HEI Reports Third Quarter 2021 Results

Rhea-AI Summary

Hawaiian Electric Industries (HEI) reported third-quarter 2021 consolidated net income of $63.4 million, with earnings per share (EPS) of $0.58, down from $65.0 million and $0.59 EPS in Q3 2020. Hawaiian Electric Company net income decreased to $50.3 million from $60.1 million, primarily due to lower revenues and higher expenses. American Savings Bank's net income dropped to $19.3 million from $30.3 million in the previous quarter. HEI declared a quarterly dividend of $0.34 per share, yielding 3.3%.

Positive

• Declared a quarterly cash dividend of $0.34 per share, maintaining a 3.3% yield.
• Effective cost management resulted in $3 million in savings passed to customers in Q3.
• The increase in total earning assets by 9.3% since December 2020 indicates growth.

Negative

• Net income for Hawaiian Electric Company fell by $9.8 million year-over-year.
• American Savings Bank's net income down 36% from the previous quarter.
• Higher operational expenses led to reduced profitability.

HONOLULU, Nov. 5, 2021 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock of $63.4 million for the third quarter of 2021 and EPS of $0.58 compared to $65.0 million and EPS of $0.59 for the third quarter of 2020.

"We're pleased with our consolidated third quarter results, with the utility achieving its efficiency targets and delivering good performance in line with expectations, and solid profitability at the bank," said Constance H. Lau, HEI president and CEO. "Following a sharp decline in new COVID-19 case counts, the governor's recent announcement encouraging visitors to return is a positive sign for our local economy. Working together, our state, our companies and our communities can continue to strengthen our economy and continue to show Hawaii's leadership in confronting climate change.

"Our utility's carbon reduction efforts go hand-in-hand with its work to provide affordable, equitable, reliable and resilient power for customers. We're on track to deliver on our management audit savings commitment for this year, providing $3 million to customers in the third quarter and an additional $3 million by year end. Cost efficiency remains a key focus. We're pleased with the collaboration with our policymakers, regulators and community to help move renewable energy and storage projects forward. We're also confident that we can continue to provide reliable power when we eliminate coal in Hawaii next year.

"Our bank's third quarter results reflect continued solid performance and good credit quality, the latter of which drove an additional release of reserves. We continue to build our capabilities to provide more value to customers by increasing digital banking services and customized financial solutions, while delivering the superior customer experience we're known for," said Lau.

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1    Unless otherwise indicated, throughout this release earnings per share (EPS) refers to diluted earnings per share.

HAWAIIAN ELECTRIC COMPANY EARNINGS

Hawaiian Electric Company's (Hawaiian Electric) net income for the third quarter of 2021 was $50.3 million, compared to $60.1 million in the third quarter of 2020, with the difference primarily driven by the following after-tax items:

• $6 million lower revenues, including (i) $5 million related solely to a change in the timing for revenue recognition within the year that eliminates seasonality and results in recognizing revenues more evenly throughout the year, with target revenues recognized on an annual basis remaining unchanged, and (ii) $1 million relating to the annual revenue adjustment mechanism, which included $3 million of management audit savings delivered to customers;
• $4 million from higher operations and maintenance expenses primarily due to an increase in generating facility overhauls performed in the quarter and delayed from earlier in the year, higher costs for energy management system upgrades, and higher medical costs due to a one-time credit in 2020, partially offset by $1 million lower labor expense;
• $1 million from higher depreciation expense due to increasing investments to integrate more renewable energy and improve customer reliability and system efficiency;
• $1 million related to lower fuel efficiency due to planned maintenance outages of certain generation units; and
• $1 million higher interest expense due to higher borrowings.

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

• $1 million lower non-service pension costs due to the reset of pension costs included in rates as part of a final rate case decision; and
• $1 million lower enterprise resource planning system implementation benefits passed on to customers in the third quarter of 2021 as compared to the same quarter last year.

AMERICAN SAVINGS BANK EARNINGS

American Savings Bank's (American) third quarter of 2021 net income was $19.3 million, compared to $30.3 million in the second quarter of 2021 and $12.2 million in the third quarter of 2020. The decrease in net income compared to the linked quarter was primarily due to the $12.2 million negative provision in the second quarter of 2021 compared to the negative provision of $1.7 million in the third quarter of 2021. The increase in net income compared to the prior year quarter was primarily due to the negative provision for credit losses of $1.7 million for the third quarter of 2021 compared to a provision for credit losses of $14.0 million in the third quarter of 2020.

