HONOLULU, Aug. 2, 2019 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE: HE) (HEI) today reported consolidated net income for common stock for the second quarter of 2019 of $42.5 million and diluted earnings per share of $0.39 compared to $46.1 million and EPS of $0.42 for the second quarter of 2018.

"HEI's earnings for the second quarter of 2019 are in line with our expectations for the year, and we are making great strides on our strategies across our enterprise," said Constance H. Lau, president and CEO of HEI.

"Together with our stakeholders, our utilities are working hard to reach our state's ambitious clean energy and carbon neutrality goals while delivering affordable, reliable energy for customers and ensuring system resilience. We recently commenced one of the largest renewables procurement processes ever undertaken by a U.S. utility—seeking up to 900 megawatts of new renewable generation, along with storage and grid services—even faster than planned."

"Our bank results were below recent quarters' performance due to volatility in American's investment portfolio driven by the lower interest rate environment as well as higher credit costs, including for one commercial exposure. The bank continued to deliver strong net interest margin, good loan and deposit growth and improving year-over-year efficiency. We are already seeing many of the benefits we anticipated from the consolidation of the bank's non-branch teammates into the new ASB Campus and we are confident in the future improvements American will deliver for our stakeholders," said Lau.

HAWAIIAN ELECTRIC COMPANY EARNINGS

Hawaiian Electric Company's1 net income for the second quarter of 2019 was $32.6 million compared to $31.2 million in the second quarter of 2018, primarily driven by the following after-tax items:

• $6.5 million revenue increase resulting from rate increases and higher rate adjustment mechanism (RAM) revenues; the revenue increase included $3.6 million from Hawaiian Electric (Oahu), $2.4 million from Maui Electric (Maui County) and $0.5 million from Hawaii Electric Light (Hawaii Island); and
• $3.3 million revenue increase from recovery of the Schofield generation project under the major project interim recovery (MPIR) mechanism. These items were partially offset by the following after-tax items:
• $4.5 million higher operations and maintenance expenses2 compared to the second quarter of 2018, primarily due to higher overhaul expenses and generating station preventative maintenance and repairs, partially offset by the absence of Hawaii Island lava eruption response costs experienced in 2018;
• $2.6 million higher depreciation expense due to increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency; and
• $0.9 million lower net income resulting from the inclusion of outages for preventative underground circuit maintenance in determining 2018 performance under the reliability performance incentive mechanism.

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.

1 Hawaiian Electric Company, unless otherwise defined, refers to the three utilities, Hawaiian Electric Company, Inc. on Oahu, Hawaii Electric Light Company, Inc. on Hawaii Island, and Maui Electric Company, Limited, serving Maui County.

2 Excludes net income neutral expenses covered by surcharges or by third parties. See the "Explanation of HEI's Use of Certain Unaudited Non-GAAP Measures" and the related reconciliation accompanying this release.

AMERICAN SAVINGS BANK EARNINGS

American Savings Bank's (American) second quarter of 2019 net income was $17.0 million compared to $20.8 million in the first, or linked, quarter and $20.6 million in the prior year quarter.

The decrease in net income compared to the linked quarter was primarily due to lower net interest income resulting from an increase in amortization of premiums in the investment securities portfolio, as well as a higher provision for loan losses due to increased loss reserves for one commercial credit, increased reserves for loan portfolio growth, and additional loss reserves for the personal unsecured loan portfolio.

Compared to the second quarter of 2018, the decrease in net income was primarily driven by a higher provision for loan losses due to an increase in loan loss reserves for the personal unsecured loan portfolio, and a lower provision in the prior year due to a release of reserves for improved credit quality in the commercial, commercial real estate and home equity line of credit loan portfolios.

Total loans were $5.0 billion as of June 30, 2019, up $164.5 million or 6.8% annualized from December 31, 2018, driven mainly by increases in commercial loans, home equity lines of credit, and residential loans.

Total deposits were $6.3 billion at June 30, 2019, an increase of $98.5 million or 3.2% annualized from December 31, 2018. Low-cost core deposits were $5.4 billion as of June 30, 2019.

American's return on average equity was 10.5% in the second quarter of 2019 compared to 13.1% in the first quarter of 2019 and 13.6% in the prior year quarter.3 Return on average assets was 0.96% in the second quarter of 2019 compared to 1.18% in the first quarter of 2019 and 1.20% in the second quarter of 2018.

