2Q22 Net Income of $52.5M and Diluted Earnings Per Share (EPS)1 of $0.48
Utility Performing Well Despite Inflationary Environment
Bank Results Reflect Strong Loan Growth, Expanding
Net Interest Margin, Favorable Credit Trends and More Normalized Provision
HONOLULU - Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock for the second quarter of 2022 of $52.5 million and EPS of $0.48 compared to $63.9 million and EPS of $0.58 for the second quarter of 2021. The lower net income was due primarily to the prior year’s negative provision for credit losses at American Savings Bank, and the return to a more normalized provision expense due to strong loan growth.
“Our consolidated second quarter results reflect solid performance across
our enterprise,” said Scott Seu, HEI president and CEO. “The utility continues to execute well under performance-based regulation, and will continue to focus on cost control to moderate the impacts of inflation and high fuel costs on customer bills. We did see higher maintenance expenses due to purposeful acceleration of work on our generating units to reduce downtimes and ensure reliable service to our customers as we completely transition off of coal and one of the largest power plants in the state on September 1. Our bank results reflect good execution from the team and an earnings level that is driven by a more normalized provision in comparison to recent periods. The bank saw strong loan growth during the quarter, and credit quality is trending favorably. Our bank continues to progress its digital transformation, and launched Zelle during the quarter, providing a fast and easy way for customers to send and receive money.
“We
know that our communities and customers are feeling financially challenged, and we are continuing to provide options to help manage their utility bills, while our bank continues working to help meet customers’ financial needs,” said Seu.
1 Unless otherwise indicated, throughout this release earnings per share (EPS) refers to diluted earnings per share.
1
HAWAIIAN ELECTRIC COMPANY (HAWAIIAN ELECTRIC) EARNINGS2
Hawaiian Electric’s net income for the second quarter of 2022 was $44.1 million, compared to $41.9 million in the second quarter of 2021, with the increase primarily driven by the
following after-tax items:
•$7 million higher Annual Revenue Adjustment revenues;
•$1 million related solely to a change in the timing for revenue recognition within the year for Maui County operations that eliminates seasonality in recognizing target revenues and results in recognizing revenues evenly throughout the year, with target revenues recognized on an annual basis remaining unchanged; and
•$1 million in higher major project interim recovery revenues related to grid modernization.
These items were partially offset by the following after-tax items:
•$5 million in higher operations and maintenance expenses, including $6 million driven by more generating
facility overhauls and maintenance performed and $1 million related to higher bad debt expense, partially offset by $2 million in lower expenses compared to last year from (i) last year’s write-off due to termination of an agreement relating to a combined heat and power unit and (ii) higher 2021 expenses for environmental reserves;
•$1 million higher depreciation expense due to increasing investments to integrate more renewable energy and improve customer reliability and system efficiency; and
•$1 million in higher interest expense.
AMERICAN SAVINGS BANK (ASB) EARNINGS
ASB’s second quarter of 2022 net income was $17.5 million, compared to $23.9 million in the first quarter of 2022 and $30.3 million in second
quarter of 2021. The decrease in net income compared to the linked and prior year quarters primarily reflected a return to a more normalized provision due to strong loan growth, following five consecutive quarters of provision releases.
Total loans were $5.4 billion as of June 30, 2022, up 4.2% from December 31, 2021, reflecting growth across nearly the entire portfolio and driven by strong growth in commercial real estate loans.
Total deposits were $8.3 billion as of June 30, 2022, an increase of 1.0%
from December 31, 2021. For the second quarter of 2022, the average cost of funds was 0.05%, flat versus the linked quarter and down two basis points versus the same quarter last year.
2 Note: 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%.
2
ASB’s return on average equity3 for the second quarter of 2022 was 12.2%, compared to 13.7% in the linked quarter and 16.8% in the second quarter of 2021. Return on average assets was 0.76% for the second quarter of 2022, compared
to 1.04% in the linked quarter and 1.38% in the same quarter last year.
In the second quarter of 2022, ASB paid dividends of $12.0 million to HEI. ASB had a Tier 1 leverage ratio of 7.7% as of June 30, 2022.
HOLDING AND OTHER COMPANIES
The holding and other companies’ net loss was $9.1 million in the second quarter of 2022 compared to $8.3 million in the second quarter of 2021. The higher net loss was primarily due to higher interest expense, principally due to higher borrowings, and higher general and administrative expenses, including higher charitable contributions (due to timing), partially offset by increased charitable contribution expense in
the second quarter of 2021 related to a settlement agreement associated with an executive transition.
