HEI Reports First Quarter 2024 Results

May 11, 2024

1Q24 Net Income of $42.1 million and Diluted Earnings Per Share (EPS) of $0.38

Utility Continues to Operate Efficiently While Advancing Wildfire Mitigation and Resilience Efforts
One ‘Ohana Initiative Progressing, With 43 Decedent and 15 Physical Injury Registrants to Date
Bank’s Strategic Balance Sheet Repositioning Executed in the Previous Quarter Contributed to Improved Profitability and Net Interest Margin
Bank’s Release of Maui Wildfire-Related Reserves Reflects Better Outlook for Maui Economy

HONOLULU–(BUSINESS WIRE)–Hawaiian Electric Industries, Inc. (NYSE: HE) (HEI) today reported consolidated net income for common stock for the first quarter of 2024 of $42.1 million and EPS of $0.38 compared to $54.7 million and EPS of $0.50 for the first quarter of 2023. Core net income and EPS¹ for the first quarter were $49.3 million and $0.45, respectively.

“We continue to work in earnest with key stakeholders to help our community recover from the devastating impacts of the Maui wildfires. The State’s One ‘Ohana fund has seen steady uptake and the Governor recently extended the registration deadline, and mediation discussions are underway with those impacted by the fires. Hawaii’s legislative session recently concluded, and although we are disappointed that we ran out of time to pass legislation this session, our governor and legislature are highly engaged in determining how to design legislation that best makes sense for Hawaii, our customers and our company. Our utility is committed to making the investments needed to mitigate wildfire risk and advance important safety and resilience work,” said Scott Seu, HEI president and CEO.

“American Savings Bank executed well in the first quarter, generating higher net income as net interest margin and profitability benefited from the strategic balance sheet repositioning executed last quarter. The bank also released reserves initially taken following the wildfires on Maui, reflecting Maui’s resilient economy and stronger-than-expected outlook.”

HAWAIIAN ELECTRIC COMPANY (HAWAIIAN ELECTRIC) EARNINGS²

Hawaiian Electric’s net income for the first quarter of 2024 was $39.2 million compared to $47.0 million in the first quarter of 2023, with the decrease primarily driven by the following after-tax items:

$12 million in higher operations and maintenance (O&M) expenses, including $7 million of costs associated with the Maui windstorm and wildfire event. These costs include the settlement of indemnification claims asserted by the state and wildfire mitigation expenses. The remaining increase in O&M included higher insurance costs and higher vegetation management costs; and
$3 million impact from worse heat rate performance.

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

$5 million higher revenues, including $4 million from the annual revenue adjustment mechanism and $1 million from the major project interim recovery mechanism;
$1 million in higher interest income; and
$1 million higher allowance for funds used during construction related to increased capital expenditures.

Excluding incremental after-tax Maui windstorm and wildfire-related expenses net of insurance recoveries, Hawaiian Electric’s core net income³ for the quarter was $44.2 million. The incremental after-tax Maui windstorm and wildfire-related expenses of $5 million were composed of $18 million of expenses, net of $7 million of insurance-related recoveries and $6 million of costs deferred pursuant to the Public Utilities Commission’s decision allowing Hawaiian Electric to defer these costs.

Utility Dividend Declaration

On May 8, 2024 Hawaiian Electric’s Board of Directors declared a $13 million quarterly cash dividend to its sole common stockholder, HEI.

AMERICAN SAVINGS BANK EARNINGS

ASB’s first quarter 2024 net income was $20.9 million, compared to $3.2 million in the fourth quarter of 2023 and $18.6 million in the first quarter of 2023. Net income for the quarter reflected the release of $1.5 million of Maui wildfire-related reserves and the recovery of $0.4 million in cash lost or damaged during the wildfires, partially offset by Maui wildfire-related expenses of $1.8 million. Excluding the after-tax impacts of these items, core net income for the first quarter was also $20.9 million.⁴

Total earning assets as of March 31, 2024 were $8.9 billion, down approximately 2.7% from December 31, 2023.

Total loans were $6.1 billion as of March 31, 2024, down 1.1% from December 31, 2023, primarily reflecting the payoff and sale of loans in the commercial markets portfolio and a decrease in the HELOC portfolio.

Total deposits were $8.0 billion as of March 31, 2024, down 1.7% from December 31, 2023. Core deposits declined 1.2% from December 31, 2023, while certificates of deposit decreased 5.3% primarily due to the paydown of $166 million in public time deposits. As of March 31, 2024, 86% of deposits were F.D.I.C. insured or fully collateralized, consistent with December 31, 2023. Approximately 82% of deposits were F.D.I.C. insured, up slightly from 80% as of December 31, 2023. For the first quarter of 2024, the average cost of funds was 117 basis points, down slightly from 118 basis points in the linked quarter and up from 66 basis points in the prior year quarter.

ASB’s return on average equity was 15.6%, compared to 2.7% in the linked quarter and 15.5% in the first quarter of 2023. Return on average assets was 0.88% for the first quarter of 2024, compared to 0.13% in the linked quarter and 0.78% in the prior year quarter.