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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.

Total earning assets as of September 30, 2021 were $8.4 billion, up 9.3% from December 31, 2020.

Total loans were $5.1 billion as of September 30, 2021, down 1.3% compared to June 30, 2021 and down 4.0% from December 31, 2020. The reduction in the loan portfolio during the quarter included approximately $111 million in forgiven Paycheck Protection Program (PPP) loans, as well as declines in the home equity line of credit and consumer portfolios. The decrease in these portfolios was partially offset by growth in the residential, commercial and commercial real estate loan portfolios. Excluding PPP loan forgiveness, the loan portfolio grew by $46 million or 0.9% compared to June 30, 2021.   

The investment securities portfolio was $3.1 billion as of September 30, 2021, up 39.8% from December 31, 2020 as growth in deposits continued to outpace loan growth. The portfolio is primarily comprised of securities issued or guaranteed by U.S. government agencies or U.S. government sponsored agencies.

Total deposits were $8.0 billion as of September 30, 2021, an increase of 1.3% compared to June 30, 2021 and an increase of 8.0% from December 31, 2020. For the third quarter of 2021, the average cost of funds was 0.06%, down one basis point versus the linked quarter and down seven basis points versus the prior year quarter.           

Overall, American's return on average equity² for the third quarter of 2021 was 10.3%, compared to 16.8% in the linked quarter and 6.8% in the third quarter of 2020. Return on average assets was 0.86% for the third quarter of 2021, compared to 1.38% in the linked quarter and 0.61% in the same quarter last year.

In the third quarter of 2021, American paid dividends of $12.0 million to HEI. American had a Tier 1 leverage ratio of 8.0% at September 30, 2021.

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

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2    Bank return on average equity calculated using weighted average daily common equity.

HOLDING AND OTHER COMPANIES

The holding and other companies' net loss was $6.2 million in the third quarter of 2021 compared to $7.2 million in the third quarter of 2020. The lower net loss was primarily due to higher Pacific Current income and lower corporate expense.

BOARD DECLARES QUARTERLY DIVIDEND

On November 4, 2021, HEI announced that the Board of Directors declared a quarterly cash dividend of $0.34 per share, payable on December 10, 2021 to shareholders of record at the close of business on November 23, 2021 (ex-dividend date is November 22, 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 November 4, 2021 of $41.14, HEI's dividend yield is 3.3%.

WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2021 GUIDANCE

HEI will conduct a webcast and conference call to review its consolidated results and

2021 earnings guidance and outlook on Friday, November 5, 2021 at 10:15 a.m. Hawaii time (4:15 p.m. Eastern).

To listen to the conference call, dial 1-844-200-6205 (U.S.) or 1-929-526-1599 (international) and enter passcode 181692. Parties may also access presentation materials 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 November 19, 2021. To access the audio replay, dial 1-866-813-9403 (U.S.) or 44-204-525-0658 (international) and enter passcode 965360.

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 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 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 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 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 into this document or into HEI's and Hawaiian Electric's SEC filings.

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, American Savings Bank, 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.

