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HEI Reports Third Quarter 2017 Earnings Of $60.1 Million
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PR Newswire
HONOLULU, Nov. 2, 2017
HONOLULU, Nov. 2, 2017 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (HEI) (NYSE: HE) today reported consolidated net income for common stock for the third quarter of 2017 of $60.1 million and diluted earnings per share (EPS) of $0.55 compared to $127.1 million and EPS of $1.17 for the third quarter of 2016. Third quarter of 2016 core earnings1 and core EPS1 were $63.3 million and $0.58, respectively. HEI's third quarter of 2016 core earnings1 included $6 million of favorable tax adjustments at the holding company as HEI moved out of a federal net operating loss position, enabling the recognition of tax benefits.
"HEI's core earnings1 for the quarter compared well to the prior year quarter. The utility performed as we expected, and we saw strong performance by American Savings Bank. The bank delivered higher earnings and profitability driven by improving credit quality and higher yields on interest-earning assets. This exemplifies the value of the unique combination of businesses which comprise HEI," said Constance H. Lau, HEI president and chief executive officer.
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| | Note: Amounts indicated as "after-tax" in this earnings release are based upon adjusting items for the composite statutory tax rates of 39% for the utilities and 40% for the bank. |
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| 1 | Non-GAAP measure that excludes after-tax income and costs related to the terminated merger with NextEra Energy, Inc., the cancelled spin-off of ASB Hawaii, Inc., and the termination of the liquefied natural gas (LNG) contract which required PUC approval of the merger with NextEra Energy, Inc. (the "Transaction Adjustments"). See the "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation. |
HAWAIIAN ELECTRIC COMPANY EARNINGS
Hawaiian Electric Company's2 net income for the third quarter of 2017 was $47.5 million as our utilities continue to perform according to plan for this transition year compared to $47.0 million in the third quarter of 2016. The $0.5 million net income increase from the prior year quarter was primarily driven by the following after-tax items:
- $2 million higher net revenues3 mainly due to higher recovery of costs for integrating more renewables and reliability investments and the Hawaii Electric Light 2016 interim rate increase which became effective on August 31, 2017;
- $2 million higher allowance for funds used during construction primarily due to the Schofield generating plant project expected to be placed in service in the second quarter of 2018; and
- $1 million favorable tax adjustments as the utility moved out of a federal net operating loss position, enabling the recognition of tax benefits in the third quarter of 2017.
These increases were offset by the following after-tax items:
- $4 million higher operations and maintenance expenses4 compared to the prior year quarter primarily due to higher overhaul expenses and enterprise resource planning project costs; and
- $1 million higher depreciation expense as a result of increasing investments for the integration of more renewable energy and improved customer reliability.
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| 2 | Hawaiian Electric Company refers to the three utilities, Hawaiian Electric Company, Inc. on Oahu, Maui Electric Company, Limited, and Hawaii Electric Light Company, Inc. |
| 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 | 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.American Savings Bank earnings |
AMERICAN SAVINGS BANK EARNINGS
American Savings Bank's (American) net income for the third quarter of 2017 was $17.6 million compared to $16.7 million in the second (or linked) quarter of 2017 and $15.1 million in the third quarter of 2016.
Compared to the third quarter of 2016, the $2.5 million increase was primarily driven by the following on an after-tax basis:
- $3 million higher net interest income driven mainly by growth in interest-earning assets funded by strong deposit growth and overall improvement in asset yields; and
- $3 million lower provision for loan losses resulting from work to improve commercial loan asset quality.
These items were offset by the following on an after-tax basis:
- $2 million lower noninterest income primarily due to lower mortgage banking income and no gain on sale of real estate; and
- $1 million higher noninterest expense primarily due to higher performance-based incentive cost.
Compared to the linked second quarter of 2017, the $0.9 million increase was primarily driven by lower provision for loan losses.
Total loans were $4.7 billion at September 30, 2017, a decrease of $65 million or 1.8% annualized from December 31, 2016. This decrease reflects American's work to improve overall commercial loan quality through a strategic decrease in its exposure to national syndicated credits, as well as a reduction in its commercial real estate loan portfolio. The decrease in American's commercial portfolio was partially offset by growth in home equity lines of credit, consumer and residential loan portfolios.
Total deposits were $5.8 billion at September 30, 2017, an increase of $203 million or 4.9% annualized from December 31, 2016. Low-cost core deposits increased $153 million or 4.2% annualized from December 31, 2016. The average cost of funds was 0.20% for the third quarter of 2017 compared to 0.21% for the second quarter of 2017 and 0.24% for the third quarter of 2016.
Overall, American achieved solid profitability in the third quarter of 2017 with a return on average equity of 11.6% and a return on average assets of 1.07%.
For additional information, refer to the American news release issued on October 30, 2017.
HOLDING AND OTHER COMPANIES
The holding and other companies' net loss was $5.0 million in the third quarter of 2017 compared to $65.1 million net income in the third quarter of 2016. Excluding the Transaction Adjustments which totaled $63.8 million in the third quarter of 2016, the holding and other companies' net loss was $5.0 million in the third quarter of 2017 compared to $1.2 net income in the third quarter of 2016. The holding company's third quarter of 2016 net income included $6.0 million of favorable tax adjustments as HEI moved out of a federal net operating loss position, enabling the recognition of tax benefits.
WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE
HEI will conduct a webcast and conference call to discuss its third quarter of 2017 earnings and 2017 EPS guidance on Thursday, November 2, 2017, at 9:00 a.m. Hawaii time (3:00 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 November 16, 2017 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10112461.
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.
| Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | ||||||||||||||||
| | | Three months ended September 30 | | Nine months ended September 30 | ||||||||||||
| (in thousands, except per share amounts) | | 2017 | | 2016 | | 2017 | | 2016 | ||||||||
| Revenues | | | | | | | | | ||||||||
| Electric utility | | $ | 598,769 | | | $ | 572,253 | | | $ | 1,674,255 | | | $ | 1,549,700 | |
| Bank | | 74,289 | | | 73,708 | | | 222,474 | | | 213,297 | | ||||
| Other | | 127 | | | 94 | | | 299 | | | 262 | | ||||
| Total revenues | | 673,185 | | | 646,055 | | | 1,897,028 | | | 1,763,259 | | ||||
| Expenses | | | | | | | | | ||||||||
| Electric utility | | 511,693 | | | 482,441 | | | 1,483,194 | | | 1,333,876 | | ||||
| Bank | | 47,525 | | | 50,981 | | | 146,754 | | | 150,752 | | ||||
| Other | | 4,422 | | | 7,191 | | | 13,777 | | | 18,883 | | ||||
| Total expenses | | 563,640 | | | 540,613 | | | 1,643,725 | | | 1,503,511 | | ||||
| Operating income (loss) | | | | | | | | | ||||||||
| Electric utility | | 87,076 | | | 89,812 | | | 191,061 | | | 215,824 | | ||||
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