BOARD DECLARES QUARTERLY DIVIDEND
On August 4, 2022, HEI announced that the Board of Directors declared a quarterly cash dividend of $0.35 per share, payable on September 9, 2022 to shareholders of record at the close of business on August 18, 2022 (ex-dividend date is August 17, 2022). This quarterly dividend is equivalent to an annual rate of $1.40 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 August 4,
2022 of $42.51, HEI’s dividend yield is 3.3%.
WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2022 GUIDANCE
HEI will conduct a webcast and conference call to review its consolidated results and
2022 earnings guidance and outlook on Monday, August 8, 2022 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 638186. 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.”
3 Bank return on average equity calculated using daily average common equity.
3
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 August 22, 2022. To access the audio replay, dial 1-866-813-9403
(U.S.) or +44-204-525-0658 (international) and enter passcode 484022.
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 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 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, 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.
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
4
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, 2021 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, 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.
###
5
Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME DATA
(Unaudited)
Three
months ended June 30
Six months ended June 30
(in thousands, except per share amounts)
2022
2021
2022
2021
Revenues
Electric utility
$
818,873
$
601,879
$
1,527,665
$
1,166,743
Bank
75,324
77,260
150,439
154,391
Other
1,410
1,118
2,571
2,069
Total
revenues
895,607
680,257
1,680,675
1,323,203
Expenses
Electric utility
747,719
534,195
1,382,916
1,029,945
Bank
53,401
37,454
98,486
79,289
Other
7,819
6,752
13,329
14,082
Total
expenses
808,939
578,401
1,494,731
1,123,316
Operating income (loss)
Electric utility
71,154
67,684
144,749
136,798
Bank
21,923
39,806
51,953
75,102
Other
(6,409)
(5,634)
(10,758)
(12,013)
Total
operating income
86,668
101,856
185,944
199,887
Retirement defined benefits credit—other than service costs
1,246
1,216
2,489
3,651
Interest
expense, net—other than on deposit liabilities and other bank borrowings
(24,965)
(23,317)
(49,314)
(47,053)
Allowance for borrowed funds used during construction
798
812
1,576
1,559
Allowance
for equity funds used during construction
2,470
2,377
4,879
4,568
Gain on sales of investment securities, net and equity-method investment
—
—
8,123
528
Income
before income taxes
66,217
82,944
153,697
163,140
Income taxes
13,203
18,599
31,043
33,964
Net
income
53,014
64,345
122,654
129,176
Preferred stock dividends of subsidiaries
473
473
946
946
Net
income for common stock
$
52,541
$
63,872
$
121,708
$
128,230
Basic earnings per common share
$
0.48
$
0.58
$
1.11
$
1.17
Diluted
earnings per common share
$
0.48
$
0.58
$
1.11
$
1.17
Dividends declared per common share
$
0.35
$
0.34
$
0.70
$
0.68
Weighted-average
number of common shares outstanding
109,432
109,282
109,397
109,252
Weighted-average shares assuming dilution
109,662
109,515
109,714
109,557
Net
income (loss) for common stock by segment
Electric utility
$
44,135
$
41,901
$
90,544
$
85,259
Bank
17,466
30,284
41,336
59,840
Other
(9,060)
(8,313)
(10,172)
(16,869)
Net
income for common stock
$
52,541
$
63,872
$
121,708
$
128,230
Comprehensive income (loss) attributable to HEI
$
(35,299)
$
80,344
$
(83,291)
$
100,686
Return
on average common equity (%) (twelve months ended)
10.4
10.5
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.
6
Hawaiian Electric Company, Inc.