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, 2020 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 September 30								Nine months ended September 30
(in thousands, except per share amounts)		2021				2020				2021				2020
Revenues
Electric utility		$	679,499			$	562,568			$	1,846,242			$	1,694,225
Bank		76,208				78,644				230,599				233,096
Other		1,197				215				3,266				237
Total revenues		756,904				641,427				2,080,107				1,927,558
Expenses
Electric utility		604,307				474,050				1,634,252				1,493,948
Bank		51,151				63,144				130,440				189,700
Other		4,130				4,672				18,212				13,091
Total expenses		659,588				541,866				1,782,904				1,696,739
Operating income (loss)
Electric utility		75,192				88,518				211,990				200,277
Bank		25,057				15,500				100,159				43,396
Other		(2,933)				(4,457)				(14,946)				(12,854)
Total operating income		97,316				99,561				297,203				230,819
Retirement defined benefits credit (expense)—other than service costs		1,058				(1,102)				4,709				(2,970)
Interest expense, net—other than on deposit liabilities and other bank borrowings		(23,477)				(22,086)				(70,530)				(66,474)
Allowance for borrowed funds used during construction		827				801				2,386				2,241
Allowance for equity funds used during construction		2,427				2,347				6,995				6,556
Gain on sale of investment securities, net		—				—				528				9,275
Income before income taxes		78,151				79,521				241,291				179,447
Income taxes		14,265				14,018				48,229				30,691
Net income		63,886				65,503				193,062				148,756
Preferred stock dividends of subsidiaries		471				471				1,417				1,417
Net income for common stock		$	63,415			$	65,032			$	191,645			$	147,339
Basic earnings per common share		$	0.58			$	0.60			$	1.75			$	1.35
Diluted earnings per common share		$	0.58			$	0.59			$	1.75			$	1.35
Dividends declared per common share		$	0.34			$	0.33			$	1.02			$	0.99
Weighted-average number of common shares outstanding		109,311				109,181				109,272				109,126
Weighted-average shares assuming dilution		109,575				109,336				109,588				109,387
Net income (loss) for common stock by segment
Electric utility		$	50,342			$	60,065			$	135,601			$	126,299
Bank		19,265				12,150				79,105				41,925
Other		(6,192)				(7,183)				(23,061)				(20,885)
Net income for common stock		$	63,415			$	65,032			$	191,645			$	147,339
Comprehensive income attributable to Hawaiian Electric Industries, Inc.		$	52,110			$	66,472			$	152,796			$	166,659
Return on average common equity (%) (twelve months ended)										10.3				9.4

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

 

Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME DATA (Unaudited)
		Three months ended September 30								Nine months ended September 30
($ in thousands, except per barrel amounts)		2021				2020				2021				2020
Revenues		$	679,499			$	562,568			$	1,846,242			$	1,694,225
Expenses
Fuel oil		180,682				105,042				447,245				390,714
Purchased power		185,759				149,025				490,520				425,679
Other operation and maintenance		116,468				111,243				349,180				348,831
Depreciation		57,386				55,689				172,122				167,235
Taxes, other than income taxes		64,012				53,051				175,185				161,489
Total expenses		604,307				474,050				1,634,252				1,493,948
Operating income		75,192				88,518				211,990				200,277
Allowance for equity funds used during construction		2,427				2,347				6,995				6,556
Retirement defined benefits credit (expense)—other than service costs		877				(432)				2,918				(1,195)
Interest expense and other charges, net		(18,148)				(16,836)				(54,126)				(50,768)
Allowance for borrowed funds used during construction		827				801				2,386				2,241
Income before income taxes		61,175				74,398				170,163				157,111
Income taxes		10,335				13,835				33,066				29,316
Net income		50,840				60,563				137,097				127,795
Preferred stock dividends of subsidiaries		228				228				686				686
Net income attributable to Hawaiian Electric		50,612				60,335				136,411				127,109
Preferred stock dividends of Hawaiian Electric		270				270				810				810
Net income for common stock		$	50,342			$	60,065			$	135,601			$	126,299
Comprehensive income attributable to Hawaiian Electric		$	50,448			$	60,113			$	135,776			$	126,398
OTHER ELECTRIC UTILITY INFORMATION
Kilowatthour sales (millions)
Hawaiian Electric		1,636				1,620				4,578				4,559
Hawaii Electric Light		273				244				774				721
Maui Electric		282				235				774				699
		2,191				2,099				6,126				5,979
Average fuel oil cost per barrel		$	86.77			$	49.71			$	74.93			$	64.70
Return on average common equity (%) (twelve months ended)1										8.3				8.4

