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"Given our expectations at the outset of the quarter for continued difficult economic conditions and delays in the regulatory process, our operating companies instituted disciplined efforts to control costs which contributed commendably to mitigating these effects and we are pleased with our companies' overall performance," said Constance H. Lau, HEI president and chief executive officer.
"At the utility, predominately short-term cost deferrals and reductions are helping us offset these challenges. In addition, kilowatthour sales benefited from more normal weather conditions than we saw in the first half of the year. At the bank, net income was down quarter over quarter but up significantly from the second quarter of 2009. In addition, the bank continued to make significant strides in its performance improvement initiative to reduce its cost structure that are helping offset elevated credit expenses during this difficult credit cycle," said Lau.
UTILITY RESULTS
Electric utility net income for common stock for the third quarter of 2009 was $26.5 million compared with $25.9 million in the third quarter of 2008. "Interim rate relief and cost control efforts enabled the utility to produce slightly better results quarter over quarter, although returns remain significantly below allowed returns," said Lau.
On August 3rd, the Public Utilities Commission of the State of Hawaii (PUC) approved the implementation of a partial interim increase of $61.1 million, or 4.7%, in HECO's 2009 test year rate case proceeding, which contributed $5.8 million quarter over quarter to utility net income.
Kilowatthour sales were down 0.8% compared with the same quarter of 2008, reducing utility net income by an estimated $1.1 million. "Sales continue to be impacted by difficult economic conditions and continuing positive efforts by Hawaii residents and businesses to conserve energy, partly offset by warmer and more humid weather," said Lau.
Operations and maintenance expenses (O&M) were up $0.4 million or 0.4% quarter over quarter. Included in third quarter 2008 O&M were $9.5 million of demand-side management program (DSM) costs that were recovered through a surcharge. The energy efficiency DSM programs were transferred to a third-party administrator at the end of the second quarter of 2009, and thus, there was only $2.4 million in costs related to DSM programs in the third quarter of 2009. The remaining difference in quarter over quarter O&M includes operating costs for the new Oahu CT-1 unit, increased spending in support of renewable initiatives, expenses to support our aging infrastructure and higher employee benefit costs. "Due to short-term, aggressive cost containment measures and project deferrals taken in the third quarter in response to delays in the regulatory process, the year-to-date O&M increase of 8% compared favorably with the 10% annual increase we estimated at the end of the second quarter. We now expect O&M for 2009 to increase by approximately 6% compared with 2008, improved from the 13% and 10% annual increases we estimated at the end of the first and second quarters, respectively. While a small portion of these reductions are sustainable, the majority of the reductions are temporary cost containment efforts which cannot be sustained long-term without impacting operations," said Lau.
On September 30th, the company's Maui County subsidiary filed a 2010 test year rate case, requesting an overall revenue increase of $28.2 million, or 9.7%. The request is based on a 10.75% return on common equity and 8.57% return on rate base. Based on the filing date, the statutory deadline for an interim decision from the Hawaii PUC expires in the third quarter of 2010.
BANK RESULTS
Bank net income for the third quarter of 2009 was $11.3 million, compared to $4.0 million in the second quarter of 2009 and $15.4 million for the same quarter last year.
"This has been a challenging year for financial institutions and our bank's results continue to be impacted by the difficult credit cycle. We continue to make significant strides in our performance improvement initiative, helping offset currently elevated credit expenses and improve the bank's cost structure and earnings power in the long-term. In addition, the bank continues to be well capitalized with a strong Tier-1 core leverage ratio of 9.1% at the end of the quarter," said Lau.
Net interest income in the third quarter of 2009 was $50.5 million compared to $52.3 million in the third quarter of 2008. Lower average earning asset balances and yields were partially offset by lower funding costs. Net interest margin grew to 4.23% in the third quarter of 2009, compared with 4.16% in the second quarter of 2009 and 4.08% in the third quarter of 2008.
The bank recorded a $5.2 million provision for loan losses for the third quarter of 2009 compared with $13.5 million in the second quarter of 2009 and $2.0 million in the third quarter of 2008. The majority of the provision in the third quarter of 2009 reflected an increase in nonperforming residential lot loans and 1-4 family mortgages. A large component of the second quarter 2009 provision related to a large single commercial credit which was partially charged-off. This credit was sold in September 2009 for a pre-tax gain of $3.0 million and was included in bank noninterest income.