In the first quarter of 2024, ASB did not pay a dividend to HEI, supporting ASB’s healthy capital levels. ASB had a Tier 1 leverage ratio of 8.0% as of March 31, 2024.

Please refer to ASB’s news release issued on April 30, 2024 for additional information on ASB.

HOLDING AND OTHER COMPANIES

The holding and other companies’ net loss was $18.0 million in the first quarter of 2024 compared to $10.9 million in the first quarter of 2023. The higher net loss compared to the prior year quarter was primarily due to wildfire-related expenses and lower Pacific Current net income. Core net loss for the first quarter of 2024 was $15.8 million⁵.

EARNINGS RELEASE, WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS

HEI will conduct a webcast and conference call to review its first quarter 2024 consolidated financial results today at 10:30 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 May 24, 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 See “Explanation of HEI’s Use of Certain Unaudited Non-GAAP Measures” and the related GAAP reconciliations at the end of this release.

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 excludes Maui wildfire-related after-tax costs. See “Explanation of HEI’s Use of Certain Unaudited Non-GAAP Measures” and the 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, 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. 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 March 31
(in thousands, except per share amounts)	2024			2023
Revenues
Electric utility	$	788,578		$	830,361
Bank		105,144			93,857
Other		3,436			4,019
Total revenues		897,158			928,237
Expenses
Electric utility		725,223			754,486
Bank		79,612			70,337
Other		15,904			9,896
Total expenses		820,739			834,719
Operating income (loss)
Electric utility		63,355			75,875
Bank		25,532			23,520
Other		(12,468	)		(5,877	)
Total operating income		76,419			93,518
Retirement defined benefits credit—other than service costs		1,282			1,152
Interest expense, net—other than on deposit liabilities and other bank borrowings		(31,591	)		(28,798	)
Allowance for borrowed funds used during construction		1,386			1,131
Allowance for equity funds used during construction		3,640			3,301
Interest income		3,133			—
Income before income taxes		54,269			70,304
Income taxes		11,674			15,110
Net income		42,595			55,194
Preferred stock dividends of subsidiaries		473			473
Net income for common stock	$	42,122		$	54,721
Basic earnings per common share	$	0.38		$	0.50
Diluted earnings per common share	$	0.38		$	0.50
Dividends declared per common share	$	—		$	0.36
Weighted-average number of common shares outstanding		110,218			109,514
Weighted-average shares assuming dilution		110,476			109,825
Net income (loss) for common stock by segment
Electric utility	$	39,221		$	47,009
Bank		20,934			18,562
Other		(18,033	)		(10,850	)
Net income for common stock	$	42,122		$	54,721
Comprehensive income attributable to HEI	$	32,321		$	75,209
Return on average common equity (%) (twelve months ended)		8.1			10.0

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.

Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME DATA (Unaudited)

	Three months ended March 31
($ in thousands, except per barrel amounts)	2024			2023
Revenues	$	788,578		$	830,361
Expenses
Fuel oil		284,296			334,097
Purchased power		159,817			152,761
Other operation and maintenance		143,890			128,316
Depreciation		62,812			60,927
Taxes, other than income taxes		74,408			78,385
Total expenses		725,223			754,486
Operating income		63,355			75,875
Allowance for equity funds used during construction		3,640			3,301
Retirement defined benefits credit—other than service costs		1,072			1,047
Interest expense and other charges, net		(19,985	)		(20,246	)
Allowance for borrowed funds used during construction		1,386			1,131
Interest income		1,432			—
Income before income taxes		50,900			61,108
Income taxes		11,180			13,600
Net income		39,720			47,508
Preferred stock dividends of subsidiaries		229			229
Net income attributable to Hawaiian Electric		39,491			47,279
Preferred stock dividends of Hawaiian Electric		270			270
Net income for common stock	$	39,221		$	47,009
Comprehensive income attributable to Hawaiian Electric	$	39,172		$	46,964
OTHER ELECTRIC UTILITY INFORMATION
Kilowatthour sales (millions)
Hawaiian Electric		1,412			1,430
Hawaii Electric Light		254			251
Maui Electric		240			255
		1,906			1,936
Average fuel oil cost per barrel	$	121.84		$	139.88
Return on average common equity (%) (twelve months ended)¹		7.8			8.2