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. 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. STATEMENTS OF INCOME DATA (Unaudited)
		Three months ended												Nine months ended September 30
(in thousands)		September 30, 2021				June 30, 2021				September 30, 2020				2021				2020
Interest and dividend income
Interest and fees on loans		$	49,445			$	51,026			$	52,419			$	150,418			$	161,505
Interest and dividends on investment securities		11,996				11,040				7,221				31,709				22,939
Total interest and dividend income		61,441				62,066				59,640				182,127				184,444
Interest expense
Interest on deposit liabilities		1,176				1,281				2,287				3,919				8,945
Interest on other borrowings		5				23				61				55				449
Total interest expense		1,181				1,304				2,348				3,974				9,394
Net interest income		60,260				60,762				57,292				178,153				175,050
Provision for credit losses		(1,725)				(12,207)				13,970				(22,367)				39,504
Net interest income after provision for credit losses		61,985				72,969				43,322				200,520				135,546
Noninterest income
Fees from other financial services		4,800				5,464				4,233				15,337				11,906
Fee income on deposit liabilities		4,262				3,904				3,832				12,029				11,842
Fee income on other financial products		2,124				2,201				1,524				6,767				4,608
Bank-owned life insurance		2,026				1,624				1,965				6,211				4,432
Mortgage banking income		1,272				1,925				7,681				7,497				15,933
Gain on sale of investment securities, net		—				—				—				528				9,275
Other income, net		283				76				(231)				631				(69)
Total noninterest income		14,767				15,194				19,004				49,000				57,927
Noninterest expense
Compensation and employee benefits		30,888				27,670				26,431				86,595				77,287
Occupancy		5,157				5,100				5,693				15,226				16,402
Data processing		4,278				4,533				3,366				13,162				11,052
Services		2,272				2,475				2,624				7,609				7,907
Equipment		2,373				2,394				2,001				6,989				6,630
Office supplies, printing and postage		1,072				978				1,187				3,094				3,577
Marketing		995				665				727				2,308				1,908
FDIC insurance		808				788				714				2,412				1,567
Other expense1		3,668				3,568				4,556				9,790				15,813
Total noninterest expense		51,511				48,171				47,299				147,185				142,143
Income before income taxes		25,241				39,992				15,027				102,335				51,330
Income taxes		5,976				9,708				2,877				23,230				9,405
Net income		$	19,265			$	30,284			$	12,150			$	79,105			$	41,925
Comprehensive income		$	7,581			$	47,283			$	13,543			$	38,666			$	62,885
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets		0.86				1.38				0.61				1.21				0.73
Return on average equity		10.26				16.76				6.75				14.31				7.95
Return on average tangible common equity		11.52				18.92				7.62				16.11				9.00
Net interest margin		2.90				2.98				3.12				2.94				3.34
Efficiency ratio		68.66				63.42				61.99				64.80				61.01
Net charge-offs to average loans outstanding		0.03				0.04				0.32				0.08				0.41
As of period end
Nonaccrual loans to loans receivable held for investment		0.97				1.03				0.77
Allowance for credit losses to loans outstanding		1.48				1.51				1.67
Tangible common equity to tangible assets		7.3				7.5				8.0
Tier-1 leverage ratio		8.0				8.0				8.3
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)		$	12.0			$	23.0			$	—			$	40.0			$	28.0

1	The three- and nine-month periods ended September 30, 2021 include approximately $0.1 million and $0.5 million, respectively, of certain direct and incremental COVID-19 related costs. The three- and nine-month periods ended September 30, 2020 include approximately $0.7 million and $4.5 million, respectively, of certain significant direct and incremental COVID-19 related costs. These costs for the first nine months of 2020, which have been recorded in Other expense, include $2.4 million of compensation expense and $1.7 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. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.

 

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

 

 

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SOURCE Hawaiian Electric Industries, Inc.

FAQ

What were Hawaiian Electric Industries' Q3 2021 earnings?

Hawaiian Electric Industries reported a consolidated net income of $63.4 million for Q3 2021.

What is the dividend yield for HE stock?

HEI's quarterly cash dividend of $0.34 per share results in a dividend yield of 3.3%.

How did Hawaiian Electric Company's net income change in Q3 2021?

Hawaiian Electric Company's net income decreased to $50.3 million from $60.1 million in Q3 2020.

What were the main factors impacting American Savings Bank's income in Q3 2021?

American Savings Bank's income decreased due to lower provisions for credit losses compared to the previous quarter.

What were the total earning assets of HEI as of Q3 2021?

Total earning assets for HEI were $8.4 billion, an increase of 9.3% from December 31, 2020.