HEI Reports First Quarter 2017 Earnings

• $5 million lower net revenues³ mainly due to the expiration of the Hawaii Public Utilities Commission-approved 2013 settlement agreement with the Consumer Advocate that had allowed Hawaiian Electric to record calendar year rate adjustment mechanism revenues from January 1, 2014  - December 31, 2016⁴; and
• $1 million higher depreciation expense as a result of increasing investments for the integration of more renewable energy and improved customer reliability.

These items were partially offset by $1 million (after-tax) lower operations and maintenance expenses⁵ compared to the prior year quarter which included power supply improvement plan consulting expenses of $2 million (after-tax).  The first quarter of 2017 also included additional reserves for environmental costs of $1 million (after-tax). 

AMERICAN SAVINGS BANK EARNINGS

American Savings Bank's (American) net income for the first quarter of 2017 was $15.8 million compared to $16.2 million in the fourth (or linked) quarter of 2016 and $12.7 million in the first quarter of 2016.

Compared to the first quarter of 2016, the $3.1 million increase was primarily driven by $3 million (after-tax) higher net interest income mainly due to growth in the commercial real estate and consumer loan portfolios as well as the deployment of strong deposit growth into our investment portfolio.

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³   Net revenues represent the after-tax impact of "Revenues" less the following expenses which are largely pass through items in revenues: "fuel oil," "purchased power" and "taxes, other than income taxes" as shown on the Hawaiian Electric Company, Inc. and Subsidiaries' Condensed Consolidated Statements of Income.
⁴   With the expiration of the 2013 settlement agreement with the Consumer Advocate that was approved by the PUC, in 2017 the Oahu rate adjustment mechanism (RAM) revenues revert to being recorded for accounting purposes from a calendar year recognition period to a period beginning on June 1 of each year through May 31 of the subsequent year.  The periods in which the cash reflecting RAM revenues is collected did not change as a result of the settlement agreement and have always been aligned to the June 1 to May 31 periods. Therefore, the expiration of the 2013 settlement agreement will have no impact on Hawaiian Electric Company cash collections.
⁵   Excludes net income neutral expenses covered by surcharges or by third parties and merger-related costs including the terminated LNG contract costs.  See the "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.

Compared to the linked fourth quarter of 2016, the $0.4 million decrease was primarily driven by the following on an after-tax basis:

• $1 million higher net interest income driven mainly by higher yields in our investment portfolio and growth in our consumer portfolio; and
• $1 million lower noninterest expense.

These increases were offset by the following on an after-tax basis:

• $1 million higher provision for loan losses including additional reserves for a commercial real estate relationship in the first quarter of 2017; and
• $1 million lower noninterest income primarily due to lower mortgage banking income as a result of a reduction in residential mortgage refinancing activity.

Total loans were $4.7 billion at March 31, 2017, and included growth in the residential and consumer loan portfolio during the first quarter of 2017.  The reduction in our exposure to national credits, a loan payoff connected with a completed construction project, and the resolution and payoff of a prior nonperforming commercial loan contributed to the 1.2% annualized decline in our loan portfolio in the first quarter of 2017.                  

Total deposits were $5.7 billion at March 31, 2017, an increase of $126 million or 9.1% annualized increase from December 31, 2016.  Low-cost core deposits increased $140 million or 11.4% annualized increase from December 31, 2016.  The average cost of funds was 0.20% for the first quarter of 2017 compared to 0.22% for the fourth quarter of 2016 and 0.23% for the first quarter of 2016.

Overall, American achieved solid profitability in the first quarter of 2017 with a return on average equity of 10.8% and a return on average assets of 0.98%.

For additional information, refer to the American news release issued on April 28, 2017.

HOLDING AND OTHER COMPANIES

The holding and other companies' net losses were $3.1 million in the first quarter of 2017 compared to the $5.7 million net loss in the first quarter of 2016.  Excluding the Transaction Adjustments which totaled $1.5 million in the first quarter of 2016, holding and other companies' net losses were $3.1 million and $4.2 million in the first quarters of 2017 and 2016, respectively.  The lower net loss was primarily driven by tax benefits in the first quarter of 2017 related to the adoption of an accounting standard update on share-based compensation.

WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE

HEI will conduct a webcast and conference call to review its first quarter of 2017 earnings and 2017 EPS guidance on Friday, May 5, 2017, at 8:00 a.m. Hawaii time (2:00 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, www.hei.com under the heading "Investor Relations."  HEI and Hawaiian Electric Company intend to continue to use HEI's website 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 such portions of HEI's website, 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 the same website beginning about two hours after the event. Replays of the conference call will also be available approximately two hours after the event through May 19, 2017, by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10104146.

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 and provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, F.S.B., one of Hawaii's largest financial institutions.

NON-GAAP MEASURES

See "Explanation of HEI's Use of Certain Unaudited Non-GAAP Measures" and related reconciliations on pages 12 to 13 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 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, 2016 and HEI's future 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 Company, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
		Three months ended March 31
(in thousands, except per share amounts)		2017				2016
Revenues
Electric utility		$	518,611			$	482,052
Bank		72,856				68,840
Other		95				68
Total revenues		591,562				550,960
Expenses
Electric utility		469,673				426,726
Bank		48,696				49,246
Other		5,331				6,137
Total expenses		523,700				482,109
Operating income (loss)
Electric utility		48,938				55,326
Bank		24,160				19,594
Other		(5,236)				(6,069)
Total operating income		67,862				68,851
Interest expense, net—other than on deposit liabilities and other bank borrowings		(19,568)				(20,126)
Allowance for borrowed funds used during construction		889				662
Allowance for equity funds used during construction		2,399				1,739
Income before income taxes		51,582				51,126
Income taxes		16,916				18,301
Net income		34,666				32,825
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