HEI Reports 2023 Results

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

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

 

1

 

Accounting principles generally accepted in the United States of America

 

Contacts

Mateo Garcia

Director, Investor Relations

Telephone: (808) 543-7300

E-mail: ir@hei.com

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