Noninterest income for the third quarter of 2009 was $11.9 million, compared with $13.0 million for the second quarter of 2009 and $16.7 million in the third quarter of 2008. Third quarter 2009 noninterest income was reduced by $9.9 million for the other-than-temporary-impairment of certain private-issue mortgage-related securities, compared with $5.6 million in the second quarter of 2009 and none in the third quarter of 2008. Excluding the effects of the other-than-temporary impairment charges in the third and second quarters of 2009 and the gain on sale of a single commercial credit in the third quarter of 2009, the increases in adjusted noninterest income were 13% quarter over quarter and 1% over the second quarter(1). These increases reflect increases in deposit fees and gains on sales of residential loans.
Noninterest expense for the third quarter of 2009 was $39.6 million, compared with $44.4 million in the second quarter of 2009 and $42.4 million for the same period in 2008. On an adjusted basis, noninterest expense decreased by $5.1 million quarter over quarter and $1.8 million over the second quarter of 2009, reflecting progress in the bank's efforts to reduce its cost structure.(1) "The bank's performance improvement project remains on track toward its goal of reducing annualized adjusted noninterest expense to $140-$145 million by the end of 2010," said Lau.(1)
HOLDING AND OTHER COMPANIES' RESULTS
The holding and other companies' net losses were $4.4 million in the third quarter of 2009, relatively flat compared with $4.1 million in the third quarter of 2008.
WEBCAST AND TELECONFERENCE
Hawaiian Electric Industries, Inc. will conduct a webcast and teleconference call to review its third quarter 2009 earnings on Monday, November 2, 2009, at 3:00 a.m. Hawaii time (8:00 a.m. Eastern time). The event can be accessed through HEI's website at http://www.hei.com or by dialing (800) 659-2032, passcode: 86467264 for the teleconference call.
An online replay of the webcast will be available at the same website beginning about two hours after the event. Replays of the teleconference call will also be available approximately two hours after the event through November 16, 2009, by dialing (888) 286-8010, passcode: 44997988.
HEI supplies power to over 400,000 customers or 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.
EXPLANATION OF HEI'S USE OF CERTAIN UNAUDITED NON-GAAP FINANCIAL MEASURES
HEI and bank management use certain non-GAAP measures in their evaluation of the bank's performance and believe the presentations of such financial measures on this basis provide useful supplemental information and a clearer picture of the bank's operating performance, and are a better indicator of the bank's ongoing core operating activities. Management also uses such measures to assist investors/analysts in better understanding the bank's progress on the execution of its process improvement initiative. These measures are also useful in understanding performance trends and facilitate comparisons with the performance of others in the financial services industry.
Management utilizes non-GAAP financial measures of noninterest income and expense in the calculation of certain of the bank's metrics/ratios, such as (i) efficiency, (ii) pretax, preprovision income, and (iii) return on average assets to analyze on a consistent basis and over a longer period of time the performance of the bank's core operating activities. Management also annualizes the non-GAAP measure of noninterest expense by multiplying such measure by 4 to develop an estimate of adjusted noninterest expense for a year-long period. This annualized adjusted noninterest expense metric (non-GAAP measure) may not reflect actual results.
Certain reconciling items--real estate transactions, professional services, FISERV conversion costs, severance, technology write-offs, prepayment penalty on early extinguishment of debt, and a loss on sale of Bishop Insurance Agency--are being incurred pursuant to the bank management's performance improvement initiative which was announced in June 2008 and is expected to conclude by the end of 2010. These costs are being incurred with the objective of increasing the bank's operating efficiency and profitability. Accordingly, bank management believes that these costs will remain temporarily elevated while the performance improvement project is being executed and will be reduced or eliminated once the project has ended. See schedule on last page of this release for a tabular reconciliation of GAAP to Non-GAAP measures.
Reported noninterest income is being adjusted by a gain on sale of a commercial loan. Bank management believes that it would not be appropriate to assume that the bank would realize material gains on a quarterly basis.
Likewise, bank management also adds back to noninterest income charges related to the other-than-temporary impairment (OTTI) of mortgage-related securities because of the material nature of the charge and the unpredictability of when those charges might occur in the future. The bank incurred material OTTI in the fourth quarter of 2008 and the second and third quarters of 2009, impacting the comparability of noninterest income for those quarters with the linked quarters and the same quarters of the previous year. Management believes that adjusting noninterest income to exclude the effects of OTTI helps the comparability of noninterest income quarter to quarter and quarter over quarter.
