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

HONOLULU–(BUSINESS WIRE)–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

Contacts

Mateo Garcia

Director, Investor Relations

Telephone: (808) 543-7300

E-mail: ir@hei.com

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