based on Non-GAAP (core)
Return on average equity	8.2	8.2

¹		Accounting principles generally accepted in the United States of America.
²		Legal, outside services and other are included in “Other operation and maintenance” on the Hawaiian Electric and subsidiaries Consolidated Statements of Income Data.
³		Interest expense is included in “Interest expense and other charges, net” on the Hawaiian Electric and subsidiaries Consolidated Statements of Income Data.
⁴		Current year composite statutory tax rate of 25.75% is used for Utility amounts.

Reconciliation of GAAP¹ to non-GAAP Measures American Savings Bank F.S.B. Unaudited

(in thousands)	Three months ended December 31, 2023			Year ended December 31, 2023
Maui wildfire-related costs and loss on sale of securities
Pretax expenses:
Provision for credit losses	$	—		$	5,900
Professional services expense		2,405			3,705
Other expenses		309			1,666
Pretax Maui wildfire-related costs		2,714			11,271
Pretax loss on sale of investment securities		14,965			14,965
Income tax benefits		(4,738	)		(7,031	)
After-tax expenses	$	12,941		$	19,205
ASB net income
GAAP (as reported)	$	3,231		$	53,362
Excluding expense related to Maui wildfire and securities loss (after tax):
Provision for credit losses		—			4,319
Professional services expense		1,760			2,712
Other expenses		227			1,220
Loss on sale of investment securities		10,954			10,954
Maui wildfire-related cost and securities loss (after tax)		12,941			19,205
Non-GAAP (core) net income	$	16,172		$	72,567

	Three months ended December 31, 2023		Year ended December 31, 2023
Ratios (annualized %)
Based on GAAP¹
Return on average assets		0.13		0.55
Return on average equity		2.74		10.98
Return on average tangible common equity		3.32		13.22
Efficiency ratio		96.42		75.20
Based on Non-GAAP (core)
Return on average assets		0.67		0.75
Return on average equity		13.73		14.94
Return on average tangible common equity		16.63		17.98
Efficiency ratio		73.94		69.88

Accounting principles generally accepted in the United States of America

View source version on businesswire.com: https://www.businesswire.com/news/home/20240213153280/en/

Mateo Garcia

Director, Investor Relations

Telephone: (808) 543-7300

E-mail: ir@hei.com

Source: Hawaiian Electric Industries, Inc.

FAQ

What was HEI's full-year net income for 2023?

HEI reported a full-year net income of $199.2 million for 2023.

What led to ASB's net income decline in 2023?

ASB's net income decline in 2023 was primarily due to Maui wildfire-related expenses and a loss on the sale of investment securities.

Why did HEI reduce its dividend?

HEI reduced its dividend to support utility operations, allowing more cash to be retained at the utility for critical investments.

What was ASB's net interest income for 2023?

ASB's net interest income for 2023 was $252.0 million, with a focus on balance sheet optimization.

What was the net loss reported by HEI's holding and other companies in 2023?

HEI's holding and other companies reported a net loss of $48.1 million in 2023.

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