Lastly, management adjusts noninterest expense to exclude a special assessment levied by the Federal Deposit Insurance Corporation (FDIC) pursuant to the FDIC's plan to recapitalize the deposit insurance fund. While the FDIC may make future special assessments pursuant to this plan, in September 2009, it proposed a restoration plan that requires banks to prepay estimated quarterly assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012. Such prepaid assessments would be amortized over these periods. In any event, bank management believes that it would not be appropriate to assume that the bank would incur these special assessments on a quarterly basis. Further, excluding the FDIC charge is consistent with the financial measures used by other banks and enhances the comparison of operating performance.
Limitations associated with utilizing non-GAAP measures are the risks of disagreement over the appropriateness of adjustments comprising these measures and that other companies might calculate these measures differently. Management addresses these limitations by providing detailed reconciliations between GAAP information and non-GAAP measures. See reconciliation on the last page.
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 expects, anticipates, intends, plans, believes, predicts, estimates or similar expressions. In addition, any statements concerning future financial performance (including future revenues, expenses, earnings or losses or growth rates), ongoing business strategies or prospects and possible future actions, which may be provided by management, 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 assumptions about 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 "Forward-Looking Statements" discussion (which is incorporated by reference herein) set forth on pages iv and v of HEI's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, and in HEI's future periodic reports that discuss important factors that could cause HEI's results to differ materially from those anticipated in such statements. Forward-looking statements speak only as of the date of this release.
(1) Refer to the last page of the accompanying schedules of this release for a reconciliation of noninterest income and expense based on U.S. generally accepted accounting principles to adjusted noninterest income and expense.
Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
Three months Nine months Twelve months
ended September 30, ended September 30, ended September 30,
(in thousands, except per share amounts) 2009 2008 2009 2008 2009 2008
Revenues
Electric utility $ 548,440 $ 827,788 $ 1,460,654 $ 2,139,798 $ 2,181,206 $ 2,738,107
Bank 71,947 87,675 229,478 279,469 308,562 387,471
Other (74 ) (32 ) (121 ) (164 ) 60 1,696
620,313 915,431 1,690,011 2,419,103 2,489,828 3,127,274
Expenses
Electric utility 494,268 775,941 1,343,250 1,981,572 2,030,669 2,522,443
Bank 54,258 62,983 189,162 262,406 258,357 343,067
Other 3,148 2,378 9,247 8,648 14,770 13,422
551,674 841,302 1,541,659 2,252,626 2,303,796 2,878,932
Operating income (loss)
Electric utility 54,172 51,847 117,404 158,226 150,537 215,664
Bank 17,689 24,692 40,316 17,063 50,205 44,404
Other (3,222 ) (2,410 ) (9,368 ) (8,812 ) (14,710 ) (11,726 )
68,639 74,129 148,352 166,477 186,032 248,342
Interest expense-other than on deposit liabilities and other bank (19,678 ) (19,345 ) (55,421 ) (56,780 ) (74,783 ) (75,954 )
borrowings
Allowance for borrowed funds used during construction 1,118 967 4,467 2,564 5,644 3,276
Allowance for equity funds used during construction 2,628 2,426 10,353 6,432 13,311 7,881
Income before income taxes 52,707 58,177 107,751 118,693 130,204 183,545
Income taxes 18,753 20,425 36,977 40,892 45,063 64,689
Net income 33,954 37,752 70,774 77,801 85,141 118,856
Less net income attributable to noncontrolling interest - 471 471 1,417 1,417 1,890 1,887
preferred stock of subsidiaries
Net income for common stock $ 33,483 $ 37,281 $ 69,357 $ 76,384 $ 83,251 $ 116,969
Basic earnings per common share $ 0.37 $ 0.44 $ 0.76 $ 0.91 $ 0.93 $ 1.40
Diluted earnings per common share $ 0.37 $ 0.44 $ 0.76 $ 0.91 $ 0.92 $ 1.39
Dividends per common share $ 0.31 $ 0.31 $ 0.93 $ 0.93 $ 1.24 $ 1.24