(Hawaiian Electric) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME DATA
(Unaudited)
Three months ended June 30
Six months ended June 30
($
in thousands, except per barrel amounts)
2022
2021
2022
2021
Revenues
$
818,873
$
601,879
$
1,527,665
$
1,166,743
Expenses
Fuel
oil
269,655
139,136
490,941
266,563
Purchased power
218,085
162,465
381,618
304,761
Other
operation and maintenance
124,892
118,142
250,149
232,712
Depreciation
58,739
57,381
117,210
114,736
Taxes,
other than income taxes
76,348
57,071
142,998
111,173
Total expenses
747,719
534,195
1,382,916
1,029,945
Operating
income
71,154
67,684
144,749
136,798
Allowance for equity funds used during construction
2,470
2,377
4,879
4,568
Retirement
defined benefits credit—other than service costs
991
1,020
1,981
2,041
Interest expense and other charges, net
(18,800)
(17,995)
(37,126)
(35,978)
Allowance
for borrowed funds used during construction
798
812
1,576
1,559
Income before income taxes
56,613
53,898
116,059
108,988
Income
taxes
11,979
11,498
24,517
22,731
Net income
44,634
42,400
91,542
86,257
Preferred
stock dividends of subsidiaries
229
229
458
458
Net income attributable to Hawaiian Electric
44,405
42,171
91,084
85,799
Preferred
stock dividends of Hawaiian Electric
270
270
540
540
Net income for common stock
$
44,135
$
41,901
$
90,544
$
85,259
Comprehensive
income attributable to Hawaiian Electric
$
44,186
$
41,936
$
90,646
$
85,328
OTHER ELECTRIC UTILITY INFORMATION
Kilowatthour
sales (millions)
Hawaiian Electric
1,506
1,514
2,954
2,942
Hawaii Electric Light
261
256
515
501
Maui
Electric
264
256
519
492
2,031
2,026
3,988
3,935
Average
fuel oil cost per barrel
$
139.51
$
73.58
$
120.54
$
68.59
Return on average common equity (%) (twelve months ended)1
8.2
8.9
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.
Net interest income after provision for credit losses
59,005
62,300
72,969
121,305
138,535
Noninterest
income
Fees from other financial services
4,716
5,587
5,464
10,303
10,537
Fee
income on deposit liabilities
4,552
4,691
3,904
9,243
7,767
Fee income on other financial products
2,529
2,718
2,201
5,247
4,643
Bank-owned
life insurance
(142)
681
1,624
539
4,185
Mortgage banking income
372
1,077
1,925
1,449
6,225
Gain
on sale of real estate
—
1,002
—
1,002
—
Gain on sale of investment securities, net
—
—
—
—
528
Other
income, net
475
372
76
847
348
Total noninterest income
12,502
16,128
15,194
28,630
34,233
Noninterest
expense
Compensation and employee benefits
27,666
27,215
27,670
54,881
55,707
Occupancy
5,467
5,952
5,100
11,419
10,069
Data
processing
4,484
4,151
4,533
8,635
8,884
Services
2,522
2,439
2,475
4,961
5,337
Equipment
2,402
2,329
2,394
4,731
4,616
Office
supplies, printing and postage
1,073
1,060
978
2,133
2,022
Marketing
934
1,018
665
1,952
1,313
FDIC
insurance
891
808
788
1,699
1,604
Other expense
3,959
3,241
3,568
7,200
6,122
Total
noninterest expense
49,398
48,213
48,171
97,611
95,674
Income before income taxes
22,109
30,215
39,992
52,324
77,094
Income
taxes
4,643
6,345
9,708
10,988
17,254
Net income
$
17,466
$
23,870
$
30,284
$
41,336
$
59,840
Comprehensive
income (loss)
$
(71,369)
$
(98,571)
$
47,283
$
(169,940)
$
31,085
OTHER BANK INFORMATION (annualized %, except as of period end)
Return
on average assets
0.76
1.04
1.38
0.90
1.39
Return on average equity
12.17
13.70
16.76
13.01
16.40
Return
on average tangible common equity
14.20
15.53
18.92
14.95
18.48
Net interest margin
2.85
2.79
2.98
2.82
2.97
Efficiency
ratio
66.52
64.14
63.42
65.32
62.89
Net charge-offs to average loans outstanding
0.00
0.01
0.04
0.01
0.11
As
of period end
Nonaccrual loans to loans receivable held for investment
0.40
0.72
1.03
Allowance for credit losses to loans outstanding
1.28
1.30
1.51
Tangible
common equity to tangible assets
4.9
5.8
7.5
Tier-1 leverage ratio
7.7
7.8
8.0
Dividend
paid to HEI (via ASB Hawaii, Inc.) ($ in millions)
$
12.0
$
15.0
$
23.0
$
27.0
$
28.0
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.
8
Dates Referenced Herein and Documents Incorporated by Reference