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
(in thousands)	March 31, 2024			December 31, 2023			March 31, 2023
Interest and dividend income
Interest and fees on loans	$	72,971		$	72,340		$	64,842
Interest and dividends on investment securities		14,964			15,587			14,637
Total interest and dividend income		87,935			87,927			79,479
Interest expense
Interest on deposit liabilities		17,432			17,961			6,837
Interest on other borrowings		8,154			8,721			7,721
Total interest expense		25,586			26,682			14,558
Net interest income		62,349			61,245			64,921
Provision for credit losses		(2,159	)		304			1,175
Net interest income after provision for credit losses		64,508			60,941			63,746
Noninterest income
Fees from other financial services		4,874			4,643			4,679
Fee income on deposit liabilities		4,898			5,104			4,599
Fee income on other financial products		2,743			2,664			2,744
Bank-owned life insurance		3,584			1,707			1,425
Mortgage banking income		424			209			130
Loss on sale of investment securities		—			(14,965	)		—
Other income, net		686			693			801
Total noninterest income		17,209			55			14,378
Noninterest expense
Compensation and employee benefits		32,459			28,797			30,204
Occupancy		5,063			5,422			5,588
Data processing		4,846			5,305			5,012
Services		4,151			5,032			2,595
Equipment		2,649			3,114			2,646
Office supplies, printing and postage		1,018			1,019			1,165
Marketing		776			1,167			1,016
Other expense		4,942			9,250			6,191
Total noninterest expense		55,904			59,106			54,417
Income before income taxes		25,813			1,890			23,707
Income taxes		4,879			(1,341	)		5,145
Net income	$	20,934		$	3,231		$	18,562
Comprehensive income (loss)	$	11,166		$	70,585		$	36,992
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets		0.88			0.13			0.78
Return on average equity		15.64			2.74			15.51
Return on average tangible common equity		18.48			3.32			18.73
Net interest margin		2.75			2.63			2.85
Efficiency ratio		70.27			96.42			68.62
Net charge-offs to average loans outstanding		0.14			0.15			0.14
As of period end
Nonaccrual loans to loans receivable held for investment		0.53			0.46			0.24
Allowance for credit losses to loans outstanding		1.16			1.20			1.18
Tangible common equity to tangible assets		5.0			4.7			4.3
Tier-1 leverage ratio		8.0			7.7			7.7
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)	$	—		$	—		$	14.0

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 regarding 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, and efficiency ratio (for ASB).

The reconciling adjustments from GAAP earnings to core earnings are limited to the costs related to the Maui wildfires. Management does not consider these items to be representative of the company’s fundamental core earnings.

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

(in thousands)	Three months ended March 31, 2024
Maui wildfire-related costs
Pretax expenses:
Legal expenses	$	15,027
Outside services expenses		2,747
Provision for credit losses		(1,500	)
Other expenses		9,019
Interest expenses		4,825
Pretax expenses		30,118
Insurance recoveries		(12,577	)
Deferral of cost		(7,898	)
Wildfire-related expenses, excluding insurance recovery and deferral		9,643
Income tax benefits²		(2,482	)
After-tax adjustments	$	7,161
HEI consolidated net income
GAAP net income (as reported)	$	42,122
Excluding special items related to the Maui wildfire (after tax):
Legal expenses		11,157
Outside services expenses		2,022
Provision for credit losses		(1,098	)
Other expenses		6,700
Interest expenses		3,582
After tax expenses		22,363
Insurance recoveries		(9,338	)
Deferral of cost		(5,864	)
Maui wildfire-related expenses, net of insurance recoveries and approved deferral treatment (after tax)		7,161
Non-GAAP (core) net income	$	49,283
GAAP Diluted earnings per share (as reported)	$	0.38
Non-GAAP (core) Diluted earnings per share	$	0.45

		Three months ended March 31, 2024
Ratios (%)
Based on GAAP¹
Return on average equity		8.1
Based on Non-GAAP (core)
Return on average equity		9.5

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

(in thousands)	Three months ended March 31, 2024
Maui windstorm and wildfire-related costs
Pretax expenses:
Legal expenses¹	$	10,735
Outside services expenses¹		784
Other expenses¹		9,141
Interest expenses²		3,907
Pretax expenses		24,567
Insurance recoveries		(9,969	)
Deferral of cost		(7,898	)
Total Maui windstorm and wildfire-related expenses, net of insurance recoveries and approved deferral treatment		6,700
Income tax benefits³		(1,725	)
After-tax expenses	$	4,975

Hawaiian Electric consolidated net income
GAAP net income (as reported)	$	39,221
Excluding special items related to the Maui windstorm and wildfires (after tax):
Legal expenses		7,971
Outside services expenses		582
Other expenses		6,787
Interest expenses		2,901
Maui windstorm and wildfire-related cost (after tax)		18,241
Insurance recovery (after tax)		(7,402	)
Deferral of cost (after tax)		(5,864	)
Total Maui windstorm and wildfire- related expenses, net of insurance recoveries and approved deferral treatment (after tax)		4,975
Non-GAAP (core) net income	$	44,196

		Three months ended March 31, 2024
Ratios (%)
Based on GAAP
Return on average equity		7.8
Based on Non-GAAP (core)
Return on average equity		8.0

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

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

(in thousands)	Three months ended March 31, 2024
Maui wildfire related costs
Pretax expenses:
Provision for credit losses	$	(1,500	)
Professional services expense		1,708
Other expenses, net		(317	)
Pretax Maui wildfire related costs, net		(109	)
Income tax¹		29
After-tax expenses, net	$	(80	)
ASB net income
GAAP (as reported)	$	20,934
Maui wildfire costs (after tax):
Provision for credit losses		(1,098	)
Professional services expense		1,250
Other expenses, net		(232	)
Maui wildfire related cost, net (after tax)		(80	)
Non-GAAP (core) net income	$	20,854