Weighted-average number of common shares outstanding 91,522 84,625 91,173 84,052 89,959 83,788
Adjusted weighted-average shares 91,653 84,842 91,278 84,182 90,072 83,906
Income (loss) by segment
Electric utility $ 26,514 $ 25,932 $ 56,141 $ 77,949 $ 70,167 $ 106,127
Bank 11,323 15,405 26,226 11,888 32,165 29,086
Other (4,354 ) (4,056 ) (13,010 ) (13,453 ) (19,081 ) (18,244 )
Net income for common stock $ 33,483 $ 37,281 $ 69,357 $ 76,384 $ 83,251 $ 116,969
This information should be read in conjunction with the
consolidated financial statements and the notes thereto for the
year ended December 31, 2008 (included in HEI's Form 8-K dated
June 9, 2009) and the consolidated financial statements and the
notes thereto in HEI's Quarterly Reports on SEC Form 10-Q for the
quarters ended March 31, 2009, June 30, 2009 and September 30,
2009 (when filed). 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 Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
(dollars in thousands) September 30, December 31,
2009 2008
Assets
Cash and equivalents $ 257,331 $ 182,903
Federal funds sold 1,708 532
Accounts receivable and unbilled revenues, net 252,186 300,666
Available-for-sale investment and mortgage-related securities 623,104 657,717
Investment in stock of Federal Home Loan Bank of Seattle 97,764 97,764
Loans receivable, net 3,758,898 4,206,492
Property, plant and equipment, net of accumulated depreciation of 3,052,209 2,907,376
$1,918,984 and $1,851,813
Regulatory assets 535,287 530,619
Other 344,336 328,823
Goodwill, net 82,190 82,190
$ 9,005,013 $ 9,295,082
Liabilities and stockholders'
equity
Liabilities
Accounts payable $ 182,943 $ 183,584
Deposit liabilities 4,047,940 4,180,175
Other bank borrowings 367,884 680,973
Long-term debt, net--other than bank 1,364,784 1,211,501
Deferred income taxes 162,452 143,308
Regulatory liabilities 282,239 288,602
Contributions in aid of construction 315,455 311,716
Other 825,115 871,476
7,548,812 7,871,335
Stockholders' equity
Common stock, no par value, authorized 200,000,000 shares; issued 1,254,893 1,231,629
and outstanding: 92,014,738 shares and 90,515,573 shares
Retained earnings 199,118 210,840
Accumulated other comprehensive loss, net of tax benefits (32,103 ) (53,015 )
Common stock equity 1,421,908 1,389,454
Preferred stock, no par value, authorized 10,000,000 shares; - -
issued: none
Noncontrolling interest: cumulative preferred stock of 34,293 34,293
subsidiaries - not subject to mandatory redemption
1,456,201 1,423,747
$ 9,005,013 $ 9,295,082
This information should be read in conjunction with the
consolidated financial statements and the notes thereto for the
year ended December 31, 2008 (included in HEI's Form 8-K dated
June 9, 2009) and the consolidated financial statements and the
notes thereto in HEI's Quarterly Reports on SEC Form 10-Q for the
quarters ended March 31, 2009, June 30, 2009 and September 30,
2009 (when filed).
Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Nine months ended September 30 2009 2008 (in thousands) Cash flows from operating activities Net income $ 70,774 $ 77,801 Adjustments to reconcile net income to net cash provided by operating activities Depreciation of property, plant and equipment 113,916 113,423 Other amortization 4,037 3,927 Provision for loan losses 27,000 4,034 Loans receivable originated and purchased, held for sale (368,880 ) (159,327 ) Proceeds from sale of loans receivable, held for sale 400,213 157,293 Net loss (gain) on sale of investment and mortgage-related securities (44 ) 17,388 Other-than-temporary impairment of available-for-sale 15,444 - mortgage-related securities Changes in deferred income taxes 2,958 12,186 Changes in excess tax benefits from share-based payment arrangements 324 (572 ) Allowance for equity funds used during construction (10,353 ) (6,432 ) Changes in assets and liabilities Decrease (increase) in accounts receivable and unbilled revenues, net 48,480 (76,034 ) Decrease (increase) in fuel oil stock 9,826 (79,693 ) Increase (decrease) in accounts payable (641 ) 54,460 Changes in prepaid and accrued income taxes and utility revenue taxes (50,514 ) (29,640 ) Changes in other assets and liabilities (35,561 ) (13,278 ) Net cash provided by operating activities 226,979 75,536 Cash flows from investing activities Available-for-sale investment and mortgage-related securities (247,425 ) (411,658 ) purchased Principal repayments on available-for-sale investment and 304,728 489,740 mortgage-related securities Proceeds from sale of available-for-sale investment and 44 1,291,609 mortgage-related securities Net decrease (increase) in loans held for investment 396,706 (55,828 ) Capital expenditures (239,441 ) (172,948 ) Contributions in aid of construction 7,472 12,266 Other 426 724 Net cash provided by investing activities 222,510 1,153,905 Cash flows from financing activities Net decrease in deposit liabilities (132,234 ) (164,612 ) Net increase in short-term borrowings with original maturities of - 138,786 three months or less Net decrease in retail repurchase agreements (18,573 ) (23,290 ) Proceeds from other bank borrowings 310,000 1,719,085 Repayments of other bank borrowings (604,517 ) (2,820,119 ) Proceeds from issuance of long-term debt 153,186 18,707 Repayment of long-term debt - (50,000 ) Changes in excess tax benefits from share-based payment arrangements (324 ) 572 Net proceeds from issuance of common stock 11,004 21,067 Common stock dividends (73,931 ) (62,493 ) Preferred stock dividends of noncontrolling interest (1,417 ) (1,417 ) Decrease in cash overdraft (9,847 ) (8,582 ) Other (7,232 ) (5,252 ) Net cash used in financing activities (373,885 ) (1,237,548 ) Net increase (decrease) in cash and equivalents and federal funds 75,604 (8,107 ) sold Cash and equivalents and federal funds sold, beginning of period 183,435 209,855 Cash and equivalents and federal funds sold, end of period $ 259,039 $ 201,748 This information should be read in conjunction with the consolidated financial statements and the notes thereto for the year ended December 31, 2008 (included in HEI's Form 8-K dated June 9, 2009) and the consolidated financial statements and the notes thereto in HEI's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2009, June 30, 2009 and September 30, 2009 (when filed).
Hawaiian Electric Company, Inc. (HECO) and Subsidiaries
CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
(dollars in thousands, except per barrel amounts) 2009 2008 2009 2008
Operating revenues $ 546,502 $ 826,124 $ 1,453,623 $ 2,135,265
Operating expenses
Fuel oil 186,719 377,157 463,893 900,455
Purchased power 134,447 202,125 364,120 530,146
Other operation 61,173 61,599 186,751 176,600
Maintenance 25,968 25,174 81,562 72,777
Depreciation 35,557 35,419 108,406 106,254
Taxes, other than income taxes 50,031 74,201 137,741 194,058
Income taxes 15,957 15,035 33,228 47,507
509,852 790,710 1,375,701 2,027,797
Operating income 36,650 35,414 77,922 107,468
Other income
Allowance for equity funds used during construction 2,628 2,426 10,353 6,432
Other, net 1,657 1,486 6,493 3,693
4,285 3,912 16,846 10,125
Interest and other charges
Interest on long-term debt 13,601 11,879 37,458 35,413
Amortization of net bond premium and expense 735 632 2,092 1,902
Other interest charges 705 1,352 2,048 3,397
Allowance for borrowed funds used during construction (1,118 ) (967 ) (4,467 ) (2,564 )
13,923 12,896 37,131 38,148
Net income 27,012 26,430 57,637 79,445
Less net income attributable to noncontrolling interest - 228 228 686 686
preferred stock of subsidiaries
Net income attributable to HECO 26,784 26,202 56,951 78,759
Preferred stock dividends of HECO 270 270 810 810
Net income for common stock $ 26,514 $ 25,932 $ 56,141 $ 77,949
OTHER ELECTRIC UTILITY INFORMATION
Kilowatthour sales (millions) 2,572 2,593 7,203 7,478
Wet-bulb temperature (Oahu average; degrees Fahrenheit) 71.5 70.7 68.5 68.6
Cooling degree days (Oahu) 1,588 1,530 3,591 3,779
Average fuel oil cost per barrel $ 66.40 $ 133.99 $ 59.21 $ 111.37
Twelve months ended
September 30, 2009
Allowed %(1) Actual %
Return on average common equity
(rate-making, simple average method)
HECO 10.50 6.52
HELCO 10.70 6.17
MECO 10.70 4.74
1 Based on interim decisions which are subject to final PUC
decisions. Allowed ROACEs for HECO, HELCO and MECO based on their
last final rate case decisions were 10.70, 11.50 and 10.94,
respectively.