Please refer to American's news release issued on July 30, 2019 for additional information on American.

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

HOLDING AND OTHER COMPANIES

The holding and other companies' net loss was $7.1 million in the second quarter of 2019 compared to $5.7 million in the prior year quarter. The higher net loss was primarily due to higher interest expense, higher HEI corporate expenses, and lower Pacific Current net income due primarily to the hiring of a management team at Pacific Current.

DIRECTOR APPPOINTED TO FILL VACANCY OF RETIRING HEI BOARD MEMBER

On July 31, 2019, the HEI Board elected Micah A. Kane to serve as a director of HEI and a member of its Nominating and Corporate Governance (NCG) Committee, both effective August 1, 2019. Mr. Kane was elected to fill the vacancies on the Board and on the NCG Committee created by the retirement of Dr. James K. Scott, who retired from the Board effective July 31, 2019.

Mr. Kane's extensive leadership experience and in-depth understanding of the communities HEI serves will add to the Board's oversight of HEI's Hawaii-focused strategy and operations. Among other leadership roles, Mr. Kane's experience includes serving as President and CEO of Hawaii Community Foundation; as a trustee of Kamehameha Schools, a private school system established under the will of Princess Bernice Pauahi Bishop to educate Native Hawaiians; and as a director on the board of HEI's electric utility subsidiary, Hawaiian Electric Company.

WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE

HEI will conduct a webcast and conference call to review its second quarter 2019 earnings and 2019 EPS guidance on Friday, August 2, 2019, at 10:15 a.m. Hawaii time (4:15 p.m. Eastern time).

Interested parties within the United States may listen to the conference by calling (844) 834-0652 and international parties may listen to the conference by calling (412) 317-5198 or by accessing the webcast on HEI's website at www.hei.com under the "Investor Relations" section, sub-heading "News and Events." HEI and Hawaiian Electric Company intend to continue to use HEI's website, www.hei.com, as a means of disclosing additional information. Such disclosures will be included on HEI's website in the Investor Relations section.

Accordingly, investors should routinely monitor the Investor Relations section of HEI's website at www.hei.com in addition to following HEI's, Hawaiian Electric Company's and American's press releases, HEI's and Hawaiian Electric Company'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 in this document or in HEI's and Hawaiian Electric Company'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 in order to review documents filed with and issued by the PUC. No information on the PUC website is incorporated by reference in this document or in HEI's and Hawaiian Electric Company's SEC filings.

An online replay of the webcast will be available at www.hei.com beginning about two hours after the event. Replays of the conference call will also be available approximately two hours after the event through August 16, 2019, by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10131926.

HEI supplies power to approximately 95% of Hawaii's population through its electric utilities, Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited; provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, one of Hawaii's largest financial institutions; and helps advance Hawaii's clean energy and sustainability goals through investments by its non-regulated subsidiary, Pacific Current, LLC.

NON-GAAP MEASURES

See "Explanation of HEI's Use of Certain Unaudited Non-GAAP Measures" and related reconciliations on page 9 of this release.

EXPLANATION OF HEI'S USE OF CERTAIN UNAUDITED NON-GAAP MEASURES

HEI and Hawaiian Electric Company management use certain non-GAAP measures, which exclude certain items that are not reflective of ongoing operations or that are not expected to reoccur, to evaluate the performance of HEI and the utility. Management believes these non-GAAP measures provide useful supplemental information and are a better indicator of the companies' core operating activities. Core earnings and other financial measures as presented below 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 and the adjusted return on average common equity (ROACE) for HEI and the utility.

The reconciling adjustments from GAAP earnings to core earnings exclude the 2017 impact of the federal tax reform act due to the adjustment of the deferred tax balances and the $1,000 non-executive employee bonuses paid by the bank related to federal tax reform. Management does not consider these items to be representative of the company's fundamental core earnings. Management has shown adjusted non-GAAP (core) net income, adjusted non-GAAP (core) ROACE in order to provide better comparability of ROACE between periods.

The accompanying table also provides the calculation of utility GAAP other operation and maintenance (O&M) expense adjusted for "O&M-related net income neutral items," which are O&M expenses covered by specific surcharges or by third parties. These "O&M-related net income neutral items" are grossed-up in revenue and expense and do not impact net income.

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SOURCE Hawaiian Electric Industries, Inc.