This information should be read in conjunction with the
consolidated financial statements and the notes thereto for the
year ended December 31, 2008 (included in HECO Exhibit 99.2 to
HECO's Form 8-K dated June 9, 2009) and the consolidated financial
statements and the notes thereto in HECO's Quarterly Reports on
SEC Form 10-Q for the quarters ended March 31, 2009, June 30, 2009
and September 30, 2009 (when filed). 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. (HECO) and Subsidiaries
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
(in thousands, except par value) September 30, December 31,
2009 2008
Assets
Utility plant, at cost
Land $ 51,401 $ 42,541
Plant and equipment 4,612,113 4,277,499
Less accumulated depreciation (1,822,860 ) (1,741,453 )
Construction in progress 155,465 266,628
Net utility plant 2,996,119 2,845,215
Current assets
Cash and equivalents 6,486 6,901
Customer accounts receivable, net 133,709 166,422
Accrued unbilled revenues, net 92,361 106,544
Other accounts receivable, net 8,208 7,918
Fuel oil stock, at average cost 67,889 77,715
Materials and supplies, at average cost 36,357 34,532
Prepayments and other 13,879 12,626
Total current assets 358,889 412,658
Other long-term assets
Regulatory assets 535,287 530,619
Unamortized debt expense 15,184 14,503
Other 69,400 53,114
Total other long-term assets 619,871 598,236
$ 3,974,879 $ 3,856,109
Capitalization and liabilities
Capitalization
Common stock, $6 2/3 par value, authorized 50,000 shares; $ 85,387 $ 85,387
outstanding 12,806 shares
Premium on capital stock 299,207 299,214
Retained earnings 825,975 802,590
Accumulated other comprehensive income, net of income taxes 1,824 1,651
Common stock equity 1,212,393 1,188,842
Cumulative preferred stock - not subject to mandatory redemption 22,293 22,293
Noncontrolling interest - cumulative preferred stock of 12,000 12,000
subsidiaries - not subject to mandatory redemption
Stockholders' equity 1,246,686 1,223,135
Long-term debt, net 1,057,784 904,501
Total capitalization 2,304,470 2,127,636
Current liabilities
Short-term borrowings-affiliate 10,700 41,550
Accounts payable 118,042 122,994
Interest and preferred dividends payable 21,096 15,397
Taxes accrued 155,211 220,046
Other 48,389 55,268
Total current liabilities 353,438 455,255
Deferred credits and other liabilities
Deferred income taxes 178,336 166,310
Regulatory liabilities 282,239 288,602
Unamortized tax credits 57,885 58,796
Retirement benefits liability 399,539 392,845
Other 83,517 54,949
Total deferred credits and other liabilities 1,001,516 961,502
Contributions in aid of construction 315,455 311,716
$ 3,974,879 $ 3,856,109
This information should be read in conjunction with the
consolidated financial statements and the notes thereto for the
year ended December 31, 2008 (included in HECO Exhibit 99.2 to
HECO's Form 8-K dated June 9, 2009) and the consolidated financial
statements and the notes thereto in HECO's Quarterly Reports on
SEC Form 10-Q for the quarters ended March 31, 2009, June 30, 2009
and September 30, 2009 (when filed).
Hawaiian Electric Company, Inc. (HECO) and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Nine months ended September 30 2009 2008 (in thousands) Cash flows from operating activities Net income $ 57,637 $ 79,445 Adjustments to reconcile net income to net cash provided by operating activities Depreciation of property, plant and equipment 108,406 106,254 Other amortization 7,702 6,426 Changes in deferred income taxes 12,532 6,588 Changes in tax credits, net (501 ) 1,503 Allowance for equity funds used during construction (10,353 ) (6,432 ) Changes in assets and liabilities Decrease (increase) in accounts receivable 32,423 (59,551 ) Decrease (increase) in accrued unbilled revenues 14,183 (23,394 ) Decrease (increase) in fuel oil stock 9,826 (79,693 ) Increase in materials and supplies (1,825 ) (3,435 ) Increase in regulatory assets (13,829 ) (28 ) Increase (decrease) in accounts payable (4,952 ) 46,324 Changes in prepaid and accrued income and utility revenue taxes (62,388 ) (7,969 ) Changes in other assets and liabilities 3,360 (5,386 ) Net cash provided by operating activities 152,221 60,652 Cash flows from investing activities Capital expenditures (237,664 ) (170,321 ) Contributions in aid of construction 7,472 12,266 Other 340 749 Net cash used in investing activities (229,852 ) (157,306 ) Cash flows from financing activities Common stock dividends (32,756 ) (14,088 ) Preferred stock dividends (1,496 ) (1,496 ) Proceeds from issuance of long-term debt 153,186 18,707 Net increase (decrease) in short-term borrowings from nonaffiliates and affiliate with original maturities of three months (30,850 ) 112,204 or less Decrease in cash overdraft (9,847 ) (8,582 ) Other (1,021 ) - Net cash provided by financing activities 77,216 106,745 Net increase (decrease) in cash and equivalents (415 ) 10,091 Cash and equivalents, beginning of period 6,901 4,678 Cash and equivalents, end of period $ 6,486 $ 14,769 This information should be read in conjunction with the consolidated financial statements and the notes thereto for the year ended December 31, 2008 (included in HECO Exhibit 99.2 to HECO's Form 8-K dated June 9, 2009) and the consolidated financial statements and the notes thereto in HECO's Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2009, June 30, 2009 and September 30, 2009 (when filed).
American Savings Bank, F.S.B. and Subsidiaries
CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
Three months ended Nine months ended
September 30, June 30, September 30, September 30,
(dollars in thousands) 2009 2009 2008 2009 2008
Interest and dividend income
Interest and fees on loans $ 53,080 $ 55,363 $ 61,100 $ 166,535 $ 186,312
Interest and dividends on investment and mortgage-related securities 6,943 7,143 9,898 21,762 57,078
60,023 62,506 70,998 188,297 243,390
Interest expense
Interest on deposit liabilities 7,286 9,902 14,070 28,753 47,909
Interest on other borrowings 2,205 2,241 4,616 7,710 40,030
9,491 12,143 18,686 36,463 87,939
Net interest income 50,532 50,363 52,312 151,834 155,451
Provision for loan losses 5,200 13,500 1,979 27,000 4,034
Net interest income after provision for loan losses 45,332 36,863 50,333 124,834 151,417
Noninterest income
Fee income on deposit liabilities 8,211 7,462 7,328 22,384 20,889
Fees from other financial services 6,385 6,443 6,318 18,747 18,554
Fee income on other financial products 1,613 1,628 1,771 4,285 5,214
Net losses on available-for-sale securities * (9,863 ) (5,537 ) - (15,400 ) (17,388 )
(includes impairment losses of $9,863 and $15,444, consisting of
$13,645 and $32,167 of total other-than-temporary impairment
losses, net of $3,782 and $16,723 of non-credit losses, recognized
in other comprehensive income, for the quarter and nine months
ended September 30, 2009, respectively)
Other income 5,578 2,997 1,260 11,165 8,810
11,924 12,993 16,677 41,181 36,079
Noninterest expense
Compensation and employee benefits 17,721 17,991 19,172 55,072 56,451
Occupancy 4,905 5,922 5,489 15,956 16,276
Data processing 3,684 3,481 2,794 10,352 8,019
Services 2,437 3,801 3,688 9,656 13,531
Equipment 1,782 2,540 3,175 7,112 9,510
Loss on early extinguishment of debt * - 60 - 101 39,843
Other expense 9,062 10,579 8,085 27,527 26,932
39,591 44,374 42,403 125,776 170,562
Income before income taxes 17,665 5,482 24,607 40,239 16,934
Income taxes * 6,342 1,461 9,202 14,013 5,046
Net income $ 11,323 $ 4,021 $ 15,405 $ 26,226 $ 11,888
OTHER BANK INFORMATION (%)
Return on average assets 0.89 0.31 1.11 0.68 0.25
Return on average equity 9.40 3.41 11.09 7.35 2.73
Net interest margin 4.23 4.16 4.08 4.17 3.49
Net charge-offs to average loans outstanding (annualized) 0.19 1.31 0.07 0.56 0.08
Efficiency ratio 63 70 61 65 89
As of period end
Nonperforming assets to loans outstanding and real estate owned ** 1.61 1.55 0.25
Allowance for loan losses to loans outstanding 1.21 1.09 0.75
Tier-1 leverage ratio 9.1 8.7 8.4
* Net income included a $35.6 million after-tax charge related to
ASB's balance sheet restructuring in June 2008. The $35.6 million
is comprised of: (1) realized losses on the sale of
mortgage-related securities and agency notes of $19.3 million
included in "Noninterest income-Net losses on available-for-sale
securities," (2) fees associated with the early retirement of
other bank borrowings of $39.8 million included in "Noninterest
expense-Loss on early extinguishment of debt" and (3) income tax
benefits of $23.5 million included in "Income taxes."
** Regulatory basis
This information should be read in conjunction with the
consolidated financial statements and the notes thereto for the
year ended December 31, 2008 (included in HEI Exhibit 13 to HEI's
Form 8-K dated June 9, 2009) and the consolidated financial
statements and the notes thereto in HEI's Quarterly Reports on SEC
Form 10-Q for the quarters ended March 31, 2009, June 30, 2009 and
September 30, 2009 (when filed). Results of operations for interim
periods are not necessarily indicative of future interim periods
or the results to be expected for full year.
American Savings Bank, F.S.B. and Subsidiaries
CONSOLIDATED
BALANCE SHEETS DATA
(Unaudited)
(in thousands) September 30, December 31,
2009 2008
Assets
Cash and equivalents $ 222,286 $ 168,766
Federal funds sold 1,708 532
Available-for-sale investment and mortgage-related securities 623,104 657,717
Investment in stock of Federal Home Loan Bank of Seattle 97,764 97,764
Loans receivable, net 3,758,898 4,206,492
Other 211,773 223,659
Goodwill, net 82,190 82,190
$ 4,997,723 $ 5,437,120
Liabilities and stockholder's equity
Deposit liabilities-noninterest-bearing $ 751,893 $ 701,090
Deposit liabilities-interest-bearing 3,296,047 3,479,085
Other borrowings 367,884 680,973
Other 91,643 98,598
4,507,467 4,959,746
Common stock 329,292 328,162
Retained earnings 188,437 197,235
Accumulated other comprehensive loss, net of tax benefits (27,473 ) (48,023 )
490,256 477,374
$ 4,997,723 $ 5,437,120
This information should be read in conjunction with the
consolidated financial statements and the notes thereto for the
year ended December 31, 2008 (included in HEI Exhibit 13 to HEI's
Form 8-K dated June 9, 2009) and the consolidated financial
statements and the notes thereto in HEI's Quarterly Reports on SEC
Form 10-Q for the quarters ended March 31, 2009, June 30, 2009 and
September 30, 2009 (when filed).
American Savings Bank, F.S.B. and Subsidiaries RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Unaudited) (in thousands) 3Q08 4Q08 1Q09 2Q09 3Q09 Noninterest income Per income statement - GAAP $ 16,677 $ 10,056 $ 16,264 $ 12,993 $ 11,924 Other-than-temporary impairment of mortgage-related securities - 7,764 - 5,581 9,863 Gain on sale of a commercial loan - - - - (2,951 ) Adjusted noninterest income $ 16,677 $ 17,820 $ 16,264 $ 18,574 $ 18,836 Noninterest expense Per income statement - GAAP $ 42,403 $ 45,442 $ 41,811 $ 44,374 $ 39,591 Real estate transactions - - - (1,180 ) (1,076 ) Professional services - - (616 ) (1,238 ) (600 ) FISERV conversion costs - - - (159 ) (572 ) Severance (222 ) (1,560 ) (673 ) (393 ) (301 ) FDIC special assessment - - - (2,338 ) - Technology write-offs - - - (145 ) - Prepayment penalty on early extinguishment of debt - - (41 ) (60 ) - Bishop Insurance Agency sale - (890 ) - - - Adjusted noninterest expense $ 42,181 $ 42,992 $ 40,481 $ 38,861 $ 37,042 Other bank information Noninterest expense (annualized) Reported $ 169,612 $ 181,768 $ 167,244 $ 177,496 $ 158,364 Adjusted 168,724 171,968 161,924 155,444 148,168 Efficiency ratio Reported 61 % 74 % 62 % 70 % 63 % Adjusted 61 % 62 % 60 % 56 % 53 % Pretax, preprovision income (annualized) Reported $ 106,344 $ 64,628 $ 101,568 $ 75,928 $ 91,460 Adjusted 107,232 105,484 106,888 120,304 129,304 Return on average assets Reported 1.11 % 0.44 % 0.82 % 0.31 % 0.89 % Adjusted 1.12 % 0.92 % 0.88 % 0.83 % 1.34 %
SOURCE: Hawaiian Electric Industries, Inc.
Shelee M.T. Kimura, 808-543-7384 Manager, Investor Relations & Strategic Planning Facsimile: 808-203-1164 skimura@hei.com
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